Governors Are Warned by U.S. of Law on Maintaining Medicaid

Republican governors seeking to use last month’s U.S. Supreme Court decision to scale back Medicaid are being told by the Obama administration that the ruling on the 2010 health-care law leaves states little room to maneuver.

The ruling doesn’t allow states to cut people from their Medicaid rolls, Health and Human Services Secretary Kathleen Sebelius said in a letter to governors yesterday. One passage of the law, called “maintenance of effort,” prevents states from reducing eligibility or benefits in Medicaid before new online insurance exchanges are to be available in 2014.

“I’m glad to see Secretary Sebelius reminding the governors that the Supreme Court only struck down a narrow part of the law about Medicaid expansion after 2014,” U.S. Representative Chellie Pingree, a Democrat from Maine, said in a statement today.

President Barack Obama’s health-care overhaul sought to expand medical coverage to more than 30 million Americans by either subsidizing a person’s purchase of insurance from a company or by making them eligible for Medicaid. Sebelius moved to address a potential gap, saying she would exempt some people in states that opt out of the Medicaid expansion from the law’s mandate that they carry insurance or pay an annual penalty.

Texas, Florida

The Republican governors of Texas and Florida, two of the four most-populated U.S. states, along with South Carolina, Louisiana and Mississippi, have said they won’t participate in the law’s provision that raises income eligibility for Medicaid, which primarily provides health care to the poor. States opting out of the expansion would leave millions without insurance, because they won’t be poor enough to qualify for Medicaid or wealthy enough to buy private insurance in the new exchanges.

“A very small number of affected individuals” who will still be subject to the law’s requirement that they carry insurance will receive a “hardship exemption” from the mandate, Sebelius said in her letter. She didn’t say how many people the exemption may cover. The law itself exempts from the mandate people who don’t make enough money to file a tax return.

“That wipes out the overwhelming majority right there,” said Ron Pollack, executive director of Families USA, a consumer advocacy group in Washington that backs the health law. “I’m not sure it has much of an impact.”

Medicaid is run by states, with the federal government covering about 59 percent of the costs. Eligibility varies, with states such as Texas and Florida excluding most working-age adults who don’t have children. The federal health-care law would expand state programs to cover everyone in families earning as much as 133 percent of the national poverty level, or about $30,657 for a family of four this year.

Legal Action

About 17 million people would be added to Medicaid if all states participate, according to the Congressional Budget Office. The federal government would eventually cover about 90 percent of the cost.

Governors Rick Perry of Texas, Rick Scott of Florida, Nikki Haley of South Carolina, Bobby Jindal of Louisiana and Phil Bryant of Mississippi have said they won’t expand their Medicaid programs. Republicans also have chaffed at the prohibition of cutting pre-health law Medicaid requirements, saying it prevents them from reducing costs in their states.

Maine Governor Paul LePage, a Republican, has proposed cutting about 21,000 people from his state’s Medicaid program by reducing eligibility for adults. His plan sparked a fight with Pingree, who wrote Sebelius this week asking her to stop him.

A spokeswoman for LePage, Adrienne Bennett, said Maine will submit its proposed eligibility reduction for Sebelius’ approval within a few weeks.

If Sebelius denies the request, “this administration is ready to take legal action,” Bennett said in a telephone interview.

To contact the reporter on this story: Alex Wayne in Washington at awayne3@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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