Alex Brandon/AP Photo
Outgoing administrator for the Centers for Medicare & Medicaid Services Seema Verma
Now that Democrats have a narrow majority in the Senate, one of their top priorities must be federalizing basic Medicaid. It is the most reasonable way to ensure around two million of the most vulnerable Americans get access to health care during this pandemic. Most importantly, it can legally be included in a budget reconciliation bill, and with some effort it should be able to get 50 votes. Federalizing Medicaid sits at a critical nexus of being actually possible, urgently needed, and politically essential for the party if it wants to hold on to its majority. Yet it risks being overlooked.
Millions of Americans fall into the so-called “Medicaid gap”: people who earn too much to qualify for Medicaid in their Republican-controlled state, and either end up being uninsured because they make too little to qualify for federal exchange subsidies, or need to overpay for private insurance. This situation exists because in National Federation of Independent Business v. Sebelius, the Supreme Court made the Affordable Care Act’s Medicaid expansion optional. Radicalized Republican governments in several states refused to expand Medicaid—even though they were hurting state budgets, public health, low-income residents, and hospitals.
The Democratic Party has only entertained two ways to deal with this legal constraint. One is to offer the remaining holdout Republican states even more money. This is what Speaker Nancy Pelosi proposed in H.R. 1425 last year. But the federal government already pays 90 percent of the Medicaid expansion cost, and Republican states still refuse.
Republican leaders in Georgia, insistent on making sure their Medicaid expansion contains onerous work requirements, turned down millions in federal money. In Tennessee, officials got a last-minute waiver to block-grant Medicaid so they could cut coverage, even though it will almost assuredly be thrown out in court. Right before leaving office, Trump’s Medicaid administrator, Seema Verma, is trying to get Republican-led states to sign on to a Medicaid waiver process that would make it extremely time-consuming for Biden to undo the damage. After more than a decade, it is clear the issue is not cost but ideology and spite. Most of the states that refuse to expand Medicaid are in the South and have large Black populations.
The other option Democrats talk about is expanding public insurance to cover these people, via either something big like Medicare for All or something more narrow like a public option. While rarely talked about, this is actually one of the most important elements of President-elect Joe Biden’s health care plan.
In practice, Biden’s public option is actually two very different proposals squashed together under one label. First, it contains a public-insurance option that higher-income individuals could choose over private insurance. Depending on the design details, this could either radically transform health care by forcing hospitals, drugmakers, and insurers to reduce prices and/or improve quality, or it could be designed as a mostly toothless backup plan.
The second major part, which has received less attention, is Biden’s plan to de facto federalize Medicaid. This would end the Medicaid gap problem. Biden would allow anyone from a nonexpansion state who qualifies for expanded Medicaid to get covered through the public option, without a premium. That’s a universe of roughly 4.9 million people, according to Biden’s campaign literature. The plan would in effect have the federal government directly provide insurance to all low-income adults.
Allowing higher-income people to choose the public option is by far the biggest political lift. It already generates significant opposition from providers and insurers who want to keep their prices outrageously high, and those opponents would have a good chance of finding friends in the Senate. Under budget reconciliation, Democrats would only need 50 Senate votes (and the vice president’s tiebreaker) to advance legislation, but with a 50-50 Senate, just one Democrat could block the bill if all Republicans opposed. With the next reconciliation bill likely to potentially cover everything—the expansion of unemployment insurance, relief checks, climate investment, college debt, etc.—leadership is going to be reluctant to start massive fights in it.
The federal takeover of Medicaid expansion, though, is very different. While hospitals hate the idea of being able to charge middle-class people less than their currently insane prices, they also hate providing uncompensated care to the uninsured. Ballot measure campaigns to expand Medicaid in Republican states often have strong business, union, and hospital support. The cost would be relatively modest. The federal government pays for most of the Medicaid expansion anyway, and since it costs 83 percent more to cover low-income people via exchange subsidies, Democrats could even save money by increasing Medicaid eligibility up to, say, 150 or 200 percent of the federal poverty level.
Despite this, the idea of simply having the federal government fully take over the Medicaid expansion has received little traction. There was almost no discussion or major congressional bills about it last session. There is a real risk, if the Biden public-option idea is killed, that federalizing Medicaid would also get lost, since it has few natural champions. Democrats may revert to the doomed extra matching funding idea in H.R. 1425 to try to entice Republicans who want no part of providing health coverage to poor people.
Federalizing Medicaid for low-income adults should be the absolute minimum for any pandemic-relief reconciliation bill.
Sen. Tammy Baldwin (D-WI) and the two newly elected Democrats from Georgia are the only Democratic senators from states that haven’t expanded Medicaid, and Wisconsin used its traditional Medicaid to cover most people in the gap. Similarly, only a tiny share of House Democrats come from the 12 nonexpansion states. Democrats are focused more on concerns in their states, but they should see federalizing basic Medicaid for adults as a way to help states instead of or in addition to providing direct fiscal aid.
Biden’s plan called for letting expansion states move part of their Medicaid population into the public option if they kept paying their 10 percent matching funds, but this requirement should be dropped. Instead, they could use this moment to reward states that have been reasonable by freeing up that 10 percent to be used for other state needs, or having the federal government pick up the entire tab for Medicaid expansion.
Politically, Democrats need to do this to protect and expand their majority. In the coming midterm election, it would be a serious mistake to send Sen. Raphael Warnock back to face the voters of Georgia without delivering on the concrete needs he ran on, including expansion of Medicaid. It would also give the party powerful proof of their value to voters in Florida and North Carolina, where they hope to flip seats.
Federalizing Medicaid for low-income adults should be the absolute minimum for any pandemic-relief reconciliation bill. Biden ran on this, and the entire Democratic congressional caucus claims to support the goal of Medicaid expansion. Meanwhile, Black Americans make up a disproportionately large share of individuals who are in the Medicaid gap, and Black Americans are dying at twice the rate of whites due to COVID-19. Skipping the issue for now or merely trying to again encourage red states to eventually expand Medicaid with more money is unacceptable during this crisis.
