Since health reform became law, states have expressed a great deal of anxiety about expanding their Medicaid programs, releasing studies demonstrating that the state portion of the expansion (the law expands the program to 133% of the FPL) would run in the billions of dollars. But now, a new report from the Urban Institute finds that the expanded population may be healthier than current Medicaid enrollees and that states can lower their Medicaid price tag by expanding their enrollment efforts:

Results from our microsimulation model indicate that the adults who enroll in Medicaid under reform are likely to be more expensive to cover than those who remain uninsured but still not likely to be as expensive as those currently enrolled in Medicaid. [...]

The higher the Medicaid participation rate among the eligible population of adults and the less adverse selection that occurs, the lower the average costs will be under reform, and the broader the mix of new enrollees will be in terms of health status. This does not mean that the new population covered by Medicaid will be uniformly in good health since there are still relatively high percentages in fair or poor health and with two or more chronic conditions within the underlying population. But on average, those newly covered are likely to be healthier and less costly than those who are currently enrolled.

In other words, sates will have to expand their enrollment efforts to net healthier (and maybe younger) enrollees who are below the poverty line to balance the costs of covering the sicker population. But that may take some time. The study finds that “a high rate of adverse selection is especially likely in the initial period following implementation of the Medicaid expansion and the other major policy changes associated with health reform, as we expect that those with the greatest health needs will be among the first to enroll.”

Fortunately, states will receive the highest federal matching fund during that critical early period. The federal government picks up the entire tab of Medicaid expansion until 2016 and then pay for 95% of the expansion in 2017, 94% in 2018, and 93% in 2019. As we get into the out years, however, it will be critical for states to enroll more people if they wish to lower their per capita spending.

Whereas the overwhelming majority of states and governors who oppose the federal health care law are accepting its grants, Minnesota Governor and GOP Presidential hopeful Tim Pawlenty is only interested in the abstinence only portions of the law. Pawlenty has issued an executive order preventing the state from applying for any more federal funding, noting in campaign-like rhetoric that reform “represents a dramatic attempt to assert federal command and control over this country’s health care system” and “includes unprecedented federal intrusions into individual liberty“:

NOW, THEREFORE, I hereby order that:

All executive branch departments and agencies are directed that no application shall be submitted to the federal government in connection with requests for grant funding for programs and demonstration projects deriving from the Patient Protection and Affordable Care Act (“PPACA” or “the Act”) (Pub.L. 111-148) unless otherwise required by law, or approved by the office of the Governor.

The order puts Pawlenty out of sync with many cities, counties, and businesses in his state — 97 of which applied for the law’s reinsurance grants. But the sheer transparency of Pawlenty’s effort was not lost on HHS Secretary Kathleen Sebelius today, who when asked about the governor’s EO, visibly snickered before noting that Minnesota residents are already benefiting from reform:

SEBELIUS: I’m afraid of citizens of Minnesota may be the victims of whatever it is that’s coming their way. I know we have companies from the great state of Minnesota who have applied to be part of this plan.…I know that we have seniors in Minnesota who have received $250 checks for prescription drug coverage because they have reached the prescription drug doughnut hole…. So I have no idea if those are the kinds of benefits he intends to eliminate for the citizens of Minnesota.

Watch Sebelius’ reaction at :28:

In the order, Pawlenty also notes that he has already determined that Minnesota will “not participate in the early expansion of the Medicaid entitlement program offered by the federal government as part of the legislation” or apply for federal grants that could help the state review unreasonable premium hikes.

Earlier this month, 19 of the 22 states that are suing the federal government over the constitutionality of health reform applied for the rate review grants under the law, continuing the pattern of implementing the measure while also disputing it in court.
Today, HHS released the its first round of reinsurance grants to help states and employers provide coverage to early retirees who are not yet eligible for Medicare benefits. Cities, counties, and businesses in all 22 states applied for federal funds and at least 7 of the 22 state governments will receive federal funds from the law they oppose.

In the table below, the asterisk (*) denotes the state governments that applied for reinsurance directly, and the number to the right of each state is a count of the number of entities that applied for the grant in each state:

Nebraska*: 18	Florida: 69	South Carolina: 9	Texas: 94
Louisiana*: 16	Utah: 14	Alabama: 12	Colorado: 16
Michigan*: 97	Pennsylvania: 103	Washington: 35	Idaho: 20
Indiana*: 74	South Dakota: 2	North Dakota: 5	Mississippi: 5
Nevada*: 14	Georgia: 27	Virginia: 45	Missouri: 49
Arizona*: 20
Alaska*: 4

This kind of contradiction is becoming fairly common and as one Utah advocate involved in state health issues speculated, it seems that even the repeal and replace advocates realize that “this is how they have to do reform and it is important to get started and try out some of these ideas.” “I wonder if they’re not thinking well, the only way to prove reforms are wrong, is to give them a good college try,” this person told me.

Today, the Department of Health and Human Services announced the “first round of applicants accepted into the Early Retiree Reinsurance Program,” a $5 billion program established by the new health care law to help employers and states “maintain coverage for early retirees age 55 and older who are not yet eligible for Medicare.” According to the agency, “nearly 2,000 employers, representing large and small businesses, State and local governments, educational institutions, non-profits, and unions” applied and have been accepted into the program and “will begin to receive reimbursements for employee claims this fall.”

Ironically, one of those employers is the oil, chemicals, and manufacturing conglomerate Koch Industries, which as Lee Fang has reported, has also spent millions of dollars opposing reform:

The contradictory practice of opposing the health care law while applying for its funding has been a common practice among states. For instance, at least 19 of the 22 states that are suing the federal government over health care reform have applied for the law’s rate review grants and some — like Utah — are actively working with HHS to ensure that the law meets their needs. Still, Koch’s efforts to cash in from a law they’re so vehemently opposing may be the most stark example thus far.