June 30th — today — is the day the enhanced federal match for Medicaid funding that was included in the 2009 stimulus package (and extended in late 2010) expires, leaving “states struggling to sustain health care’s safety net,” Judy Feder and John Halahan remind us in this Kaiser Health News column. The problem with the current Medicaid structure is that it’s counter cyclical: the rolls swell when the economy turns south and people lose their jobs. But at that point states can’t afford to expand their programs because tax revenues have also declined. Currently, Medicaid enrollment still remains high and “states’ revenues are not back to their prerecession levels.”

So what to do? Feder and Halahan propose extending the increased federal match — when states need it most — and asking them to pay back the loan once the economy recovers. Otherwise, state programs will take a hit and the economic activity that resulted from additional spending on health care services (and all the purchases that supported) will come to a standstill.

The Council On State Governments estimates that for 20 states, the Medicaid match rate in the 2012 fiscal year will actually be lower than the pre-recession rate in the 2008 fiscal year. Seventeen states will experience a rate increase (although the rates will still fall below the enhanced rates provided by federal stimulus funds) and 13 and the District of Columbia will have the same match rates in 2012 as they did in 2008. Here are the states that will likely experience the largest Medicaid cuts and adverse economic consequences if the increased federal contribution is not sustained:

The Hill’s Sam Baker notices that Republicans weren’t fudging when they promised to attach legislation repealing portions of the Affordable Care Act to critical legislation. Several Republicans on the Senate Finance Committee have filed amendments to the South Korea free trade agreement that would eliminate sections of the law or legislate other health care changes. Below is a summary of some of the most critical amendments:

– SEN. ORRIN HATCH (R-UT): repeals the tax on medical devices, the employer free rider, and the maintenance of effort provision that bars states from cutting Medicaid eligibility. He also offered amendments that would not implement the renewal of a trade assistance program “until the Secretary of Health and Human services certifies that health insurance premiums have been reduced, on average, by $2,500,” repeals a provision of the ACA that requires insurers to spend 80 to 85 percent of premium dollars on health care services (the so-called Medical-Loss Ratio), and restores “over-the-counter drug purchases as a qualified medical expense without a prescription for FSAs, HSAs, HRAs, and Archer MSAs.” A separate measure also bars any facility that provides abortions from receiving Medicaid funds — even in cases where the woman’s life is in danger.

– SEN. CHUCK GRASSLEY (R-IA): sunsets the Independent Payment Advisory Board (IPAB) as of December 31, 2020, but preserves the authority for any recommendations made under the IPAB during 2020 to be implemented during 2021 and beyond.

– SEN. MIKE CRAPO (R-ID): removes regulations which would restrict the development of the ACO model to certain providers and facilities, makes “adequate” payment updates to ambulatory surgery centers, prevents CMS from cutting physician payments when developing rates for Medicare Advantage.

– SEN. PAT ROBERTS (R-KS): repeals payment reductions to home health providers, exempts Critical Access Hospitals from consideration by IPAB for payment reduction through 2018, stipulates that regulations must be done through a notice of proposed rulemaking with a minimum of 60 days for comment to begin on date of publication of the rule in the Federal Register (this would severely slow down the implementation effort)

– SEN. MIKE ENZI (R-WY): eliminates Medicaid and insurance subsidy eligibility for early retirees (addresses the language that could allow 5 million early retirees to become eligible for Medicaid).

– SEN. JOHN THUNE (R-SD): repeals the CLASS Act, a provisions of the health care law that provides long-term care insurance.

Many of these amendments — repealing the tax on medical devices, eliminating the employer free rider provision (which requires large employers that don’t offer insurance to pay a fee if their employees are receiving government subsidies), and increasing payment rates to various providers — would increase the national deficit, something the senators don’t seem particularly concerned about. Almost all of the amendments filed list the budget offset for the spending increases as “to be determined.”

Idaho may be part of a multi-state lawsuit challenging the constitutionality of the Affordable Care Act, but that isn’t stopping Republican Governor Butch Otter (R) from taking credit for some provisions included in the law. Otter is a proponent of the exchanges and a provision that allows young people to remain on their parents’ insurance policies and is now claiming that Democrats “co-opted” his ideas and added them to their bill :

“There is a big difference,” he says, between Obamacare and a state health insurance exchange. He says the Idaho exchange was crafted in Idaho to address needs as identified by Idahoans, not put together by bureaucrats in Washington. “That was one of the first things that came up when we started working on our health care reform and our health care needs in Idaho in ’07. I called a bunch of folks from all aspects of the health care industry together and said, ‘OK, what should health care in Idaho look like?’ The whole idea of insurance exchanges, which is providing insurance packages, providing a certain level of co-pay, providing a certain level of deductible, all of those things. We’ve been working on that since ’07. It was just co-opted into the Obamacare bill.”

Idaho was ahead of the curve in supporting health care exchanges, says the governor, citing, for example, his support of keeping children on a family insurance plan until they were 23. “All Obamacare did is say we’re going to make it 26. So there were a lot of things that we were doing but for the most part they were all voluntary. We weren’t compelling people to do anything.”

Otter is still not a fan of the law, however. In April, the Governor issued an executive order prohibiting state agencies from implementing the law. “[N]o executive branch department, agency, institution or employee of the state shall establish or amend any program or promulgate any rule to implement any provisions” of the law, the directive states. The state has also passed legislation nullifying the law, something it cannot legally accomplish.

Meanwhile, HHS reports that it has “awarded $27.9 million in new grant funding” to the state.

Kaiser Health News’ Julie Appleby notes that nonprofit Blue Cross Blue Shield plans are sitting on huge reserves of cash even as they’re setting premium prices “above underlying inflation” and paying out smaller claims because of underutilization of care. As a result, net profit margins are increasing.

But some analysts believe that plans may take advantage of their growing margins to provide rebates to beneficiaries and aggressively price their products:

“The peak level of profitability that the industry is enjoying right now … (has) likely resulted in dozens of conversations in Blue Cross boardrooms across the county about how to deal with their unexpected windfall,” writes McDonald.

Earlier this month, Blue Shield of California announced it would cap its profits at 2 percent and issue rebates to policyholders. While McDonald doesn’t expect many other plans to do the same, he says “premium holidays” and other types of givebacks are possible. That’s particularly true in areas where Blues plans look like they won’t meet the new federal requirement of spending at least 80 percent of premium revenue on medical care and quality improvements.

Blues plans may also come in with more “aggressive premium pricing” – analyst-speak for rates set lower than expected medical cost trends – in several states, including Arizona, North Carolina, Illinois and Texas, he says.

Greater rebates would certainly provide some relief for consumers, but it’s important to remember that this is the trend throughout the health insurance industry: both nonprofit and profit insurers are filing premium increases above medical inflation while enjoying lower utilization rates. So next time you hear insurers complain that their profits are lower than those of others in the health care sector and blame high premium increases on health care reform, it would be good to remember what a good profitable time they’re now having.

While most other states are implementing various aspects of the health care law, Linda Shrieves of the Orlando Sentinel reports that Florida Governor Rick Scott (R) has turned down another Affordable Care Act grant — bringing the total number of dollars the state has rejected or refused to apply for to at least $54 million. The $2.1 million federal grant rejected last week would have “paved the way for the state to receive $35 million in federal funding that would move elderly and disabled patients from nursing homes to their own homes during the next five years.”

“It just gets more and more outrageous,” Laura Goodhue of Florida CHAIN told the Sentinel. “People are getting upset, especially community providers because they know this money could be put to good use… . These are our seniors; they’re our grandparents.” Scott is one of the very few governors who has refused to accept almost any dollars from the Affordable Care Act while he is challenging the law in court. Here is some of the funding the state has rejected:

– Part of a $40 million federal program to promote wellness, including helping those with chronic diseases, such as diabetes, manage their health.

– $8 million for construction of community-health centers.

– $3.4 million for in-home visitations with at-risk families.

– $2.1 million to set up a consumer-assistance office to educate Floridians about health insurance and assist them in appeals when insurers deny treatment.

– $2 million for hospice care for children.

– $2 million to $650,000 to help low-income seniors pay their Medicare premiums and buy prescription drugs.

– $1 million grant to help the state plan a health-care-exchange system that would let consumers compare insurance plans.

– $1 million to help the state insurance agency monitor rising health-insurance rates.