In states that don't expand Medicaid eligibility, thousands or even millions of low-income Americans may find themselves in a new healthcare donut hole: too rich for Medicaid and too poor for insurance tax credit subsidies.
It's in large part an unintended consequence of the Supreme Court ruling that Medicaid expansion is optional, and in small part due to the Affordable Care Act's baseline for insurance subsidies, 100 percent of the federal poverty level.
Many of the states not expanding Medicaid don't even offer coverage for childless adults, and even parents with dependent children have to be quite poor: earning below 25 percent FPL in Texas and under 56 percent FPL in Florida.
That means Texans or Floridians ineligible for Medicaid but making below 100 percent FPL could buy exchange plans, but likely couldn't receive any subsidy at all, not even the tax credit pegged at 100 FPL, the baseline for states that do not expand Medicaid, said Denise Rodriguez, an attorney with Foley & Lardner in Los Angeles.
"It is highly unlikely that those people would be able to afford coverage without the subsidy and, as a result, they would remain uninsured," Rodriguez said.
Aside from Congress amending the law and offering tax credits to anyone below 400 percent of the federal poverty level or Republican-led states expanding Medicaid under the ACA, the only solution available to the donut hole is a federal waiver. And several states are taking the opportunity.
Waivers are being sought by several states, including Pennsylvania, interested in pursuing a market-based Medicaid expansion, as Arkansas and Iowa are doing in subsidizing private health plans for the would-be expansion population.
Michigan, led by Republican Governor Rick Snyder, is also taking a novel approach to a more market-based Medicaid expansion with a still-to-be-approved federal waiver.
Under Michigan's Medicaid expansion plan, beneficiaries earning between 10 percent and 133 percent of the federal poverty level will have to make a choice after 48 months: buying a private insurance plan on the exchange, or staying on Medicaid but with new co-pays.
For the 150,000 new enrollees earning between 100 percent and 133 percent of the federal poverty level, cost sharing of up to 5 percent of their annual income will begin after six months, and after 48 months, they'll have to choose between increased cost sharing of up to 7 percent of their income or enrollment in a subsidized private exchange plan.
Nationwide, though, more than 5 million currently uninsured people who would be eligible for Medicaid may remain without coverage, in the 22 states so far declining to participate or consider expanding Medicaid. That means many hospitals in those regions, including in Texas and several Southern states, will likely continue to see uncompensated care.
The problem has the American Hospital Association wondering if providers would be able to help pay the premiums of their commercial insured patients -- a potential way to cover those in the donut hole, and more specifically to offer financial aid to patients whose insurance may be at risk of lapsing.
The question comes amid a tentative new federal rule outlining commercial insurance grace period rules. Patients failing to pay insurance premiums will have a 90-day grace period before coverage is dropped, with insurers liable for claims in the first 30 days and providers potentially on the hook for the rest.
The Department of Health and Human Services hasn't responded to the AHA question, posed at a recent webinar, but it's unlikely to lend a seal of approval to the practice, said Kathy Kudner, an Ann Arbor, Michigan-based attorney with the firm Dykema.
For Medicare and Medicaid, hospitals are prohibited from giving beneficiaries any kind of "inducements to use their facilities," Kudner said, and a number of states prohibit the same type of payments for commercially-insured patients.
"Hospitals can provide charity care and also charge sliding scale fees, so the question is whether there's a way to characterize this as sort of a discount," she said.