Is the Obama Administration Playing Hardball on Health Care?

The current debate in Florida over Medicaid funding could be a sign of things to come.

Florida Governor Rick Scott is pictured. Erik Kellar/Getty Images
National Journal
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Dylan Scott
March 11, 2015, 4:01 p.m.

Since 2012, more than 20 states have re­jec­ted Obama­care funds to ex­pand Medi­caid be­cause of Re­pub­lic­an op­pos­i­tion, and the ad­min­is­tra­tion has had little re­course bey­ond rhet­or­ic and a will­ing­ness to ac­com­mod­ate al­tern­at­ive pro­grams more pal­at­able to con­ser­vat­ives to change their minds. The states have held all the cards.

Un­til now.

The feds find them­selves with some lever­age, in­ten­tion­ally or not, and state law­makers in one of the biggest hol­d­outs—Flor­ida—are feel­ing the pres­sure.

Flor­ida has more than $1 bil­lion in fed­er­al Medi­caid fund­ing that will ex­pire this sum­mer, and the Cen­ters for Medi­care and Medi­caid Ser­vices has already said that that fund­ing, which helps com­pensate health care pro­viders that serve a lot of un­in­sured and low-in­come Flor­idi­ans, won’t be re­newed as is. Le­gis­lat­ors are now rush­ing to take up Medi­caid ex­pan­sion this month.

(RE­LATED: Obama­care En­rollees Are Sur­pris­ingly Smart Shop­pers)

For some who watch this stuff closely, the ad­min­is­tra­tion does seem to be mak­ing a play.

The Health and Hu­man Ser­vices De­part­ment “ap­pears to be us­ing its lever­age to try to con­vince re­cal­cit­rant states to do the ex­pan­sion,” said Matt Salo, ex­ec­ut­ive dir­ect­or of the Na­tion­al As­so­ci­ation of Medi­caid Dir­ect­ors.

Flor­ida might ac­tu­ally be the start of a new round of Medi­caid-ex­pan­sion de­bates. Texas, the biggest get left for the Obama ad­min­is­tra­tion with its nearly 1 mil­lion people in the ex­pan­sion gap, also has some Medi­caid fund­ing that helps cov­er un­com­pensated care that will run out in 2016.

“I think there’s a gen­er­al ques­tion to be asked about, if we con­tin­ue to have states that haven’t ex­pan­ded Medi­caid, if they come in and ask for fed­er­al Medi­caid dol­lars that are not tied to people get­ting cov­er­age. … That raises a lot of ques­tions for me and many oth­er people,” Joan Al­k­er, ex­ec­ut­ive dir­ect­or of Geor­getown Uni­versity’s Cen­ter for Chil­dren and Fam­il­ies, said. “Why would CMS go around hand­ing out large sums of fed­er­al Medi­caid dol­lars through that kind of back­door ar­range­ment in a state that’s not ex­pand­ing Medi­caid and guar­an­tee­ing cov­er­age for people who really need it?”

Sen. Bill Nel­son, a Flor­ida Demo­crat, sug­ges­ted something sim­il­ar last week, ac­cord­ing to loc­al re­ports, based on his con­ver­sa­tions with HHS Sec­ret­ary Sylvia Math­ews Bur­well. “The money is there un­der the law,” Nel­son said, re­fer­ring to Obama­care’s Medi­caid-ex­pan­sion fund­ing. “The fed­er­al gov­ern­ment is not go­ing to be pay­ing twice.”

(RE­LATED: Obama­care’s Price Tag Just Went Down, Ac­cord­ing to CBO)

Now CMS prob­ably isn’t de­mand­ing that Flor­ida ex­pand Medi­caid or else. Those fol­low­ing the situ­ation say that the cur­rent pro­gram, known as the Low-In­come Pool, will likely be re­newed in some fash­ion even if the state ex­pands Medi­caid and needs to be re­viewed re­gard­less of the Af­ford­able Care Act.

But the ex­pir­ing $1 bil­lion in fed­er­al fund­ing is non­ethe­less act­ing as a cata­lyst for state law­makers to take up Medi­caid ex­pan­sion. In 2014, CMS ap­proved a three-year ex­ten­sion of Flor­ida’s Medi­caid man­aged-care pro­gram—but only a one-year ex­ten­sion of the Low-In­come Pool, while also re­quir­ing an in­de­pend­ent study of its ef­fect­ive­ness. That brought the pro­gram and its big pot of fed­er­al dol­lars to the fore­front of the state budget de­bate this year.

How sig­ni­fic­ant is that pres­sure? After Medi­caid ex­pan­sion was stifled in 2013 and all but ig­nored last year, Flor­ida’s Re­pub­lic­an-led Sen­ate brought it up al­most as soon as its le­gis­lat­ive ses­sion opened on March 3. They’ve in­tro­duced an ex­pan­sion plan, which would use Medi­caid dol­lars to pay for private in­sur­ance and re­quire small co­pay­ments, which the Health Com­mit­tee ap­proved on Tues­day. It still needs to clear the full Sen­ate and a more skep­tic­al House—but that is ma­jor mo­mentum for Medi­caid ex­pan­sion dur­ing the first week or so of the le­gis­lat­ive ses­sion.

“We don’t know how this ends, but we want to be pre­pared for whatever is go­ing to come down the pipe,” Flor­ida Sen­ate Pres­id­ent Andy Gardiner, a Re­pub­lic­an, said in an in­ter­view. “I do think the LIP dis­cus­sion has opened up a bit more dia­logue for every­body, that this could be a ser­i­ous prob­lem if we don’t ad­dress it.”

Flor­ida Gov. Rick Scott cer­tainly ap­pears to be­lieve he’s en­gaged in hard­ball ne­go­ti­ations. He sent a let­ter to Pres­id­ent Obama last week, warn­ing that if the fed­er­al LIP fund­ing was not re­newed, he wouldn’t use state dol­lars to fill the budget hole. He also tried to dis­tance the LIP talks from Medi­caid ex­pan­sion.

(RE­LATED: The 5 Most Im­port­ant Quotes From SCOTUS’ Obama­care Ar­gu­ments)

“This re­quest is not as­so­ci­ated with Medi­caid ex­pan­sion in any way,” he wrote. “Your ad­min­is­tra­tion has already made it clear that wheth­er or not a state ex­pands Medi­caid does not im­pact the con­tinu­ation of sim­il­ar pro­grams with­in that state.”

It’s easy to ima­gine why the Obama ad­min­is­tra­tion isn’t eager to just reau­thor­ize the full LIP fund­ing when Flor­ida could ac­cess $50 bil­lion in Medi­caid-ex­pan­sion money over the next dec­ade and provide full health cov­er­age to many of the same people, though it’s not pub­licly tak­ing a hard line.

“CMS is com­mit­ted to work­ing with the state of Flor­ida to con­tin­ue to im­prove Flor­idi­ans ac­cess to high-qual­ity health care,” Aaron Al­bright, an agency spokes­per­son, said of the ne­go­ti­ations. He wouldn’t com­ment on wheth­er it was pleased that the LIP cliff seemed to have spurred new Medi­caid-ex­pan­sion dis­cus­sions. CMS’s back­ground on the situ­ation did, however, note of the be­ne­fits of ex­pand­ing Medi­caid.

Flor­ida is a not­able de­par­ture from the Medi­caid-ex­pan­sion de­bates in oth­er states thus far. CMS has gen­er­ally stretched to ac­com­mod­ate the al­tern­at­ive ex­pan­sion plans pro­posed by Re­pub­lic­ans in states like Iowa and In­di­ana. They’ve al­lowed states to use Medi­caid dol­lars to pay for private in­sur­ance and have ac­cep­ted small premi­ums for some en­rollees, some of the most pop­u­lar policies for­war­ded by con­ser­vat­ives. It has led to hun­dreds of thou­sands of low-in­come people get­ting covered un­der Obama­care, a win for the White House, though not as ori­gin­ally en­vi­sioned.

Now the Sun­shine State might be a pre­view of the new play­book.

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