II. Expanding Access to Health Insurance
The ACA's expansion of public and private insurance is monumental and has the potential to close the insurance coverage gap between whites and communities of color. This, in turn, has the potential to increase access to care, leading to improvements in health and a reduction in disparities. The law extends health insurance to an estimated 32 million people--almost half of them through an expanded Medicaid program providing coverage to all families with incomes below 133% of the federal poverty level, no matter the state they live in. In addition, the law establishes a health insurance marketplace that actually protects people when they're sick, ending insurers' ability to deny protection or cut off benefits when people need them most. To make private insurance coverage affordable, the law provides subsidies and tax credits that will be especially beneficial to lower- and middle-income persons of color.
The ACA's insurance coverage commitments will not be easy to achieve. Of those individuals newly eligible for Medicaid, a disproportionate share live in medically underserved urban communities where the health care risks are higher and the primary care resources are insufficient. Further, the contentious partisan politics that characterized the battle for enactment continue unabated in implementation. Medicaid makes a convenient target for conservative politicians because it represents many of the ideological right's lightning rods for outrage: federal control, major government spending, and a means-tested program that they view as rewarding poverty.
A. Medicaid
Among the most important provisions for reducing health disparities for low-income people of color is the expansion of Medicaid, the nation's safety net health insurance program. Medicaid provides federal financial assistance to states operating approved medical-assistance plans. The federal government contributes from 50% to 83% of Medicaid program costs (depending on the per capita income of the state) with the state covering the rest. Federal statutes and regulations establish basic requirements for eligibility, benefits, payment, and administration, but significant differences exist among the states in virtually all aspects of the Medicaid program.
Medicaid currently covers only a small percentage of poor, non-elderly adults; over the period 2006 to 2007, the program reached only 27.7% of these individuals. Absent a waiver, no federal funds are available to help states finance medical care for poor, non-elderly adults, unless they are pregnant, disabled, or parents or caretakers of a minor child. A few states have such waivers, but in forty-two states, childless adults cannot qualify for Medicaid. In addition, the current Medicaid program lacks a uniform definition of poverty for adults. For children and pregnant women, the program establishes a national income-eligibility ceiling of 133% of the federal poverty limit
For those adults who do not fall into existing coverage categories, some states have restrictive Medicaid eligibility standards that allow coverage for only the very poorest of the poor. The income-eligibility threshold can be as low as 17% of the FPL for working parents. In addition, many of these are also the states with large numbers of racially and ethnically diverse populations.
1. Medicaid Enhancements
The ACA extends and simplifies Medicaid eligibility beginning in 2014. The law replaces Medicaid's previous, multiple categorical groupings and limitations with one simplified overarching rule: All individuals under age 65 with incomes under 133% of the FPL who meet U.S. citizenship and state residency requirements, are entitled to medical assistance. Significantly, the Medicaid expansion will serve as a key building block to expanding health insurance coverage to communities of color; it will extend eligibility to an additional 4 million African Americans, and an additional 8 million Latinos/Hispanic Americans.
Although undocumented immigrants represent about 15% of the nation's 47 million uninsured, the legislation maintains the status quo; these individuals can get emergency care through Medicaid, but they cannot receive nonemergency care unless they pay. The RAND Corporation estimates that roughly 38% of those who remain uninsured after final implementation will be Medicaid eligible but not enrolled in it; they are people who have simply fallen through the cracks.
Without question, the Medicaid expansion is an important first step toward the goal of eliminating racial and ethnic health care disparities. A recent study by the U.S. Bureau of Economic Research shows that expanded access to Medicaid increases the utilization of health care resources (including primary and preventative care), decreases financial stress and results in across-the-board improvements in self-reported physical and mental health, including “a general sense of improved The authors are careful not to predict from their research the likely outcomes of the 2014 Medicaid expansion built into the ACA. The study also exposes serious defects in the partisan claim that Medicaid is “worse than no coverage at all,” or is a “health care gulag.” No one denies that Medicaid contains flaws and deficiencies, and needs improvement; however, its greatest detractors rarely propose improvements, only cuts or abandonment.
2. Implementation Challenges
Three topics deserve particular attention in assessing whether the ACA's Medicaid expansion will advance health equity. First, the issue of provider payments and incentives looms large. While varying from state to state, Medicaid physician payment rates have traditionally trailed those of both Medicare and employer-sponsored insurance. After controlling for inflation, Medicaid physician fees declined from 2003 through 2008. Because reimbursement is lower, many doctors do not participate in the program or greatly restrict the number of Medicaid patients they treat. As a result, Medicaid enrollees often seek care from hospital emergency rooms, federally qualified health centers, or other safety-net institutions.
The ACA attempts to confront the provider payment issue by requiring states to establish Medicaid payment rates for primary care doctors practicing family medicine, pediatrics, or general internal medicine--that achieve parity with Medicare rates in 2013 and 2014. The federal government will absorb 100% of the added costs. However, because states set Medicaid provider payment rates, the new policy will have widely different impacts on physicians and provide different incentives to serve additional enrollees. Primary care physicians in states with lower Medicaid-to-Medicare fee ratios will benefit more from the policy than those in states where there is greater existing parity between the two programs' reimbursement rates. The ACA's changes to provider payment may improve Medicaid provider participation in the short-term, but it does not address the long-term problem. Unless Medicaid payment yields rates that motivate specialists and other providers to serve the program's enrollees, troubling issues of access and quality disparities will continue.
To complicate matters further, about a dozen states are currently seeking to shore up budget shortfalls by reducing already low payments to doctors, hospitals and other health care providers. In response, the Obama Administration recently issued a proposed rule that aims to provide guidance on how to assure access to Medicaid beneficiaries. The introductory section makes clear that the administration does not intend to prevent states from cutting Medicaid provider payments. From there the rule proposes a general requirement that states considering cuts show that Medicaid recipients will have “sufficient access” to care after the provider cuts. Influential health law scholars like Sara Rosenbaum have slammed the rule, characterizing it as a deeply flawed “information gathering exercise” that lacks measurable standards, meaningful reporting requirements, and enforceable sanctions. Physicians across the country have also reacted, emphasizing that without adequate payment rates, Medicaid beneficiaries may have coverage but not real access to care.
From a health equity perspective, there is little to commend. Further reductions in payment rates can only worsen existing disparities because many of the states considering cutting rates already have severe Medicaid physician shortages. Provider payment cuts will also disproportionately burden communities of color because they already face severe shortages of physicians and hospitals. The proposal clearly elevates states' short-term fiscal concerns over the quality and access demands of communities of color.
Second, lagging commitment and capacity in some of the most populous states could jeopardize the Medicaid coverage expansion. States have long manifested vast differences both in their commitment to Medicaid and their capacity to serve enrollees. Some states have proven much more committed and administratively effective than others in enrolling and retaining those who qualify for Medicaid. Participation rates range from just under 44% in Oklahoma, Oregon, and Florida to 80% in Massachusetts and 88% in the District of Columbia. The take-up challenge under the ACA will be far from trivial. Moreover, the states that will have the greatest number of newly eligible adults under health care reform are precisely those states that historically have been worse at finding and keeping eligible adults enrolled in Medicaid. Low-income persons of color already face a host of enrollment obstacles including: completing the long and complicated Medicaid application; finding translators to assist in completing the application process; and obtaining reliable transportation to apply for Medicaid or to secure the documents needed to apply. Though the details of enrollment outreach, application processes, and renewal procedures may not be glamorous, they hold the key to success and demand strong and creative leadership from the federal government, states, grassroots activists and social justice advocates.
In terms of capacity, eight states--Oklahoma, Georgia, Texas, Louisiana, Arkansas, Nevada, North Carolina, and Kentucky--face the greatest challenges. These states are expected to have large Medicaid expansions yet now have weak primary care capacity. In addition, most of these states have large populations of racial and ethnic minorities. In the absence of additional efforts, the demand for care by newly eligible patients could be substantially greater than the supply of primary care providers in these states.
Third, the outcome of the political struggle over Medicaid in the wake of National Federation of Independent Business v. Sebelius (hereinafter NFIB v. Sebelius) will help determine the success of the Medicaid expansion. Likely the “biggest of the many surprises” found in NFIB v. Sebelius was the Court's conclusion that the ACA's Medicaid expansion scheduled for 2014 is unconstitutional. Before the case was decided, most attention was squarely focused on whether the Court would uphold the individual mandate requiring all individuals to obtain health insurance coverage. In the wake of the Court's decision, however, whether states will refuse to participate in the Medicaid expansion is a major issue, given the Court's conclusion that the Department of Health and Human Services (“HHS”) Secretary cannot enforce the expansion as a mandate.
The twenty-six state petitioners argued that the Medicaid expansion exceeded Congress's authority under the Spending Clause because Congress' threat to withhold all Medicaid funding if the states did not participate coerced the states and therefore was unconstitutional. Chief Justice John Roberts, joined by Justices Stephen Breyer and Elena Kagan and supported by a joint dissent from Justices Antonin Scalia, Anthony Kennedy, Clarence Thomas, and Samuel Alito, held that the states must be free to accept or reject federal funding and the ACA Medicaid expansion crossed this line. The Court distinguished South Dakota v. Dole where the federal government conditioned receipt of highway funding on states raising their drinking age to twenty-one. There, the funding in question was less than 1% of a state's overall budget, whereas the Medicaid funding at issue often accounts for over 20% of a state's total budget. Justice Ginsburg argued in dissent that the ACA simply changed the rules of the already established program, but Justice Roberts characterized the ACA Medicare expansion as a change so fundamental in scope and nature that it was an entirely new program.
After finding the Medicaid expansion unconstitutional, the court did not strike the provision as the dissenting justices wanted. The ruling simply prevents the HHS from requiring that all states participate or risk losing existing Medicaid funds. As a practical matter, the ruling turns the expansion into a voluntary option for the states.
Some Republican governors have made noise they will opt out of the Medicaid expansion. These pronouncements are consistent with a recurring line of partisan attack that the 2014 expansion will explode state budgets in the long term. Republicans have estimated that the expansion will cost state taxpayers an additional $118.4 billion through 2023. However, according to the non-partisan Congressional Budget Office, the additional cost to states represents only a 1.25% increase in what states would have spent on Medicaid from 2014 to 2019 in the absence of health reform. Moreover, the CBO estimates that the federal government will assume 96% of the costs of the Medicaid expansion over the next ten years. Nonpartisan budget experts have noted that the Republican estimate cherry-picks the worst-case scenarios from various studies that use different time frames and rely on flawed assumptions.
Further, the role of the federal government in bearing most of the expansion cost is clear in the statutory design. The federal government will cover 100% of the costs to states for the newly eligible population for the first three years, between 2014 and 2016. The federal government will then cover 95% of all costs in 2017, 94% in 2018 and 93% in 2019. In 2020 and for every year following that, the federal government will pay 90% of all costs for the newly covered Americans. Moreover, states that have been historically generous in providing coverage for low-income people will be rewarded. They will receive a higher federal match rate for the coverage they were already providing to adults without dependent children.
The Obama administration is putting pressure on the states to participate in the expansion, telling them that while there is no deadline for participation, they could lose federal funding if they delay. The outcome of the 2012 presidential election is also likely to determine the fate of the expansion. Republican presidential candidate Mitt Romney pledged to repeal the ACA, cut Medicaid funding, and give each state a block grant. Although the political strength of Medicaid has grown, unlike Medicare, the program does not have a large enough or consistent bloc of advocates whose vote could make a difference.
B. The Health Exchanges
The ACA creates a new marketplace--the health exchange--where individuals and families will be able to shop and compare health coverage policies. This is quite similar to the way members of Congress obtain health insurance. The law requires insurers to provide certain essential health benefits that will be equal to the scope of benefits provided under a typical employer plan. The essential benefits will be defined by the HHS Secretary, but the legislation specifies that it will include hospitalization, professional services, prescription drugs, rehabilitation services, mental health and substance use disorders services, and maternity care. In general, insurers will also be required to sell plans that provide payment, on average, of at least 60% of the total costs of covered benefits (60% actuarial
However, the creation of a “public option” insurance plan is noticeably absent. The “public option” is a hotly debated reform, which proponents argued would introduce much needed competition into the health exchanges. Instead, the ACA gives states various options to create their own new insurance plans and mandates that the Office of Personnel Management contract with insurance carriers to assure that at least two “multistate plans” are offered in every health insurance exchange in each state. It also enables the creation of non-profit Consumer Owned and Oriented Plans--co-ops. The law encourages that co-ops be statewide or in geographic regions throughout the country and provide loans and grants to help with start-up costs.
1. Premium Credits and Subsidies
To ensure that coverage in the health exchange will be affordable, premium credits will be available for individuals and some small businesses starting in 2014. Individuals are eligible for a sliding scale premium tax credit and cost-sharing reduction if their modified adjusted gross income is no greater than 400% FPL, they are not eligible for public coverage, and they do not have access to affordable employer-sponsored insurance.
Today, nearly half of the 16 million uninsured adults with incomes between 150% and 399% FPL belong to communities of color. The federal decision to subsidize the insurance purchased through the health exchange distributes federal resources in a way that is likely to move toward equalizing the health outcomes of persons of color with the outcomes of their more advantaged counterparts. In addition, the ACA ensures that premium credits are available to individuals and families at the time they purchase health coverage: The U.S. Department of the Treasury will make payment directly to the insurance company. This advance payment provision is especially important to racial and ethnic minorities due to wealth differences--the median wealth of white households is 20 times that of Black households and 18 times that of Hispanic households. These individuals would be far less likely to have sufficient cash on hand to pay the full premium upfront.
The ACA also removes all cost-sharing requirements for American Indians and Alaska Natives at or below 300% of the FPL, which is roughly $66,000 for a family of four ($83,000 in While American Indians and Alaska Natives have long been entitled to medical care through the Indian Health Service (IHS), chronic under funding has limited the services it can provide and many IHS facilities only offer primary care services. Removing cost sharing requirements has the potential to improve access to health insurance and health care for the approximately 1.1 million American Indians and Alaska Natives that are at or below 300% FPL.
Finally, the ACA explicitly puts forth a mandate for nondiscrimination in federal health programs and health exchanges by directly incorporating numerous civil rights laws. This incorporation makes clear that health plans that receive federal premium tax credits are bound by existing federal civil rights laws applicable to other federally assisted programs. Moreover, because existing law reaches both intentional and de facto discrimination, the health exchange nondiscrimination provisions should be interpreted in a fashion that parallels existing civil rights law.
2. Implementation Challenges
While the health exchange holds promise to reduce disparities in insurance coverage, targeted efforts will be necessary to ensure that persons of color are enrolled and take full advantage of benefits for which they are eligible. The health exchanges defined in the federal law are modeled on the Commonwealth Connector--the online marketplace created in 2007 for Massachusetts's health care reform. However, an important lesson from Massachusetts is that consumers using the health exchange will require considerable levels of education and support beyond customer support. In Massachusetts, consumers required significant levels of education about the health care reform program and the benefits and choices available, as well as more traditional customer support that focused on how to interact with the website and use the available tools.
The ACA explicitly recognizes that some consumers will need personal assistance to make educated decisions about their needs and the value of plans and establishes a navigator program as part of the health exchanges. The federal law proposes that groups navigate the exchange, including the chambers of commerce, unions, brokers, and community and consumer-focused nonprofit groups, chambers of commerce, unions, community-based organizations. Now, the work is making sure that states choose navigators that are appropriate to serve the needs of communities of color who will get insurance through exchanges.
More fundamentally, the health exchange will increase access only if the insurance coverage available is affordable. However, this issue is fraught with complexity and implicates a host of economic, consumer choice, and personal finance issues. Using a budget-based approach, MIT economist Jonathan Gruber found that after paying for necessities an overwhelming majority of low-income households have room in their budgets for health insurance premiums and moderate levels of out-of-pocket costs established by the ACA. Of particular importance, Gruber found that sicker low income individuals are unable to pay for premiums and typical out-of-pocket costs without reducing spending on necessities. This conclusion suggests that while the subsidies will make insurance affordable, the out-of-pocket expenses and cost-sharing will leave sicker individuals of color more vulnerable.
The affordability issue is also closely tied to the most controversial aspect of the ACA, the individual mandate, which requires that most people in the U.S. purchase health insurance coverage. Elementary health care economics informs us that if people who are in better health can opt out of the market and effectively gamble that they can pay for whatever health care they need at the point of service, prices rise in the health exchange for those who are in poorer health, leading to an “adverse selection” spiral that raises insurance prices for all.
3. Insurance Market Reforms
Other provisions likely to play an important role in reducing health insurance coverage disparities focus on employer-based health insurance reforms. Again, race and ethnicity matter here. For example, the most recent data shows that while 71% of working-age whites obtained health insurance at work; only one-third of working-age Hispanics and half of working age African Americans had employer-sponsored coverage. The ACA requires employers with 50 or more employees to offer coverage to employees or pay a penalty for any full-time employee who receives a premium tax credit for purchasing their own coverage through exchanges. Large employers with 200 or more employees are mandated to automatically enroll employees into their health insurance plans. Finally, small employers with 25 or fewer employees and average annual wages of less than $50,000 will be provided a tax credit.
These employer mandates have the potential to expand coverage for sizeable numbers of low-income populations of color. Racial and ethnic minorities are more likely to be employed by a small firm that does not offer health coverage. This is particularly true for minority owned firms; over 90% have fewer than 25 workers. Even if insurance is offered, persons of color are more likely than whites to decline coverage because of the high cost of health insurance purchased in the small group market. Indeed, data on workers in small firms indicates that approximately 57% of Hispanics, 40% of African Americans, 40% of AI/ANs, and 36% of Asians have declined employer-sponsored coverage, compared to 24% of whites. The availability of a small employer tax credit should help lower the cost of purchasing insurance in the group market and thereby decrease the cost to both the employer and the employee.
