What stands in the way of hundreds of thousands in Michigan getting health insurance? The state Legislature.

By Walt Sorg
Source: U.S. Department of Health and Human Services Illustration: Rachel Harper

For most of her adult life, Mari has lived the ultimate gamble: getting through without health insurance.

She has always had a job but made too much money to qualify for Medicaid, which caps income for single adult recipients at 35 percent of the federal poverty level, or about $3,900 in 2012. Her employers did not offer a health benefit. With an annual income of less than $22,000, buying insurance on her own was simply out of the question.

Mari is more fortunate than many low-income individuals and families in Michigan. Thanks to the Ingham Health Plan, which helps up to 200 percent of poverty, she had access to office visits and some prescription assistance.

But she knew she was just one serious illness away from bankruptcy.

“I’ve been very grateful that I’ve maintained my health and haven’t add any major emergencies. Not having hospitalization, coverage for cancer or coverage for surgery, is scary,” she said.

Mari is one of an estimated 35,000 people in Ingham County who don’t qualify for Medicaid and are uninsured — about 14 percent of the population.

Beginning next January, Mari and thousands more will qualify either for Medicaid or heavily subsidized private health insurance — but only if the state Legislature allows it. And that’s far from a sure thing.

“It means a lot of peace of mind for me,” she said.

That peace of mind comes from the Affordable Healthcare Act — generally called “Obamacare.” To understand the impact of the law requires remembering two key numbers: 138 and 400.

If the state approves Medicaid expansion as proposed by Gov. Rick Snyder, individuals and families with incomes up to 138 percent of poverty would be eligible, which includes coverage for hospitalization, mental health services, office visits and emergency room treatment. Statewide, the Kaiser Family Foundation estimates 345,000 Michigan residents would be added to the Medicaid rolls, although “a lot of this is educated guesswork,” says Don Hazaert, director of Michigan Consumers for Healthcare.

“But there’s no question most of Michigan’s 1.2 million uninsured will have coverage, either through Medicaid or subsidized private insurance purchased through the state exchange,” Hazaert said.

Between 138 percent and 400 percent of poverty, significant federal tax credits will be available towards the purchase of private insurance through the “insurance exchange,” a Travelocity-style website that will give consumers multiple options for coverage. The law requires most people above 138 percent of poverty to purchase insurance or face tax penalties.

In addition, small businesses will be encouraged to maintain or add health benefits through additional federal tax subsidies. Businesses with 50 or more full-time employees will be required to provide insurance, or face increasing financial penalties.

The combination of the exchange and mandated benefits for many employees, Kaiser estimates, will result in coverage for an additional 415,000.

That’s a total of about 760,000 fewer uninsured in Michigan, leaving 440,000 still without insurance. In Ingham County, fewer than 10,000 Ingham County residents would remain uninsured.

Added to the mix will be greater access to physicians for Medicaid patients. Obamacare doubles the compensation paid to medical professionals for Medicaid patients. In Michigan, providers are offered about half of the Medicare reimbursement rate for Medicaid. As a result, many doctors will not accept Medicaid patients because they lose money on every one of them.

The increased compensation “takes away the financial incentive for physicians to discriminate against patients who have Medicaid,” said Hazaert. “The expectation is that you are going to see more physicians accepting Medicaid once they realize they are going to be paid the same.”

That should provide some relief for Ingham County’s two major charitable medical organizations, Care Free Medical & Dental and Cristo Rey Community Center.

“About 80 percent of our 8,000 patients have Medicaid coverage, but can’t find a doctor who will treat them,” noted Dr. Barry Saltman, founder and CEO of Care Free Medical in Lansing.

“We are their family physician. But even with all the volunteer help we get and our much lower administrative overhead, Care Free loses money on Medicaid patients, money that has to be made up through donations.”

Who won’t be covered
Some county residents will still be left out of the health care system and will still have to rely on Care Free and Cristo Rey — or do without healthcare.

“We estimate that just under 9,000-to-10,000 people will continue to be uninsured,” said Robin Reynolds, executive director of the Ingham Health Plan. “Part of the challenge is getting the word out to people who could qualify but don’t know it. Community outreach will be a high priority for us.”

Reynolds also expects some lower-income working families and individuals to fall between the cracks.

“These will be the people who are at around 250 percent of the poverty level, high-needs people who have unusually high spending for copays and deductibles: large families, and the chronically ill,” said Reynolds.

Some others — mostly childless individuals and couples in their 30s — will simply choose to pay a tax penalty rather than buy insurance through the exchange. In 2014, the “personal responsibility penalty” is only $95 for an adult and $47.50 for children, but it ratchets up to $2,085 or 2 percent of gross income (whichever is greater) by 2016.

The two other large groups that will not be covered are prisoners and undocumented workers, as well as non-citizens who have been in the country fewer than five years, Native Americans and members of certain religions (most notably Christian Scientists).

The Politics
There’s one big “if” attached to all of this: if the Legislature approves Snyder’s recommendation that Michigan opt into the expansion of Medicaid. While upholding the rest of Obamacare, the U.S. Supreme Court struck down portions that effectively required states to participate, leaving the decision on participation up to each state Legislature. A dozen states with Republican legislatures have already decided against expanding Medicaid, choosing to leave hundreds-of-thousands without medical coverage rather than accept the federally funded expansion.

Working in favor of Snyder’s recommendation: The federal government will provide 100 percent of the coverage for new Medicaid enrollees through 2016 and 90 percent after that. The federal government would also pick up costs for some state health services, including community mental health services.

The Center for Healthcare Research and Transformation at the University of Michigan estimates total state budget savings of $983 million over the next decade as a result. (Snyder has built $400 million of the savings into next year’s budget. If the Legislature balks at expanding Medicaid, there will be a huge hole in the governor’s budget that will have to be plugged.) Consumers for Healthcare estimates the infusion of federal money will create 18,000 new jobs in the state.

Obamacare is anathema to the Tea Party, which calls it a “government takeover” and “socialized medicine.” Republicans like Snyder (along with his peers in Ohio, Pennsylvania, New Jersey, Arizona and Florida) are considered political traitors by the true believers. That view is reflected by many in the Republican-controlled Michigan Legislature.

The bigger legislative challenge for Snyder is the state House of Representatives, where Speaker Jase Bolger calls himself “appropriately skeptical.” In the Senate, Appropriations Committee Chairman Roger Kahn (himself a physician) is supporting the expansion. In a Detroit News op-ed, Kahn concluded “expanding Medicaid will save lives, save money and lead to a healthier population.”

Beyond ideology, legislative opponents raise what they see as practical concerns:

You can’t trust the Feds to continue 90 percent funding. (Given the record of the Legislature in slashing revenue sharing to local government, you can understand the mindset.)

With 750,000 more people in the healthcare system, we wont have the resources to serve everyone. A survey cited by Snyder, conducted through the University of Michigan, indicates this won’t be a challenge.

Even if you believe the feds, beginning in 2016 the state will have to come up with 10 percent of the cost, and that’s too high a price to pay.

The business community is divided. The Small Business Association of Michigan and Michigan Business and Professional Association are strongly behind Snyder on the issue. SBAM’s executive director, Rob Fowler, notes that business owners pay the cost of non-paying emergency room patients through higher insurance premiums, and Obamacare will sharply reduce those costs.

“It’s called cost shifting, and it’s been happening for a very long time,” Fowler said.

Cost shifting, Fowler notes, raises the price of health insurance by about $1,500 per family. The Kaiser Family Foundation estimates the law, if fully implemented in all states, would reduce uncompensated care by $351 billion over the next decade.

“It’s found its way into the base rates of health insurance for small businesses all across the state,” says Fowler.

“I would say it’s a terrible business model, that we take a growing burden of people who come without compensation and we shift it to a shrinking group of people (small business owners) who struggle to pay for health insurance. We support (expansion of Medicaid) because we believe it ultimately can reduce the sort of piling on effect that’s been happening to paying customers for many years.”

Jennifer Kluge, CEO of the Michigan Business and Professional Association, told Crain’s Detroit Business “expanding healthcare is good for business, the state economy and its citizens.”

Two major voices have yet to weigh in. The very conservative Michigan State Chamber of Commerce and more centrist Business Leaders for Michigan both have taken no position on Snyder’s proposal.

A poll of Michigan members of the National Federation of Independent Business Owners ran two-to-one against expanding Medicaid.

Another political consideration is the deregulation of Michigan Blue Cross Blue Shield, which controls more than 70 percent of the Michigan health insurance market. Haezert said that legislation will result in higher premiums that will be blamed on Obamacare.

“What you are seeing in states with meaningful rate review is increases in the 4.5 percent range,” he said. “States that aren’t doing any meaningful review are seeing 20 percent-plus annual increases. That’s where Michigan is going with this change.” Those rate increases would be used as ammunition by conservatives to back out of the federal expansion.

BCBSM’s 70 percent market share, he says, effectively allows one company to set the price of insurance for all of Michigan. It is comparable to how Speedway sets the market price for gasoline: when Speedway changes prices, everyone else changes within a matter of hours or even minutes. The same, he fears, will be the case with health insurance.

The Impact
How affordable health care impacts you depends on your personal circumstances. Here’s what it would mean to 1) patients now served by the Ingham Health Plan; 2) families between 138 percent and 400 percent of poverty; 3) people who already have insurance; and 4) seniors.

Ingham Health Plan
The Ingham Health Plan provides office visits (including some referrals to specialists) and some prescription coverage. Moving IHP patients to Medicaid adds more inclusive coverage: dental, family planning, hearing and speech, home healthcare, hospice, hospitalization, surgery, vision, medical equipment, prosthetics and physical therapy — none of which is available through IHP. While IHP loses its state funding as a result of Obamacare, the significantly reduced need for the program will allow it to transform itself.

“Our budget would go from $13 million to $3.4 million, completely funded through last year’s millage,” said Reynolds. “We are looking at transforming ourselves from a benefit program to a subsidy program for those families that can’t afford even the subsidized insurance through the Exchange.”

Tax Credits Families Who Qualify for Insurance Premium
Families with incomes between 138 percent and 400 percent of poverty get an insurance tax credit based on the cost of insurance compared with a percentage of their income. At 138 percent of poverty, any premium exceeding 2 percent of family income is rebated. The percentage ratchets up to 9.5 percent for families at 400 percent of poverty ($92,200 for a family of four) and goes away for higher incomes.

The median Michigan family income is $46,000, or 200 percent of poverty for a family of four. At that level the family receives a rebate of premiums exceeding 6.3 percent of income ($2,898). For that family, the premium subsidy would likely exceed $10,000. (Rebates are based on what’s called a “silver” plan in the array of plans that will be offered on the exchange. Additional costs for a more inclusive “gold” plan do not qualify for rebates.) Families with incomes up to 250 percent of poverty will also qualify for help in paying out-of-pocket costs for co-pays and deductibles not covered by insurance.

Impact on Those Who Already Have Insurance
“We expect a fairly seamless transition,” said Consumers for Healthcare’s Hazert.

“What people are going to notice is that their health plans will cover more preventative services without a co-pay. It will cost a little bit more initially to cover the expanded benefits, maybe 1 to 2 percent. In the long run there will be a huge societal savings from transitioning to a preventative care model.”

Families with coverage are able to keep children on their policies up to age 26. With most young people entering the workforce in jobs that don’t include a healthcare benefit, this change has already reduced the numbers of uninsured by thousands. Insurers must now provide coverage for pre-existing conditions.

Some smaller businesses (with 50 to100 employees) may opt to pay federal penalties and drop health coverage for employees, or adjust employment so that more workers are classified part time and the business drops below the 50 full-time employee threshold for mandatory coverage. Some consider this especially likely for low-wage businesses such as fast food and convenience stores.

Hazaert is optimistic this won’t happen on a large scale. His organization is working directly with small businesses.

“Unfortunately it got politicized and that created misinformation and anxiety,” he said.

“There’s a good feeling in the small business community once you explain to them how it works. Small businesses are eligible for large tax credits. And there’s no reason for any business to reduce payroll because of ACA, although it likely will be used as a cover for some layoffs.”

Seniors on Medicare are among the big winners in healthcare reform. The law closes the “donut hole” in the Medicare Part D prescription drug benefit. It expands options for home-based healthcare. Co-pays are eliminated for Medicare-covered preventative services, including colorectal screening tests.

What it means
A lot of this depends on affirmative action by the Legislature. Without it, families with incomes between 138 percent and 400 percent of poverty will still be eligible for federal insurance premium subsidies through the exchange.

Poorer people who don’t already qualify for Medicaid (about 315,000) but are under 138 percent of poverty will still be able to buy insurance through the Exchange, but will not be eligible for federal premium subsidies. In effect, they will still be shut out and continue to either use emergency rooms, or do without medical care. They will pay a high price for legislative inaction and, ironically, so will everyone who pays for medical insurance because we subsidize that uncompensated care.

It would mean the Legislature is turning down the federal cash infusion for such state programs as community mental health, leaving the governor’s budget with a $400-million hole (about 5 percent of the total general fund budget). If history is any indication, that money would be made up in cuts to revenue sharing and higher education.

The challenge for the Legislature: Will conservative ideology take precedence over practicality — and over the healthcare needs of 350,000 Michigan citizens?