Will Illinois Medicaid Cuts Survive Obamacare?

In an historic 5-4 ruling Thursday, the Supreme Court upheld the Patient Protection and Affordable Care Act (also known as "Obamacare").

Along with the individual mandate requiring individuals to have health insurance, the Act provided sweeping expansions of Medicaid and increased the number of individuals the States must cover in their Medicaid programs.

In an effort to shore up its budget deficits, the State of Illinois recently proposed and passed $1.6 billion in cuts to its state Medicaid program.  Whether these cuts will survive Obamacare remains to be seen.

The Medicaid program offers federal funding to the states to assist in providing medical care to certain categories of needy people (such as preganant women, children, impoverished families, the blind, the elderly, and the disabled). While states receiving federal funds for their Medicaid programs must comply with certain minimum federal requirements dictating who is eligible for Medicaid coverage, the states are responsible for implementing these guidelines and administering their programs at the state level.

The Act vastly expands the scope of the guidelines for Medicaid eligibility; for example, it requires state programs to provide Medicaid coverage by 2014 to all individuals under the age of 65 with incomes below 133 percent of the federal poverty level.

By contrast, under current state laws, many states cover adults with children only if their income is considerably lower, and do not cover childless adults at all.  The states also have considerable flexibility with respect to Medicaid coverage for parents of needy families.

In its decision Thursday, the Court upheld both this expansion of Medicaid eligibility, and the Act's requirement that states must provide to all new Medicaid recipients an "[e]ssential health benefits" package sufficient to satisfy the recipient's obligations under the individual health insurance mandate. Thus, the Act's changes will vastly expand both the number of people who are Medicaid-eligible and the level of medical coverage that Medicaid recipients receive.

Two weeks ago, in an attempt to address the state's record-setting $13 billion budget deficit, Illinois Governor Pat Quinn signed into law a package of legislation that included sizeable cuts to the Illinois Medicaid Program.

Cuts to the Medicaid Program will total $1.6 billion -- $350 million as a result of greater scrutiny over who is eligible for Medicaid; $49.8 million from reducing the number of people eligible for family care; and $72.2 million from eliminating a state paid Pharmacy Assistant Plan. It is not clear how many of these cuts will survive the provisions of the Act upheld by the Supreme Court.

What we do know, however, is that cuts that do not conform to the Act will not jeopardize the federal funding that Illinois already receives for Medicaid.

Prior to Thursday's decision, the Act provided that a state failing to comply with the Act’s new coverage requirements could lose not only funding for those requirements, but all of its federal Medicaid funds as well. The Court struck down this provision, holding that existing federal Medicaid funds cannot be withdrawn from states who fail to comply with the Act’s new requirements.

As a practical matter, this means that states may choose to reject the expansion of Medicaid without jeopardizing the funding of their current programs. States who choose to implement the Act’s new requirements, by contrast, will be eligible for additional federal funds – specifically, federal funds will cover 100 percent of the expansion in coverage from 2014 through 2016, gradually decreasing to 90 percent in 2020 and thereafter.

Will Illinois sign on to the expanded Medicaid program?  Only time will tell.

Have a legal question you'd like to see answered in a future article? Email it to me at hgwalser@lavellelaw.com 

Disclaimer: This article provides legal information of a general nature and is not intended as legal advice, nor does it create an attorney-client relationship with any person or group of persons. Should you wish to obtain legal advice concerning your particular situation, contact an attorney.