How States Rejecting the Medicaid Expansion Sabotaged Their Biggest Cities

Major urban areas are magnets for the uninsured, and the state politicians who turned down the Medicaid expansion are not the ones who will pay to treat them.

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Flickr/unclepockets

Grady Memorial Hospital in downtown Atlanta is a formidable institution, a bulwark for the low-income and uninsured that grew from a hundred beds in 1892 to one of the largest public hospitals in the country. It has the primary Level I trauma center in the metro region. It has one of just two burn centers in the state. Each year, nearly every one of Georgia's 158 counties sends patients to the hospital for its specialized units or its open doors.

Private insurance covers little of this care: A majority of all these people who come to Grady are either on Medicaid or have no insurance at all.

Next year, the hospital's perpetually strained resources will begin to grow even tighter. The federal Affordable Care Act contains a sweeping expansion of Medicaid, the piece of the law aimed precisely at the low-income Georgians that Grady has long made a point of serving. Only half of the states have opted to take the expansion, paid for in its entirety by the federal government for the first three years. Georgia is not one of them.

That Grady Memorial must live with Georgia's decision illustrates two perverse subplots as the Affordable Care Act rolls out very differently across the 50 states. The political dynamic of somewhat more left-leaning major cities located in red states means that governors and state legislatures have rejected health care resources that many local officials in urban areas desperately wanted.

And because big cities are also magnets for the uninsured, with their more extensive health infrastructure, the burden of caring for a state’s uninsured disproportionately rests on its urban hospitals and taxpayers.

The state politicians who have made these decisions, in short, are not the ones who will bear the cost of them.

Kaiser Family Foundation

The people who pay for Grady are taxpayers in DeKalb and Fulton counties, the two largest counties in Georgia, which bisect Atlanta and its immediate suburbs. Grady draws resources from charitable contributions, Medicare and Medicaid payments, private insurance reimbursements, and property tax assessments in these two counties. That tax money goes to general funds, not a "Grady" line item, meaning local money that’s spent on everyone’s health care is money not spent on other local priorities.

“Only two counties pay for [Grady] out of more than 150 counties,” says DeKalb County Commissioner Larry Johnson. “But most of those counties use that service.”

The state of Georgia has also repeatedly declined to help fund Grady, even as Atlanta sits as the seat of the state capital and the epicenter through which its highways, tourists, events and business flow.

A similar tension has long existed between urban hospital districts (and the taxpayers who fund them), and suburban and rural counties that sit within driving distance of that care without helping to subsidize it. Texas's largest urban areas, spanning San Antonio, Austin, Houston, Dallas, Fort Worth and El Paso, all currently have large local taxing districts to help support health care for the indigent.

“The economic argument is completely overwhelming for the big cities,” says Anne Dunkelberg with the Center for Public Policy Priorities in Texas, which has advocated (unsuccessfully) for Medicaid expansion there. “They’re paying 100 percent local tax dollars instead of getting 100 percent federal funding.”

Part of the issue here lies in a fundamental disparity between local governing and statewide politics. Governors and state legislatures have made many of these decisions to reject the Medicaid expansion on philosophical grounds rather than poverty rates or hospital budgets (often despite receiving detailed analyses on those fronts). County and municipal officials, on the other hand, can seldom afford ideology.

“Oh man, I was just talking to a Head Start group this morning,” says Johnson, ticking off all the ways his job as a county commissioner forces him to face actual constituents more often than abstract debate. He hears from struggling residents when he leaves his house, when he walks through his neighborhood, when he goes to the grocery store, when steps into the local Big Lots. “We see them every day, and we get to see a lot of issues and ills that they go through that are based on decisions that the federal government and governors make.”

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Central to the Affordable Care Act was a plan to expand the federal insurance program for the poor to cover adults with incomes at or below 138 percent of the federal poverty line (that’s $15,856 for an individual this year). The expansion is set to begin Jan. 1 of next year. It was originally estimated to bring about 13.1 million new people onto Medicaid by 2016.

Lately, most of the public attention on the Affordable Care Act has focused on the malfunctioning online insurance marketplaces, where moderate and middle-income Americans are supposed to be able to shop for private insurance, many of them receiving federal subsidies to buy it. The Medicaid expansion, however, was aimed at a different group: those families and adults who likely wouldn’t be able to afford even subsidized private insurance, but who made barely too much to currently qualify in most states for Medicaid.

Memorial Herman Southwest Hospital in Houston, Flickr user Ed Uthman.

Then, last year, despite ruling that the Affordable Care Act’s individual insurance mandate was constitutional, the Supreme Court decided that states could choose for themselves whether they would expand Medicaid.

“It threw a lot of curve balls at people,” says Keith Fontenot, a former budget expert on health care in the Obama Administration who’s now a visiting scholar at the Brookings Institution's Engelberg Center for Health Care Reform. “I don’t know anybody that foresaw the Supreme Court going down that road. All the focus was on the individual mandate. So now you have this really kind of unusual patchwork quilt – only it’s missing some of the pieces.”

Twenty-five Republican-controlled states have since announced that they will not broaden Medicaid at this time. Under the law, the federal government pays for the full expansion for the first three years. States then gradually pick up a share of the cost, but never more than 10 percent of it. Governors who have rejected the bill have said that even that 90 percent federal match rate would leave their states with unsustainable costs down the road.

That assessment, though, ignores the economic windfall of billions of new federal dollars in health care spending across these states (as local hospital associations and chambers of commerce have pointed out). And it defies the fact that the public in many cases already pays for safety-net care for the uninsured, in forms like those property taxes that help support Grady Memorial.

University of Mississippi Medical Center in Jackson, Mississippi, Flickr user /\ \/\/ /\.

In San Antonio’s Bexar County, the Medicaid expansion was estimated to cover an additional 200,000 people, accounting for about half of the county’s uninsured. The county hospital there currently runs a program called CareLink, which offers the poor substantially reduced fees on individual health care services (rather than an insurance plan to cover them). The program serves about 60,000 people, at an annual cost of $54 million. County tax dollars pay for that.

“That’s the irony of the Medicaid expansion that didn’t happen here,” says Thomas Schlenker, the director of public health for San Antonio and Bexar County. “Many if not all of those people who are currently enrolled in CareLink would have gotten Medicaid insurance, which would have meant that the federal government would be paying for their care, as opposed to the county.”

San Antonio, Schlenker adds, attracts people looking for low-wage work in its construction, hospitality and landscaping industries, the kind of jobs that seldom come with employer-provided health insurance. The county is also a magnet for the sick, he says, precisely because of programs like CareLike and the medical care provided by the University Health System.

Most of the 200,000 people in Bexar County who would have benefited from the Medicaid expansion, he says, will have no recourse for now. And the county will have to continue providing for them as best as it can.

“This is not how the Affordable Care Act was supposed to work,” Schlenker says. “And it’s really sad for those people.”

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Since states began sorting themselves into two groups, expanding Medicaid or rejecting it, a couple of ironies have emerged.

The states not expanding coverage for the poor also have some of the lowest current Medicaid eligibility levels. New York State, which has opted into the new federal funds, currently provides coverage for jobless parents making up to 150 percent of the poverty line.

In Florida, it’s 19 percent. In Texas: 12 percent. In Alabama: 10 percent. This means, in Birmingham, that an unemployed single parent with two children must live on less than $2,013 a year to qualify. And in those three states, along with every other state rejecting the expansion, there are no Medicaid benefits for adults without children.

UAB Children's Hospital in Birmingham, Flickr user Wally Argus.

Because of these strict eligibility cutoffs, the states that have turned down the expansion are also those that stood to benefit the most from it – and to receive the biggest new influx in federal dollars. The Kaiser Family Foundation calculated earlier this summer (before a few last states made up their minds) that the Medicaid expansion would have had twice the impact in those states leaning against it than in those that are embracing it.

The “patchwork quilt” that Fontenot refers to is not just a reference to this disjointed geography. There will also now be glaring gaps in coverage along the income scale in states like Texas and Georgia. Families and individuals making between 100 and 400 percent of the poverty level will qualify for subsidies to buy insurance on the exchanges. But because a family in Texas making 30 percent of the poverty line will qualify for neither Medicaid nor the exchange subsidies, those people won’t be served by the law at all.

They live in the gap shown below, by the Kaiser Family Foundation, between Medicaid's safety net and the Affordable Care Act's larger promise:

Kaiser Family Foundation

One of the other terrible ironies of this decision lies in a provision of the Affordable Care Act targeting “Disproportionate Share Hospital” payments that the federal government sends to places like Grady and Bexar County’s University Health System. The federal government gives extra support to these places that serve a particularly large share of Medicaid or uninsured patients, to help make up for the fact that hospitals recoup so little money in caring for them.

Historically, 90 to 95 percent of these payments have gone to large urban hospitals. But the Affordable Care Act partially pays for expanded coverage by significantly scaling back these checks to hospitals. In theory, if the proportion of uninsured in America drops, and the number on Medicaid expands, hospitals shouldn’t need quite as much of this money.

Again, that was how the law was intended to work. In reality, Grady and other urban hospitals like it will begin to lose these payments next year. But they won’t receive any of the financial benefits of the Medicaid expansion.

Some urban hospitals in regions hit particularly hard by the housing bust will suffer in three ways: They’ll lose the Medicaid expansion, they’ll lose their DSH payments, and they'll continue to see less of the property-tax revenue that traditionally funds their services.

One last rub: Many states that have turned down Medicaid help to local communities and hospitals have long placed requirements on counties to provide the very safety net that states are now actively restraining. Eight non-expansion states have requirements that counties contribute to the non-federal share of Medicaid costs (Florida, Kansas, Nebraska, New Hampshire, Pennsylvania, South Carolina, Utah and Wisconsin).

And 15 of them, listed at left, have a requirement that counties provide some kind of indigent care. Local government, long the caretaker of safety nets, essentially gets the responsibility without the resources – or even without a say in whether to accept them.

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So why can’t New Orleans, or Philadelphia, or Kansas City – or the counties that contain them – simply opt into the Medicaid expansion on their own, without statewide consensus?

The National Association of Counties actually looked into this on behalf of its many frustrated members. While NACo didn’t wholeheartedly endorse the Affordable Care Act, it supported the Medicaid expansion, precisely because of the pressure it would relieve on county budgets. There’s also some precedent for counties to receive waivers in how they implement Medicaid.

“The answer was no, because the law doesn’t permit that,” says Paul Beddoe, the associate legislative director for health policy at NACo.

On the whole, Medicaid is founded on a relationship between the federal government and states, not between the federal government and local communities. Even those county waivers that do exist must be negotiated through the state (something it’s hard to imagine Governor Rick Perry doing here for San Antonio).

“As a practical matter, it’s pretty hard to expect the federal government to deal directly on Medicaid with every city in the country,” Fontenot says. “It doesn’t work as a management issue.”

University of North Carolina Hospitals in Chapel Hill, Flickr user William Yeung.

From the point of view of cities and counties, this is one of just many ways that they must wait for federal resources – and decisions on how to spend them – to slowly trickle downhill.

As of January 1, things won’t exactly get dramatically worse for these communities, or the uninsured who live there (dwindling DSH payments aside). Local governments will keep doing what they’ve already been doing.

“In some ways, it’s not like solutions don’t exist,” Beddoe says, referring to the array of existing models, from the property taxes that fund Grady, to the public support of Bexar’s CareLink, to a health care levy in Kansas City. “It’s just that it’s going to get better in other places.”

But eventually, the contrast should become clear: States that do expand will have financially healthier hospitals, literally healthier residents, less strain on public resources, and even broader economic benefits.

Some other, more intimate differences will emerge, too.

“I think when those stories start to get around, when people understand that a mom with two kids earning $18,000 gets no help, but a mom with two kids earning $19,000, $20,000 does – I think that’s going to have an impact,” Dunkelberg says. That same mom with two kids in Texas may also soon come to feel that she'd be better off in neighboring New Mexico.

She'll likely move faster than governors and legislatures in these states will. In its original form, Medicaid was created as a voluntary program in 1965. Arizona was eventually the last state to join. It didn’t get around to doing that until 1982.

Top image of Grady Memorial Hospital in Atlanta: Flickr user unclepockets.

About the Author

  • Emily Badger is a former staff writer at CityLab. Her work has previously appeared in Pacific StandardGOODThe Christian Science Monitor, and The New York Times. She lives in the Washington, D.C. area.