States Find Medicaid “Silver Lining” in Court Decision

By Robert Holden, Vice President

Prior to the Supreme Court’s decision, most Court watchers’ attention was focused on the challenge to the individual mandate.   Striking down the individual mandate could have brought down the entire Affordable Care Act (ACA), or at least eliminated the private health insurance provisions of the law.  But instead of striking down the private insurance provisions, the Court instead supported the plaintiff states’ contention that the law unfairly allowed federal agencies to withhold Medicaid funding to compel state compliance with the ACA’s Medicaid expansion.  As Chief Justice Roberts stated in the Court’s ruling (which can be found here in full):

“The threatened loss of over 10 percent of a state’s overall budget is economic dragooning that leaves the states with no real option but to acquiesce in the Medicaid expansion.”

The Medicaid holding, what disappointed Colorado Attorney General John Suthers referred to as the “Silver Lining,” offers states a real opportunity to opt out of the Medicaid expansion under the ACA and continue to receive funding for their existing Medicaid programs.

The Supreme Court’s decision will have enormous fiscal impacts on the states and political implications on ACA implementation.  While implementation of a state-level health insurance exchange has always been optional under the law, Medicaid eligibility expansion to 138% of the federal poverty level was practically a given.  Federal funding would have picked up the entire direct cost of additional Medicaid claims, at least for a few years.  But the states would be required to support the administrative cost of adding, in some instances, 50% more enrollees to Medicaid programs already strained by the recession.  These additional costs were tolerable for states only given the alternative catastrophe of losing all of their existing federal Medicaid funding if they did not agree to the Medicaid eligibility expansion.  This proposition will be revisited now that they can avoid those administrative costs and receive Medicaid matching funds.

Thirty states have now either joined lawsuits to strike down the ACA, or have made formal requests for flexibility in Medicaid reform implementation.  If a large number of these states opt out of the ACA’s Medicaid expansion, and assuming implementation of the private insurance exchanges, many people formerly eligible for Medicaid will now seek federal subsidies in the health insurance exchanges.  This gives states inclined to disrupt ACA implementation leverage by increasing federal costs in two ways.  A larger number of state residents will be seeking federal subsidies – adding to the program’s bottom line.  Additionally, states could continue to opt out of creating state exchanges and rely on a federally established insurance exchange.  What the states do next will frame much of the debate as we head into the ultimate challenge for ACA implementation in November.

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Robert Holden is Vice President at Stateside Associates managing the health care practice, addressing issues concerning public and private payers, as well as service and product providers. Mr. Holden also uses his issue and policy group experience to guide the legislative and regulatory monitoring teams focusing on healthcare policy issues.

A Tale of Two Counties: Energy Development Helps Counties Go from Bust to Boom

By Jake Hegeman, Vice President

What are the biggest issues facing local governments in the Western United States? That was my question when I attended the National Association of Counties (NACo) Western Interstate Region conference in Santa Fe, New Mexico. This annual meeting brings together county officials from Midwestern and Western states to discuss common issues and identify key policy priorities—with a particular focus on agriculture, rural affairs and public lands issues. Attended by approximately 200 officials, this year’s meeting covered these issues, as well as local health care and economic development, but it was energy production (or a lack thereof) that really struck me as the hot topic for local governments throughout the West today.

A look out of a plane window over Western states shows signs of this new energy frontier—drill sites and wind turbines are becoming standard scenery in many areas. In particular, technology advances in oil and gas production have brought new energy projects online and helped drive significant economic growth in many western communities. Highlighting this trend was the news that North Dakota has become the nation’s #2 oil producer, surpassing Alaska nearly a year earlier than anticipated. North Dakota also features the lowest unemployment rate in the country.

Finding the right policies to promote energy development and reap its economic benefits are key issues at the county level. In particular, having both the right zoning and tax policies is critical. Zoning requirements that allow for development but preserve aesthetic and other quality of life factors can be instrumental in creating communities that will be successful in the long-term.  Similarly, local sales and real estate transfer taxes that balance revenue generation and economic development can be the difference between energy creating a boom or bringing with it a bust. Adding to this equation are state and federal regulatory issues—in particular an emerging patchwork of environmental requirements—that could slow the development of future projects.

Officials at the meeting also warned of logistical challenges for counties with developing energy industries. Most discussed was the need for infrastructure improvements to support the massive influx of energy sector workers. Citing years of population decline in many rural areas coupled with scarce state and federal funds, county officials noted that roads, schools and sewer systems frequently are inadequate to handle the hundreds of workers that arrive to develop new energy projects. And, many of these individuals are only in the county temporarily—meaning that the infrastructure improvements may not be needed down the road. These difficult governance challenges aside, most that commented saw the benefits of energy development as outweighing the negatives.

Overall, the meeting highlighted the reality that counties are where the “rubber hits the road”—literally in the case of energy development—and that local officials faced with a potential energy rush in their counties can learn from their counterparts across the West about what works and what doesn’t, to ensure their communities maximize the benefit of this economy-driving energy boom.

For those interested in this issue, NACo’s annual meeting July 13-17 in Pittsburgh will take a closer look, with a session dedicated to where the natural gas jobs are today.  If you plan to attend, drop me a line. I would love to hear from you about these and other issues you will be closely monitoring.

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Jake Hegeman is Vice President at Stateside Associates managing the Regulatory Services Division. He works with clients on a wide range of state and local regulatory advocacy efforts, with specific expertise in the issue-areas of energy, environment, agriculture and natural resources.