Medicaid rules for partial expansion

Some states have suggested limiting coverage for adults  to a sub-group of the ACA’s adult expansion category—to homeless people or to people at or below 100 percent of poverty, for example—rather than covering everyone up to the full 133 percent of poverty envisioned by the ACA. This is generally referred to as a “partial expansion.” 

The Supreme Court ruling in National Federation of Independent Business (NFIB) v. Sebelius 567 U.S. 519 (2012) made the Medicaid expansion an option for states. As a result, states can legally extend Medicaid coverage to less than the full expansion population (whether this is good health care or fiscal policy for a state is a separate question). However, NFIB v. Sebelius did not authorize CMS to pay the enhanced expansion match for anything less than a full Medicaid expansion.  

This focuses on partial expansion waiver requests in which states are asking for the enhanced Medicaid match without covering the entire expansion population. 

Partial expansion defined

The Affordable Care Act required states to expand their Medicaid program to otherwise eligible individuals below 133 percent of poverty and in 2012, the Supreme Court made this a state option. For those states who expand, the federal government pays for 90 percent of enrollees’ costs while states pick up the other ten percent. In contrast, the federal government pays for sixty percent of costs, on average, for other Medicaid enrollees. 

Under a “partial expansion,” a state would ask to exclude some or even most of the adult population with incomes below 133 percent of poverty from Medicaid coverage, yet still receive enhanced federal funding for those under 100 percent of poverty.  Currently, Wisconsin covers adults only up to 100 percent of poverty under their Medicaid programs and Virginia covers adults with mental illness who are not otherwise eligible for Medicaid: because they have not expanded Medicaid to 133 percent of poverty, they only receive the standard federal matching rate.

The Affordable Care Act and partial expansions

The Affordable Care Act never intended states to only cover a portion of expansion eligible adults. The law treats the expansion group as a unit, with the enhanced federal funds only available to states that covered the entire adult group up to 133 percent of poverty.  The law does not provide for enhanced funding for states that do not adhere to that requirement. The language defining the expansion matching rate appears in a section of the Social Security Act that the Secretary does not have the authority to waive. States have the option of expanding Medicaid coverage to less than the full expansion population (less than 133 percent of poverty), but not at the enhanced match rate.

Arguments against partial expansion

The Secretary does not have the authority to approve a partial expansion with an enhanced federal match.

  • Congress did not intend that states receive an enhanced match if they covered less than the full expansion population, up to 133 percent of poverty, defined in section 1902 (a)(10)(A)(i)(VIII). That language defines the expansion groups as, “all individuals….. who are under 65 years of age, not pregnant, not entitled to, or enrolled for, benefits under part A of title XVIII, or enrolled for benefits under part B of title XVIII, and are not described in a previous subclause of this clause, and whose income (as determined under subsection (e)(14)) does not exceed 133 percent of the poverty line.” That group, defined clearly and without any flexibility, is the group that a state must cover in order to receive the enhanced federal match. Congress clearly intended that the enhanced federal match only apply when a state covers that group in its entirety. 
  • Nothing in the Supreme Court decision making the Medicaid expansion a state option changes the requirement that a state must cover all adults up to 133 percent of poverty in order to receive the enhanced match. The Supreme Court decision making the Medicaid expansion an option for states does not change the requirement that a state must expand Medicaid eligibility to 133 percent of poverty in order to be eligible for an enhanced federal match.  In the majority opinion, Justice Roberts explicitly stated that his opinion only went to the requirement for states to expand Medicaid. He noted the Court was not rewriting the Medicaid expansion and that states that choose to expand coverage must still comply with all the requirements of the expansion.  A defining requirement is expanding coverage to 133 percent of poverty.  
  • The Secretary does not have the legal authority to approve a partial expansion with an enhanced federal match. The enhanced match is defined in section 1905 of the Social Security Act. The Secretary does not have the authority to waive section 1905. 
  • Federal guidance states partial expansions are not permissible. According to federal guidance from 2012, “Congress directed that the enhanced matching rate be used to expand coverage to 133% FPL. The law does not provide for a phased in or partial expansion.”

A partial expansion serves no demonstration purpose. 

  • 1115 waivers are intended, by statute, to serve a demonstration purpose. The effects of withholding Medicaid coverage from individuals with incomes below 133 percent of poverty are well known based on the experience of states that have chosen to not expand Medicaid. Additionally, states have the option, without an enhanced federal match, to extend Medicaid to a portion of the expansion population of adults with less than 133 percent of poverty. 133There is no demonstration value in allowing states to exclude this population from Medicaid coverage while still receiving the enhanced match.
  • A partial expansion does not promote the objectives of the Medicaid program. 1115 waivers must promote the objectives of the Medicaid program. The objective of the Medicaid program is to provide necessary medical care to eligible enrollees. Barring statutorily eligible people from Medicaid and instead offering them nothing or, in the case of those with incomes between 101 and 133 percent of poverty the option of a less generous Marketplace plan, does not further these objectives.

Individuals between 100 percent and 133 percent will receive less generous coverage

  • People between 100 percent and 133 percent of the federal poverty line who are ineligible for Medicaid through a partial expansion like that proposed by Arkansas or Wisconsin will have the option to receive coverage through the Marketplace. However, this coverage is less affordable and less comprehensive than Medicaid. 
  • Receiving less generous coverage will be particularly harmful for those who are “medically frail” or have significant health problems, including substance use disorders and mental health conditions. These individuals with serious health conditions need the comprehensive Medicaid benefit package, including long term services and supports, not offered through Marketplace plans. 
  • For 19 and 20 year olds in the Medicaid expansion, the Early and Periodic Screening, Diagnosis and Treatment (EPSDT) benefit provides them with greater access to vital preventative dental, mental health and other services. For arguments on the importance of EPSDT for 19 and 20 year olds, see our page on EPSDT. These young adults between 100 and 133 percent of poverty won’t have access to these services with Marketplace plans. 

States with a Partial Expansion Element

Arkansas
Arkansas
 

Massachusetts
Massachusetts*
 

*Waiver Pending Approval

Partial expansion for people with incomes between 100 and 133 percent of poverty will shift costs from the state onto the federal government, violating federal budget neutrality

  • Current expansion coverage is funded through a mix of federal and state dollars. People who are moved from the Medicaid expansion will be eligible for Marketplace plans with premium tax credits and cost sharing reductions, all federally funded. Because Marketplace plans are more expensive than Medicaid, the federal government ends up paying more. Ninety percent of these increased costs will be borne by the federal government, with beneficiaries picking up the other ten.
  • 1115 waivers must be budget neutral to the federal government. Secretary Price and CMS Administrator Verma underscored the importance of budget neutrality in a recent letter to governors. A partial expansion waiver that pushes costs onto the federal government is not in accordance CMS budget neutrality requirements. 

As of August 2017, partial expansions with enhanced ACA federal match had not been approved in any Medicaid program. For the reasons outlined above, partial expansion is not consistent with the goals and objectives of the Medicaid program and are outside of the Secretary’s waiver authority.

If a partial expansion is approved in your state

Even though the legal arguments against partial expansion are strong, partial expansions may still be approved.  There are things that can be done to counter the decision. 

  • Collect evidence of the impact on consumers: Legislation and waivers can be modified. Document the impact of a partial expansion on access to care, particularly for those excluded from coverage. 
  • Participate in litigation. Consumers are also potential plaintiffs in litigation making collecting stories particularly important. You may want to write a “friend of the court” brief in any litigation challenging a partial expansion, or sign on to someone else’s.
  • Plan a campaign with a broad coalition: Reach out to other groups that might be affected by a partial expansion, such as providers, health plans, and businesses whose employees might lose coverage. Build a coalition to advocate for program changes.