With governor John Kasich’s decision to expand Medicaid, 6 GOP governors (OH, MI, ND, AZ, NV, NM) are now onboard. Michigan’s Rick Snyder followed Kasich right after his announcement.
The remaining states opposing Medicaid Expansion are faced with not only the political conundrum of having coverage available for residents with higher incomes than the poorest in their states, but also face declining reimbursement for state hospitals taking care of indigent patients in the emergency room. This “double hit” results from the change in the formula for reimbursement from the Feds (as greater numbers of residents obtain coverage) also known as the DSH (Disproportionate Share Hospital) payment. Ironically, residents in non-Medicaid Expansion states will end up paying federal taxes to subsidize the expansion of Medicaid in states that opt-in and get stuck with the cost of uncompensated care that the Feds are not picking up in their states-or see hospitals close. This is why the hospital lobby has been so adamant about Medicaid Expansion.
Most of us have focused on the Medicaid Expansion decision’s impact on the poor. However, there are also major implications of state decisions to not expand for the insured population-hospitals will be forced to substantially increase the rates they charge private insurers to offset the decline in federal reimbursement for uncompensated care. For governors deciding against expansion, they will actually be hindering competitiveness in the private insurance markets that they actually want to see function as the solution to all of this.