Capstone Project - Final for submission - 07.13.2015

CAPSTONE PAPER
The MedicaidCoverage Gap – a Look at Six States
Francis Secada
Francis.secada@baruchmail.cuny.edu
Abstract
An evaluation of six states,and their choices regardingwhether to expand Medicaid for their
poor populations or not.

Capstone Paper
1 | P a g e
Contents
Executive Summary ............................................................................................................................2
Topic..................................................................................................................................................3
Policy.............................................................................................................................................3
Organization...................................................................................................................................4
Question........................................................................................................................................4
Policy Network ...............................................................................................................................5
Hypothesis/Claim............................................................................................................................5
Literature Review ...............................................................................................................................6
Private Health Care Market Failures: An Overview............................................................................7
Insurance Failures .......................................................................................................................7
Government Involvement with Health Market Failures...................................................................10
Medicaid before the Affordable Care Act: State/Federal Partnerships ..........................................12
Contrasting Views on Health Care..................................................................................................14
Medicaid expansion as a Drain on State Economies.....................................................................14
In support of restructuring the Health Markets Nationally...........................................................16
Research..........................................................................................................................................20
Research Frame + Selection...........................................................................................................20
The Data.......................................................................................................................................22
Conclusion .......................................................................................................................................25
Notes on Research and Analysis ........................................................................................................27
References.......................................................................................................................................30
Appendix: Dataset and Graphs ..........................................................................................................32
CompileddatafromUS CensusBureau’sCommunityPopulationSurvey(CPS), viaKaiserFamily
Foundation...................................................................................................................................32
Graphs.........................................................................................................................................33

Capstone Paper
2 | P a g e
Executive Summary
This capstone paper evaluates the consequences of the National Federation of Independent
Businessv. Sebelius SupremeCourtDecision in 2012. Specifically, the ruling onthe Medicaid
expansion resulted in states being able to choose between opting in or out of the public
insurance expansion, resulting in the emergence of a “Coverage Gap.” This gap is defined as
the number of people who are excluded from having health insurance, who would otherwise
qualify under the new federal guidelines. The review of surrounding literature will detail
the circumstances that led to the need for the legislation of the Affordable Care Act, and how
the Individual Mandate andthe Medicaid expansionweredesignedto work togethertowards
addressing market failures related to adverse selection and Death Spirals of insurance risk
pools.
A comparative view for addressing concerns with promoting health insurance participation
seeks to weigh the merits ofpromoting private insurancecoverage capacities by diminishing
Medicaid’s supposed crowding-out effect against the need for a stronger regulatory
approach for promoting insurance participation. The opposing sides can be best simplified
by the competing rhetoric of emphasizing private insurance over Medicaid, and the need to
expand insurance participation with both private insurance and Medicaid, and the need for
regulatory mechanisms to facilitate this.
Data analysis on a sample of six US states demonstrates how states that do not opt into the
Medicaid expansion artificially inflate their number and rates of uninsurance among their
vulnerable populations. Modeling a scenario in which the two treatment states expand
Medicaid results in the treatment group lowering the number of uninsured significantly.

Capstone Paper
3 | P a g e
Topic
The topic of this paper is about The Patient Protection and Affordable Care Act (PPACA) of
2010, known colloquially as The Affordable Care Act or Obamacare. This act changed the
national landscape of healthcare for all citizens within the United States, by mandating
individual coverage for all qualified adults through various mechanisms that are
administered on the state level. Individuals must buy qualified health insurance policies
under penalty of a fine/tax that is collected by the IRS during federal filing season.
Individuals who are not able to bear the full burden of obtaining private insurance are able
to qualify for federal subsidies that offset monthly premium costs. Individuals who earn
under 138% of the Federal Poverty Level (FPL) would qualify for Medicaid. However, due
to the decision ofNational FederationofIndependent Businessv. Sebelius in 2012, states are
able to choose whether to opt into the new Medicaid agreement with Centers for Medicare
& Medicaid (CMS) or to remain with their previous contract. Because eligibility levels for
Medicaid vary across state lines, this court decision introduces fragmentation within the
federal framework of the law. Therefore, achieving full insurance rates while lowering the
rate of the uninsured is complicated
Policy
The specific policy that will be evaluated will be the Medicaid expansion component of the
Affordable Care Act. Specifically, this law simplified eligibility for Medicaid insurance by
removing most categories, and expanding the insurance to most individuals who earn below
138% of the federal poverty level. States who accepted this Medicaid expansion component
of the law were able to provide insurance to the impoverished while also receiving sizeable
assistance from the federal government. In regards to new Medicaid Spending, the federal

Capstone Paper
4 | P a g e
government provided scaled financing, covering 100% of initial costs of Medicaid spending
in the first three years, then reducing funding until achieving a 90% funding rate by 2020.
Within a time horizon from 2010 to 2020, states can potentially achieve a 10:1 match of
Medicaid spending.
Because of the NFIB v. Sebelius, SCOTUS decision, states are not obligated to enroll in the
new federal Medicaid program. Therefore, there is a research opportunity to draw
comparisons between states that have opted into participation with the new Medicaid
provisions, and states that have opted out of the new arrangement.
Organization
The organizations that will be covered within this research paper will be six states within
the United States of America. Those states will be California, Illinois, Mississippi, Missouri,
New York and Ohio. They will be grouped according to the kind of state exchanges they have
(federally-facilitated state exchanges, state partnership exchanges, and state-based
exchanges). These states will also be grouped according to whether they have opted in or
out of the Medicaid expansion.
Question
The question that will be addressed in this research paper is: Do states that opt out of the
Medicaid expansion cause people, who would have been newly qualified for Medicaid, to be
pushed out of insurance participation? This will be gauged with federally reported figures
ona selection ofvariables, suchas total population, numbersofthoseinsuredand uninsured,
uninsurance percentage, and number of people who may fall into the new coverage gap.

Capstone Paper
5 | P a g e
Policy Network
The audience for this paper will include a variety of non-partisan and left-leaning think
tanks, non-profit care organizations that have been impacted by the law, and various
governmental agencies and stakeholders that have an acute interest in a state’s decision to
participate in the Medicaid expansion.
Hypothesis/Claim
I hypothesizethat the states that chooseto opt outofthe Medicaid expansioncreatecoverage
gaps for their lower-income citizenry. Specifically, because the Medicaid expansion was a
significant component for reducing the number of uninsured individuals, federal subsidies
for private insurance options within state exchanges were capped at above 138% of the
Federal Poverty Level. Therefore, those who would qualify forMedicaid are not qualified for
federal subsidies to purchase private insurance options within state exchanges.
Consequently, states that opt out of the expansion expose otherwise qualified citizens to
continued lack of insurance, despite federal dollars being available to provide coverage at no
expense to states at the initial stage.
Because states can opt in and out of the Medicaid expansion, a natural experiment can be
observed in regards to evaluating 1) the number of people who could be left out of insurance
pools from the larger uninsured population; and 2) the percentage of overall uninsured
populations that coverage-gap individuals comprise.

Capstone Paper
6 | P a g e
Literature Review
The Affordable Care Act is a wide-ranging piece of legislation that seeks to address the
various gaps and inefficiencies that pervade in the healthcare system. The “three-stool”
approachto healthcarepolicy focusesonissuesrelated to insurancecoverage,accessto care,
and quality of care. Insurance coverage priorto the law was largely left to self-regulation, in
that health insurance policy options were sold and managed in accordance to what the
market allowed. The insurance market functioned on the principle of actuarially fair market
value, in which individuals with a specific risk rating would pay the cost to insurance against
the possibility of entering an adverse state. Therefore, if an individual who is predisposed
to Diabetes due to family history seeks insurance to protect against health costs associated
with that condition, the insurance rate would have to reflect that increased probability.
Access to care, too, was ultimately left to market forces, where hospitals and medical
practices emerged based on need. Primary and Secondary Care physicians practiced
medicine in either individual or group practices, or part of larger health care or hospital
networks. Private hospitals developed from community care centers that treated the sickest
to non-profit or for-profit facilities that provide wide swaths of medical services, addressing
the secondary, tertiary, and long-term needs of patients. Care was typically compensated
through a variety of pay schedules, but the predominant fee schedules were fee-for-service
or Diagnosis-Related-Group billing. In the former payment scheme, providers were paid
according to the services they provided, while in the latter, a bulk reimbursement rate that
is pre-determined is set aside for the hospital or group practice.

Capstone Paper
7 | P a g e
Private Health Care Market Failures: An Overview
Inefficiencies that were present in the health care infrastructure were related to weaknesses
in the market’sability to self-regulate. By this, the threeaspects ofhealthcarewere impacted
by market failures.
Insurance Failures
Private sale of insurance policy options contained a variety of perverse incentives that
affected the exchange between insurance firms and individuals. To begin, information
asymmetry between firms and buyers prevented each from operating with full information
(and some have argued that consumers of health insurance and health services lack
meaningful understanding of their own health and body). People are more aware of their
family history than firms are of them, while firms may have a better understanding of
community and global trends in health costs, spending, research, and availability of
providers. Additionally (and consequentially), people with a variety of risk factors and
probabilities of needing care attempt to purchase insurance at the same price, which
negatively impacts healthier or more risk-averse individuals, while subsidizing sicker or
risk-tolerant individuals. Because people do not pay the actuarially fair price for insuring
themselves against adverse states, insurers are at risk of exposure to financial losses. As a
result, insurers resort to a variety of categorization techniques to have people either self-
select themselves into appropriate insurance levels or engage in individual risk assessments
to underwrite one’s insurance policy. The result of this was that individuals with greater
need for health insurance (in order to secure access to health) ended up paying increasing
rates for insurance coverage (as healthier people opted out for more cost-effective options)

Capstone Paper
8 | P a g e
while individuals with a statistical probability of becoming sick ended up being priced out of
individual insurance policy options1.
The onlytrue meansofobtaining meaningful insurancecoveragewas throughgrouppolicies,
which were mostly concentrated within large companies that had the necessary negotiating
power to obtain a generous policy rate (or have enough money and resources to self-insure
their employees).
Upon the publication of the Health Insurance Experiment by the RAND Corporation in the
1980s, health insurance companies began experimenting with new co-insurance schemes.
Instead of providing full insurance for a monthly fee, insurers started to provide coverage
with a variety of cost-sharing mechanisms, including deductibles (what one pays before the
insurance takes effect), co-pays (what one pays upon accessing care), and premiums.
Additionally, insurers could opt to force providers either to absorb costs from
uncompensated care or to pass it onto the patient. So if a patient is covered for Neurology
appointments, but only 80% of the fee schedule, then a $75 visit could end up costing a
patient $44.60if the scheduleprice is $38 pervisit with a coinsurancerateof80% (or$75.00
– [$38 X .80] = $75-$30.40 = $44.60). With patients taking on more of the burden of health
care costs, new concerns emerged for populations that could not effectively access primary
or secondary care due to inability to shoulder those cost burdens.
1 (Cutler & Zeckhauser, Adverse Selection in Health Insurance,1997)

Capstone Paper
9 | P a g e
As insurance became the preferred fringe benefit for employees by employers, so did the
solidification of health insurance and health services being a prominent component of the
national economy.
The evolution of health insurance formats from pure indemnity insurance to Health
Maintenance Organization (HMO) insurance options to Approved Plan Provider Networks
(or Plan Provider Organizations or Exclusive Provider Organizations) failed to successful
control spending by health providers; rather, these plans progressively shifted the costs of
care from insurers onto individuals. Furthermore, attempts by insurers to control costs may
have triggered the ongoing competition between insurers and medical providers to gain
dominance in negotiating annual contracts. Throughout the 1990s, medical groups and
hospitals beganmerging into larger entities in orderto create competitive organizations and
alliances, leading to the proliferationoflarge carenetworks. Insurershavealso merged with
other firms in order to gain prominence in the health care sector, while also staving off the
dominant positioning of health organizations2. While these dominance behaviors have
occurred prior to the 90s, it had proliferated to a tipping point.
Traditional reimbursement was providedon afee-for-servicebasis,in which oneservicewas
billed at one rate, while another service was billed on another. As this incentivized
physicians to provide as much services as possible, insurers sought a better method for
compensating care. A significant development was the emergence of the Diagnosis-Related
Group fee schedule. Within this reimbursement scheme, hospitals and physicians would be
compensated a set amount for the expected care needed to treat a diagnosis. Any care above
2 (Conflictand Change in America's Health Care System, 2012)

Capstone Paper
10 | P a g e
what was needed would be uncompensated, and the health firm would absorb those costs.
While this sought to bundle related services under one rate, it also encouraged medical
providers to render care in accordance to diagnoses.
Government Involvement with Health Market Failures
The seeming absence of talking about social insurance programs and government’s role in
regulating healthcareis nota means ofdismissing its impact or its importance. It is to signify
that healthcare in the United States is a result of piecemeal legislation. Pathways towards
insuring and compensating for care are obfuscated by variances in insurance schemes,
stakeholders, and government involvement with addresses failures. As a result, there is
robust policy and implementation of social insurance programs across federal and state
governments, but no platform to put forth a unifying national health insurance framework
prior to the Affordable Care Act.
The variety of pre-existing social insurance programs that address market failures through
intervention and regulation. Germane to this paper are the programs that affect health care
and health insurance for vulnerable populations. Medicare and Medicaid, for example, are
insurance programs designed to provide affordable and equitable insurance coverage for
peoplewho were effectively pricedout ofprivateinsurancemarkets. Medicareaccomplishes
this by using dedicatedtax dollarsto fundinsurancetrusts that then payformedical services.
Medicaid is provided through federal allocations to state governments through block grants.
Other public insurance options like Veteran’s Affairs Insurance, Children’s Health Insurance
Plan (CHIP) and so forth provide coverage according to categorical eligibility (e.g.: VA for
veterans, CHIP for vulnerable children etc.).

Capstone Paper
11 | P a g e
Social insurance programs are effective in fulfilling their mission, which is to provide for
vulnerable populations through redistributive means. However, these social programs do
not address issues related to access of care and quality of care completely. What can be
accomplished is only done so in piecemeal, and not as part of a more comprehensive attempt
to address the structural inefficiencies of the market. Medicaid and Medicaid dollars go to
states, who thenpay hospitalsforall the charity carethat is provided. So ratherthaninsuring
vulnerable demographics from adverse health events, it is paying hospitals who treat
patients in inpatient settings. All the while, those who are insured via Medicare have
received varying levels of care from participating providers, but without clear indications as
to the optimal levels ofcare. Succinctly, individuals living acrosshighand low-yielding areas
can largely achieve similar health outcomes, regardless of the spending amounts3.
While these insurance programs may be successful in fulfilling their missions (to protect
vulnerable populations), they do not address the larger concerns of the total healthcare
market. They promote socially optimal levels of care, but they do not address causes for
health disparities or ensure provider choice for patients. They protect vulnerable
populations from suffering long-term health effects from prolonged lack of insurance, but
they do not address erosion of coverage from the general health insurance market. They
help expand access to care, but they do not address deficits in efficiencies and efficacies of
health care. Simply, these programs inject federal dollars into a growing health insurance
market, while failing to address the structural issues that cause prolonged instability.
3 (Cutler, Walkingthe Tightrope on MedicareReform, 2000)

Capstone Paper
12 | P a g e
Medicaid before the Affordable Care Act: State/Federal Partnerships
Medicaid is a federal health insurance program specifically targeted for vulnerable
populations. While mostly inclusive, it is geared towards helping those in poverty. People
who have incomes in proximity to the Federal Poverty Level (FPL) can be eligible for
coverage,providingmeaningful reliefwhen being pricedoutofthe private market. However,
this federal program is administered by each state, with their own levels of participation.
Medicaid was initially treated as an opt-in program for states, where the federal government
provided a 1-for-1 spending ratio for those looking to provide care for the impoverished.
Requirement for participation was to accept minimal categorizations for eligibility, but left
additional levels optional to states. Arizona became the last state to enter into agreement
with CMS in 1982 to form the Arizona Health Care Cost Containment System (AHCCCS)4.
Since then, states have been largely left with the option and incentive to operate their own
programs.
While this level of flexibility provided states the opportunity to construct public insurance
to match their own specific needs, the minimum requirements only covered vulnerable
populations based on specific categories. For example, states must provide coverage for
pregnant mothers, children, and the disabled. They do not have to provide insurance to
single men or women who live below the federal poverty level. Most states opt to provide
some kind of coverage for these individuals, but median percentage of federal poverty level
is roughly 44%. This kind of variance in the categorical qualifications for Medicaid creates a
porous safety net program, where many individuals in need pass through because they do
4 (National Health Policy Forum, 2000)

Capstone Paper
13 | P a g e
not qualify. Furthermore, individuals that actually qualify for Medicaid may end up not
enrolling or accessing the entitlement.

Capstone Paper
14 | P a g e
Contrasting Views on Health Care
Medicaid expansion as a Drain on State Economies
Conservative perspectives on the Medicaid expansion are specific to a central theme. This
theme is the crowding out of private insurance options for low-income patients while
exacerbatingclinical outcomesofpatients. Medicaid is the lowest-paying insuranceprovider
of all other insurance programs in the United States, as it attempts to be the provider of
lowest costs. Much is this is attributed to federal contribution rates being determined by the
Federal Medical Assistance Percentage (FMAP), which is done through a methodology that
incorporates variables like income-per-capita5. States can choose their level of participation
or their generosity rate, depending on whether they can demonstrate that they can cover
their share of all state Medicaid expenses. That being said, Medicaid’s reimbursement rate
is often measured as a percentage of Medicare’s established rates for a given year, although
there is wide variability across states. For example, Rhode Island’s rate reflects the national
average of 58% while Alaska had a Medicaid rate that was 242% of Medicare’s6. For a
significant number of states, the lower reimbursement rates contribute to the systemic
weaknesses in accessto careand quality of caremetrics. This is reflected in researchby Avik
Royofthe Manhattan Institute7, in which Chapin White’sstudy onthe formationofChildren’s
Health Insurance Program’s Program yielded results that demonstrates quality of services
and access to care being chiefly determined by provider payment rates8.
5 (Centers for Medicareand Medicaid,n.d.)
6 (How Much Will Medicaid Physician Fees for Primary CareRIse in 2013? Evidence from a 2012 Survey of Medcaid
Physician Fees,2012, p. 1)
7 (The Medicaid Mess: How ObamacareMakes itWorse, 2012)
8 (A Comparison of Two Approaches to IncreasingAccess to Care: ExpandingCoverage versus IncreasingPhysician
Fees, 2012)

Capstone Paper
15 | P a g e
The reported crowding out of private-insurance enrollees for public insurance9 introduces
concerns that Medicaid recipients will end up suffering in health outcomes as compared to
private insurance recipients. Less physicians accept Medicaid due to its low reimbursement
rates, and more Medicaid patients experience higher incidences their insurance not being
accepted, of physicians declining to take them on as new patients, and die more often than
private insurancerecipients when receiving the same care (Herrick, 2010). This is conjoined
with the concern that the cuts to the Disproportionate Hospital Payments over the decade
will erode states’ abilities to provide needed hospital care to the very sick (and the
impoverished)10.
With these factors working in confluence, Medicaid recipients end up having to use services
more often, creating bigger costs to the state and federal government, and achieve poorer
outcomes than private insurance recipients achieve. Bureaucracies and infrastructure
considerations also come into play, as states would have to adapt to the increased demand
from Medicaid recipients to accommodate the demand surge. As most non-Medicaid
expansion participating states demonstrate, they have a significant uninsurance rate that
would lead to additional expenditures. Furthermore, with a significant percentage of
Medicaid recipients being individuals who had qualified under the previous categorical
requirementsbut didnot enroll,they would addnotableexpenses,asthe federalgovernment
would provide funding under the old Medicaid agreement.
Alternative proposals have been made in response to these concerns. First, states can
request additional federal funding, but to have the monies be directed towards increasing
9 (Crowd-out Ten Years Later: Have Recent Public InsuranceExpansionsCrowded out Private Health Insurance?)
10 (Medicaid Expansion will Bankruptthe States, 2010)

Capstone Paper
16 | P a g e
reimbursement rates. Second, Medicaid recipients should be allowed to participate in the
state exchanges, and purchase their own insurance through it, similar to how Arkansas is
implementing the Medicaid expansion. Finally, states can request block grants to make
changes to state Medicaid programs, much like with the Welfare Reform movement of
199611. These separate proposals seek to encourage participation in achieving insurance
coverage while subsidizing private plans through federal subsidies.
It is worth noting that conservative arguments against the Medicaid expansion (and the
Affordable Care Act in general) do not necessarily argue against the existence of a health
insurance coverage gap. However, within the provided framework, the solution towards
addressinggapsin coverageis purportedto befoundthroughprivate insurancemechanisms
that bumps up the starting positions of low-income individuals. In Florida, for example, the
drafting of the Florida Health Choice Plus (FHCP) as an alternative towards the Medicaid
expansionwouldpromoteparticipation byproviding subsidiesin a $2,000annual grant,plus
a $25 monthly subsidy forthe purchasingof health servicesand insurance12. The idea is that
subsidizes low-income individuals through a voucher-like system will lower health costs,
although this option does not address the cause of the Coverage Gap (i.e.: the state’s refusal
to expand Medicaid).
In support of restructuring the Health Markets Nationally
Government insurance options have been traditionally been crafted as a responsive to
failures in private markets. What this means is that these interventions are definitively
reactive. This is because governments do not necessarily have to intervene with markets via
11 (The Medicaid Mess: How ObamacareMakes itWorse, 2012,p. 5)
12 (Bragdon, 2013)

Capstone Paper
17 | P a g e
regulatory routes, but can effectively induce change by entering the market themselves.
Medicare,forexample, competeswith otherprivate insuranceoptionsforenrollees. Because
the target demographics for this insurance are the elderly and the formerly working
disabled, the actuarially fair market price for insuring against related conditions may be
beyond what many individuals can afford. Medicare is able to provide meaningful insurance
to these demographics for a significantly lower price than what can be provided privately.
CMS does not institute regulations for private insurance markets, so the impact of the
Medicare and Medicaid are observed by their effectiveness in improving health outcomes as
insurer providers. However, government participation as a providing firm in a market place
does not necessarily address the true market failures of the health care system.
Comparisons between public and private insurance options may invite false equivalencies
because of the different types of customers that are treated. Private insurance options on
average may provide more generous payments to providers for care, but they also contain
coinsurance schemes and associated costs. Additionally, private insurance options are most
utilized through employee-based insurance, where individuals are insured via group
policies. Employers may be motivated to reduce healthcare costs to their employees by
offering various insurance plans, which would result in employees self-selecting into
appropriate risk pools. However, those in need of health care can end up experiencing
increasing annual premiums and deductibles if healthier people continuously opt out of
policies that are more generous and into more affordable options. In this way, healthier
peoplebenefit fromprivate insuranceoptions while sicker peopleareat greaterrisk ofbeing
priced out of coverage.

Capstone Paper
18 | P a g e
Individuals who opt into public insuranceprogramscangain meaningful insurance coverage
while avoiding increasing cost-sharing. These individuals, because of their needs and
preferences, are typically sicker and in greater need of services. People who are sicker
typically are in greater need of healthcare services than those who are healthy. People who
must bear greater shares ofhealthcare costs forreceiving medical and clinical care are more
likely to ration the utilization of care, and will likely forego care until their needs become
urgent or emergent. It can then be presumed that people who are priced out of private
insurance tend to be poorer, and those who are poorerare most likely to also be sicker than
those who can maintain private insurance. The RAND Corporation released a major study
on health insurance in 1984 that demonstrates this point. Individuals who have established
needs for ongoing therapeutic care or has a well-established diagnosis benefitted most from
receiving free care (i.e.: having no cost-sharing for their insurance)13.
With this consideration, the accusation of public insurance crowding out private insurance
may be exaggerated. Individuals who may end up benefitting the most from Medicaid
expansion are childless adults and disabled adults. Of disabled adults, it is possible for the
newly eligible Medicaid beneficiaries to be less expensive in terms of risk factor and
projected costs than the previously qualified disabled who receive Supplemental Security
Income (SSI) from Social Security14.
By removing categorical eligibility requirements, the poor uninsured can achieve insurance
coverage by verifying their income levels. With a push to provide state funding to remove
13 (Brook, et al.,1984)
14 (Medicaid Expansions for theworking age disabled;Revistingthe crowd-out of privatehealth insurance,2014,p.
79)

Capstone Paper
19 | P a g e
barriers to applying, as well as checking eligibility through health exchange web portals,
individuals who fulfill their obligation to obtain insurance may find themselves fully eligible
for insurance free of coinsurance charges. Individuals who earn between 139% and 400%
of FPL can qualify federal subsidies to offset the costs of their health insurance plans. By
instituting regulatory requirements on insurers to drop Experience Rating practices for
individuals and to discriminate against policyholders based on pre-existing medical
conditions no longer, people who were previously priced out of private insurance can now
achieve insurance coverage.
While Medicaid payment rates vary across states, long-term medical costs can be managed
and ultimately controlled through mechanisms of the Affordable Care Act. What is integral
is facilitating access to care, by both ensuring that insurance allows for continuous coverage
forindividuals, andby encouragingpreventativecareservicesthroughreducingcoinsurance
for annual visits. Promoting Preventative Care would reduce costs by facilitating earlier
detection of health conditions, with consistent screening and provision of resources to
engage in health maintenance behaviors. Promoting insurance rates and preventative care
would help reduce costs associated with emergency care and increases in charitable care.
Consequentially, Disproportionate Share Hospital payments by Medicaid would be reduced
because of the number of indigent populations would decrease through the state exchange
and the Medicaid expansions15.
15 (The Evolution of Support for Safety-Net Hospitals,1997)

Capstone Paper
20 | P a g e
Research
Research Frame + Selection
This paper will evaluate the relationship between the independent variable of Medicaid
Option status, and the dependent variable of the number of people who exist within the ACA
Coverage Gap. Other variables to be evaluated include a state’s marketplace type, the
number of those insured, the number of those uninsured, total state population, the
Uninsured Percentage Rate, 2015 figure for Adults in Coverage Gap, and the Uninsured Rate
if the Medicaid expansion were to be universally applied across states. Information was
obtained by the Community Population Survey via the US Census Bureau. Information was
cross-referenced by the Kaiser Family Foundation’s State Health facts database.
The following states are being evaluated.
 California: the most populated state in the union, home to a significant immigration
population. California is one of the handful of states that opted in at the beginning of
the Affordable Care Act’s expansion. Because the Affordable Care Act limits
undocumented immigrants from being eligible for both the Medicaid expansion and
federal subsidy funds for the state exchange.
 Illinois: the fifth most populated state in the union, with a significant low-income
population. Illinois is one of the handful of states that opted in at the beginning of the
Affordable Care Act’s expansion.
 Mississippi: the 31st most populated state in the union, with a significant number of
individuals who live at or below the Federal Poverty Level. It is one of the handful of
states that have opted out after the NFIB v. Sebelius SCOTUS decision.

Capstone Paper
21 | P a g e
 Missouri: the 28th most populated state in the union. Despite having a Democratic
governor, the state has chosen to opt out after the outcome of NFIB v. Sebelius.
 New York: the third most populated state in the union, with a significant
undocumented immigration population. The state is known for being among the
most generous in terms of providing Medicaid benefits as part of its agreement with
Centers for Medicare and Medicaid. It is among the handful of states that opted in at
the beginning of the Affordable Care Act’s expansion.
 Ohio: the seventh most populated state in the union. Despite having a Republican
governor, the state opted to opt in at the beginning of the Affordable Care Act’s
expansion.
Out of the selected six states, two states have decided to opt out of the expansion. California
and New York have state-based Marketplaces for their exchanges, Illinois has a state-
partnership marketplace, and Missouri, Mississippi an Ohio have federally-facilitated
marketplaces. States Exchanges that are not state-based have systems and digital
information filtered through the healthcare.gov website.

Capstone Paper
22 | P a g e
The Data
Of the chosen six states, California and Mississippi have the highest percentage of uninsured
population, at 17%. Illinois and Missouri have a 13% uninsured population rate, and Ohio
and New York have 11%. Among the highest percentage states, California has over 6.5
million people without insurance, while Mississippi has just shy of 500,000 people without
insurance. Illinois has 1.6 million people without insurance, and Missouri has close to
773,000 people without insurance. New York has close to 2.07 million people without
insurance, and Ohio has close to 1.26 million people without insurance.
As stated earlier in the paper, because four of the six states have accepted the Medicaid
expansion, it is difficult to determine how each state has been impacted by the increased
Medicaid rolls and the significant funding that is provided by the federal government.
Because the figures are not easily separable, it is difficult to analyze how states would have

Capstone Paper
23 | P a g e
fared without the expansion. However, because states can choose to opt in or out of the
expansion, people in the uninsured population can be separated into those who would
qualify under the new Medicaid eligibility criteria, and the older requirements as dictated by
the state’s own specific criteria. These individuals can be counted as a separate metric.
Becauseofthe variances in statistical reportingbetween national andstate figures,complete
and workable datasets up to 2013 are available, while 2014 is available in a more piecemeal
fashion. The determination forthe numberofadults within thecoveragegaparedetermined
based on the 2014 Population Survey by the US Census Bureau and the 2014 Medicaid
eligibility guidelines.
The data show that Mississippi and Missouri have 107,000 and 147,000 people who are
currently within the Medicaid Coverage Gap. That translates to 21% and 19% of the total
uninsured state populations, respectively. If states were compelled to expand Medicaid
under the new Expansion guidelines, those numbers would then be tallied into the Insured
column.

Capstone Paper
24 | P a g e
Under the Medicaid expansion for All States scenario, Mississippi would reduce their
uninsured population to 392,840, while Missouri would reduce their uninsured population
to 625,833. Their percentage of the uninsured would drop to 13% and 11%, respectively.

Capstone Paper
25 | P a g e
Conclusion
The findings suggest that opt-out states maintain an uninsured population percentage that
is onpar with morepopulatedopt-in states. IfMissouri andMississippi chooseto participate
in the Medicaid expansion, then they can reduce those percentages to reflect those of Ohio
and New York. Those states would be able to provide meaningful insurance to 254,000 low-
income individuals who qualify under the new federal Medicaid guidelines.
These findings demonstrate that within this testing sample, there is direct causal
relationship between opting out of the Medicaid expansion and producing a new population
of individuals who fall into the coverage gap. Because of the wording of the law, these
individuals cannot participate in state exchanges because they are not qualified to receive
federalsubsidies to offsetthe costs ofprivate health insurance. Expanding coverageto these
individuals would bring them into compliance with the individual mandate, and the costs
associated with providing coverage to these individuals would be significantly covered by
the Federal Government (100% of all initial new Medicaid spending, decreasing to 90% by
2020).
Further research should be conducted to look at all 50 states within the country, and to do
repeat the separation analysis based on state’s Medicaid expansion status, number of
uninsured individuals residing in the state, and the rate of uninsurance as part of the states’
total population figures. Once data becomes robust enough to evaluate figures for 2014 and
2015, data should be analyzed to determine how many new beneficiaries are produced by
states who have opted into the expansion, and use that figure to determine who would have
fallen into the coveragegaphadthey chosen differently. If data permits, per-capita spending
for the uninsured should be determined based on state levels for uncompensated care, and

Capstone Paper
26 | P a g e
DSH funding and other governmental funding sources. Lastly, Medicaid figures should be
compiled to determine a cost-per-capita rate that allows for comparisons between Medicaid
and Uninsured care provisions.

Capstone Paper
27 | P a g e
Notes on Research and Analysis
There are significant considerations when evaluating this analysis. First, the data used to
determine the percentage of individuals lacking insurance were compiled for 2013. As such,
these figures do not represent state figures after the introduction of state exchanges and the
Medicaid expansion. Robust datasets for 2014 and 2015 are not currently available, making
calculations forstate figures relating to new Medicaid enrollments, total insurancerates, and
previously-ineligible enrollment unavailable for analysis. Secondly, information on the
CoverageGapis taken fromthe2014 CurrentPopulationSurvey,conducted bythe US Census
Bureau. Because the compiled data were collected from various sets across a two-year
period, the findings may not reflect the numbers of people who currently fall within the
Coverage Gap. Finally, a causal relationship is not necessarily proved by the data, although
a relational demonstration is presented graphically. The cause is directly rooted in both the
structure of federal funding from the language of the Patient Accountability and Affordable
Care Act language, and the outcome of the NFIB v. Sebelius Supreme Court Decision. States
were initially compelled to expand their eligibility requirements on pain of forfeiting the
previous existing contract with Centers for Medicare and Medicaid, but gained the reprieve
after SCOTUS found the expansion to be unlawful.
The Coverage Gap that exists varies from state-to-state. States like Mississippi have very
stringent eligibility requirements to access the public insurance, while states like Wisconsin
were among the most generous with Medicaid benefits. So while both states are examples
ofstates that haveoptedout ofthe Medicaid expansion,they will both havevarying Coverage
Gap rates, as they have differing starting positions of generosity. Additionally, certain states

Capstone Paper
28 | P a g e
have higher concentrations of immigrant populations, with a significant percentage of that
segment being comprised of undocumented immigrants. When evaluating the coverage gap,
undocumentedimmigrants andlegal immigrants that havebeenin the countryforunderfive
years are filtered out of the analysis, because they are not eligible for federal subsidies or
participation in the state exchanges. Some states have varying degrees of eligibility for these
segments ofthe population,but previousCMSagreementsstipulated that states hadto spend
their own monies to insure them.
While this paper demonstrates how insuring those under the Coverage Gap would lead to
decreasing rates of the uninsured for states, it is unable to make any argument towards the
cost effectiveness ofinsuring theseindividuals. Peoplewho lack insurancehave traditionally
sought care from emergency rooms, with hospitals being the primary source for care. The
reasons are numerous, but can be reduced to sick uninsured individuals holding off on
seeking care until their condition necessitates it, and because consistent care necessary to
maintain ongoing conditions is unaffordable to those who lack insurance coverage.
Reporting on the costs associated with providing care to these individuals are disparate and
incomplete, often being compiled based on trade association reports, surveys, and
government funding allocation. The best available data on funding to hospitals for
uncompensated care are the annual reporting figures on Disproportionate Share Hospital
allotments, which are funded through a combination of Medicare and Medicaid funds. DSH
datasets are robust enough to break down allotments based on individual hospitals and
geographic locations, but because qualified hospitals often target specific populations and
specialties (substance abuse, psychiatric, HIV/AIDs, immigrant patients etc.), it is difficult to
diffuse the data down to a cost-per-capita variable. In addition, Medicaid expenditures for

Capstone Paper
29 | P a g e
2014 and beyond are not available, and the existing data does not distinguish between
Medicaid funds allotted to states based on the previous CMS agreement and those allotted
based on the conditions of the expansion. Because the generous federal funding levels are
only available to newly eligible populations, states are still responsible for dollars spent on
grandfathered segments of the population (e.g.: the disabled, children, the poor elderly,
expectant and young mothers etc.). Dividing up the expenditures is important to accurately
gauge the cost-per-capita figures for insuring newly eligible Medicaid recipients, and to
determine state’s responsibility for those new expenditures.

Capstone Paper
30 | P a g e
References
Bodenheimer,T.,&Grumbach, K.(2012). ConflictandChange inAmerica'sHealthCare System. InT.
Bodenheimer,&K.Grumbach, Understanding Health Policy:A Clinical Approach,6th Edition (pp.
201-212). SanFrancisco:McGraw Hill Medical.
Bragdon,T. (2013, April 17). Health Care Reportfromthe States:Florida Medicaid Expansion. Retrieved
fromThe DailySignal (The Heritage Foundation):http://dailysignal.com/2013/04/17/health-
care-report-from-the-states-florida-medicaid-expansion/
Brook,R. H., Ware, Jr.,J. E., Rogers,W.H., Emmett,K. B.,Davies,A.R.,Sherbourne,C.A.,. . . Newhouse,
J. P.(1984). The Effectof Coinsuranceon theHealth of Adults. SantaMonica: The Rand
Corporation.
CentersforMedicare and Medicaid.(n.d.). Financing &Reimbursement.RetrievedJune 10,2015, from
Medicaid.gov:http://www.medicaid.gov/medicaid-chip-program-information/by-
topics/financing-and-reimbursement/financing-and-reimbursement.html
Cutler,D.M. (2000). Walkingthe Tightrope onMedicare Reform. TheJournalof Economic Perspectives,
14(2), 45-56.
Cutler,D.M., & Zeckhauser,R.J.(1997). AdverseSelection in Health Insurance. Cambridge:National
Bureauof EconomicResearch.
Fishman,L.E., & Bentley,J.D.(1997). The Evolutionof SupportforSafety-NetHospitals. Health Affairs,
30-47.
Gruber,J., & Simon,K.(n.d.). Crowd-outTen YearsLater: Have Recent Public InsuranceExpansions
Crowded outPrivateHealth Insurance? Cambridge:NationalBureauof EconomicResearch.
Herrick,D. (2010, October25). MedicaidExpansionwill Bankruptthe States. NationalCenterforPolicy
Analysis(729).Dallas,Texas, UnitedStates:National CenterforPolicyAnalysis.
National HealthPolicyForum.(2000). Managed Medicaid:Arizona'sAHCCCSExperience. Washington
DC: George WashingtonUniversity.
Padilla,A.(2014, February19). What HealthCare Coverage DoImmigrantsGet?:A Conversationwith
Angel Padilla.(D.Introcaso,Interviewer) RetrievedJune14,2015, from
http://www.thehealthcarepolicypodcast.com/2015/02/what-health-care-coverage-do-
immigrants-get-a-conversation-with-angel-padilla-february-19th.html
Roy,A. (2012). The Medicaid Mess:How ObamacareMakesitWorse. The Manhattan Institute,New
York.
UnitedStatesGovernmentAccountabilityOffice.(2012). MEDICAIDEXPANSION:StateImpelemtation of
the PatientProtection and AffordableCareAct. WashingtonD.C.:UnitedStatesGovernment
AccountabilityOffice.

Capstone Paper
31 | P a g e
Wagner,K. L. (2014). MedicaidExpansionsforthe workingage disabled;Revistingthe crowd-outof
private healthinsurance. Journalof Health Economics,69-82.
White,C.(2012, June).A Comparisonof TwoApproachestoIncreasingAccesstoCare: Expanding
Coverage versusIncreasingPhysicianFees. Health ServicesResearch,pp.963-983.
Zuckerman,S.,& Goin,D. (2012). HowMuch Will Medicaid Physician Fees forPrimary Care RIsein 2013?
Evidence froma 2012 Survey of Medcaid Physician Fees. The Urban Institute.The HenryJ.Kaiser
FamilyFoundation.

Capstone Paper
32 | P a g e
Appendix: Dataset and Graphs
Compiled data from US Census Bureau’s Community Population Survey (CPS), via Kaiser Family Foundation
Location
Marketplace
Type
Medicaid
Status
Insured Uninsured Total
Uninsured
Percentage
Rate
Number
of Adults
in
Coverage
Gap
(2015
figures)
As a Share
(%) of All
Uninsured
Nonelderly
in State
Uninsured
Numbers if
MA Exp.
was
Universal
Uninsured
Percentage
Rate if MA
Exp. Was
Universal
California
State-based
Marketplace
Opt-In 31,331,374.00 6,500,179.00 37,831,553.00 17% 0 0% 6,500,179.00 17%
Illinois
State-
Partnership
Marketplace
Opt-In 11,086,412.00 1,618,204.00 12,704,616.00 13% 0 0% 1,618,204.00 13%
Mississippi
Federally-
facilitated
Marketplace
Opt-Out 2,425,362.00 499,849.00 2,925,211.00 17% 107,000 21% 392,849.00 13%
Missouri
Federally-
facilitated
Marketplace
Opt-Out 5,157,844.00 772,833.00 5,930,677.00 13% 147,000 19% 625,833.00 11%
New York
State-based
Marketplace
Opt-In 17,330,548.00 2,069,521.00 19,400,069.00 11% 0 0% 2,069,521.00 11%
Ohio
Federally-
facilitated
Marketplace
Opt-In 10,140,742.00 1,257,556.00 11,398,298.00 11% 0 0% 1,257,556.00 11%

Capstone Paper
33 | P a g e
Graphs

Capstone Project - Final for submission - 07.13.2015

More Related Content

Similar to Capstone Project - Final for submission - 07.13.2015 (20)

Capstone Project - Final for submission - 07.13.2015