Why Mississippi’s GOP Governor’s Risky Bet On Medicaid Expansion Could Come Back To Haunt Him

Mississippi, one of the poorest states in the nation, is grappling with what to do about its Medicaid program. A deeply red state where the GOP controls both state houses and the governor’s mansion, Mississippi lawmakers are highly skeptical of Obamacare’s optional Medicaid expansion. So, in a last-ditch effort to protect the state’s low-income residents — as well as the fiscal security of the safety net hospitals that serve them — Democrats in the state senate sent Gov. Phil Bryant (R) a letter expressing their wish to introduce legislation that would automatically trigger a Medicaid expansion if Mississippi’s disproportionate share hospitals (DSHs) buckle under the weight of the payment cuts contained in Obamacare. Unfortunately, Bryant’s initial response to the proposal suggests he doesn’t fully understand the dire consequences awaiting his state’s safety net hospitals without an expansion of Medicaid.

For some context: as part of Obamacare’s efforts to make a dent in government health expenditures, the law contained some pretty deep cuts to so-called “DSH payments” — federal reimbursements to safety net hospitals that cater mostly to the poor and uninsured. Such hospitals need these reimbursements since their patients usually can’t afford the full cost of their care, and the DSH payments help make up for their resulting high uncompensated care costs. But Obamacare cuts these payments in half by the year 2019. The reason? When lawmakers first passed the reform law, they were working under the assumption that its Medicaid expansion would be mandatory, and that an influx of newly-insured Americans on Medicaid would reduce the federal government’s need to dole out DSH payments.

Of course, the Supreme Court ultimately rendered the Medicaid expansion optional and left it to states’ individual discretion. That threw a pretty big wrench into the Obama Administration’s plans, and is a large part of the reason the Administration has been begging states to grow their Medicaid pools; it’s also a large part of the reason that GOP governors in highly uninsured states like Arizona and Florida have embraced expansion, giving into pressure from hospital associations warning that they can’t afford to keep treating poor and uninsured Americans in the face of DSH payment cuts. But Bryant is betting that the federal government won’t actually follow through on the DSH cuts because they would violate the Supreme Court’s ruling that states cannot be “punished” for not expanding Medicaid:

“Without disproportionate share payments, many rural hospitals and hospitals that treat a disproportionate share of uninsured Mississippians will close,” Sen. David Blount, D-Jackson, said during a news conference that two dozen Democrats had in the Capitol rotunda. “People will lose jobs and people will lose access to health care, particularly in our rural communities.”

Bryant said in an interview a short time later he doesn’t believe the federal government will eliminate disproportionate share payments.

“We believe that they would be in violation of the United States Supreme Court decision, which said you can’t punish a state for not expanding Medicaid. And they certainly would be punishing us by doing that. So, I don’t think that ought to be a trigger,” Bryant told reporters in an office next to the House chamber, where he’d been having closed-door meetings with Republican lawmakers.

But Bryant’s interpretation of the Supreme Court’s ruling on the Medicaid expansion is wildly off-kilter, considering that Obamacare’s cuts to DSH reimbursements and its expansion of Medicaid — while related from a logical and policy perspective — are not legally enjoined in the Supreme Court’s decision. In other words, all that the Court’s ruling on the Medicaid expansion did was make it optional for states to partake in it — the decision did not prohibit the federal government from making technically unrelated cuts to other health care spending, so Bryant’s prediction constitutes wishful thinking more than anything else.

That dubious hope is understandable considering Mississippi’s dismal health coverage statistics: one in five state residents is on Medicaid, and an additional one in five is uninsured. Of course, it’s not totally out of the realm of possibility that the Administration will rethink its DSH cuts if it concludes that enough safety net hospitals would be harmed by states refusing to expand Medicaid. But eight GOP governors, in addition to almost every Democratic governor, have already embraced the Medicaid expansion out of fear of these very cuts and their effect on safety net providers and the poor. Furthermore, DSH payments are a far more inefficient approach to lowering hospitals’ uncompensated care costs — not to mention improving Americans’ health — than actually insuring low-income Americans with Medicaid. Increasing DSH payments would also raise the federal budget deficit, making its prospects even more dim.

Bryant, like many GOP leaders and lawmakers, doesn’t trust the federal government to keep to its promise and fund the vast majority of states’ Medicaid expansions. But those fears are largely unfounded given the historical evidence — and on top of that, the federal government has a strong incentive to follow through on its promises because it wants to see the health reform law actually work. Between cutting Medicaid funding and not cutting DSH payments, Bryant would be better off betting on the federal government to follow through on its Medicaid obligations — as would the low-income, uninsured, and disabled residents of Mississippi.