Kasich explores alternative to Medicaid expansion

Ohio wants to expand Medicaid with private insurance.

Ohio Gov. John Kasich is negotiating a plan with the federal government to use the money originally intended to expand Medicaid eligibility to about 366,000 Ohioans to instead buy private insurance for new enrollees on state health exchanges expected to go on-line in October.

The money would be used help pay premiums on the health exchanges, officially called Health Insurance Marketplaces, for low-income people at or below 138 percent of the federal poverty rate, or about $15,400 for an individual or $32,000 for a family of four in annual earnings.

“It’s something that we have been talking to (the Centers for Medicare & Medicaid Services) about,” said Ohio Medicaid Director John McCarthy. “No deal is done. We’re just exploring whether it’s technically possible to do this, and how, specifically, would it work.”

McCarthy said the state would have to make certain it had the legal authority to use Medicaid funds, which are jointly provided by federal and state governments, to buy private insurance and determine exactly how much the state could spend on private plans.

“There are federal rules around this that have to do with cost-effectiveness,” he said. “That is something that we are actively looking at; how that calculation would be determined.”

Health and Human Services Secretary Kathleen Sebelius has promised to offer more guidance on that issue in the near future, but, so far, all the federal government has said is that the money states would spend to enroll Medicaid beneficiaries in private plans would have to be “comparable” to what they would have spent otherwise.

According Kasich’s latest budget proposal, it would cost $14.5 billion in state and federal spending to expand Medicaid enrollment from 2014 to 2020.

But private plans offered on the exchanges are likely to be more costly than Medicaid plans because private plans typically reimburse doctors, hospitals and other health care providers at a higher rate than Medicaid.

“There might be a modest increase in cost to do this on the exchange,” said Pamela Morris, president and CEO of Dayton-based CareSource, which manages the largest Medicaid plan in Ohio. But (those newly eligible for Medicaid) are going to have coverage either way, and that’s the most important thing from a CareSource standpoint.”

Morris said the proposed premium-assistance model hasn’t changed CareSource’s plans to offer a qualified health plan on the exchange, and she expects the cost of health insurance on the exchanges to come down over time.

“Part of the allure of the premium-assistance model is that consumers who would qualify for this coverage would have a choice of a number of private health plans,” she said. “I think it will be a very competitive market, and I think that’s always good for the consumer because more competition typically drives costs down.”

The Medicaid expansion originally proposed in the Patient Protection and Affordable Care Act, otherwise known as Obamacare, could generate a net gain of $1.4 billion for Ohio by 2022, according to estimates in the governor’s budget proposal. Medicaid presently covers 2.3 million people in Ohio.

But experts say opposition to Obamacare from heavily Republican legislatures is likely leading Kasich and other governors to consider other options to secure Medicaid funding from the federal government, which has promised to cover the entire cost of Medicaid expansion for first three years and no less than 90 percent of the cost thereafter.

So far, Arkansas — with a Democratic governor and conservative state legislature — is the only other state that has been granted tentative approval to pursue an option to use its Medicaid dollars to purchase private health insurance for its low-income people, according to Pew Charitable Trusts.

“Economically, it’s such a good deal for (Ohio), it’s hard to turn the money down,” said Bryan Marshall, a political science professor at Miami University. “That’s why you’ve seen more and more Republican governors coming on board. But they’re going to try to find any daylight they can find between this federal money and embracing Obamacare because conservatives are very much against Obamacare.”

Some lawmakers have expressed concern that the government might renege on its funding promises, noting that forced federal budget cuts known as the sequester has already resulted in unexpected cuts to Medicare, the federally subsidized health plan for the elderly.

Others simply object to expanding entitlement programs like Medicaid, which have contributed heavily to the trillion-dollar federal budget deficit.

That’s why even in a semi-privatized form, a Medicaid expansion is still likely to encounter roadblocks in the Ohio legislators that will ultimately have to approve any plan, Marshall said.

“There’s still going to be some resistance,” he said. “But it probably won’t be as sharp as it would have been otherwise. It’s still Medicaid, but it’s not Obamacare.”

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