trump-300x204-6280986The looming repeal of the Affordable Care Act – which suddenly became much more likely with Donald Trump’s election as president – would open an enormous hole in New York’s state budget.

A major provision of the ACA encouraged states to expand Medicaid eligibility up to 138 percent of the federal poverty level, and committed Washington to picking up 100 percent of the cost of newly eligible enrollees at first, diminishing to 90 percent by 2020.

States that already covered some or all of this income range, including New York, also received enhanced aid for previously eligible enrollees in the expansion group.

New York gained more federal funding from these changes than all but one other state, and therefore has more to lose if the law goes away.

Based on an analysis of data from the Centers for Medicare & Medicaid Services, New York’s Medicaid program drew about $665 million in extra federal aid during the three months ending in June 2015. That equates to $2.7 billion annually, second only to California at $6.5 billion.

If Obamacare were repealed, New York and other expansion states would face the choice of finding billions in state funds to replace the lost federal aid, or taking coverage away from hundreds of thousands of people.

Another optional provision of the law allows states to offer low-cost coverage to people between 138 percent and 200 percent of the poverty level, with the federal government picking up most of the cost. New York and Minnesota were the only two states to take the offer.

The Cuomo administration estimated that its resulting program, known as the Essential Plan, will save the state budget $850 million this fiscal year. With repeal, that would become another budget hole to be filled.

The details of Trump’s health plan are vague, but he has repeatedly called for “repealing” Obamacare. Most repeal bills proposed in Congress – including one that passed both houses last year, later vetoed by President Obama – have aimed to roll back or eliminate the Medicaid expansion.

Beyond the impact on state government finances, repeal would also have particularly severe consequences for New York’s direct-pay insurance market, in which individuals buy coverage directly rather than through an employer.

Before the ACA, that market was all but destroyed by state laws requiring insurers to accept all customers, regardless of pre-existing conditions, while charging comparable premiums to everyone in any given plan.

The result was a “death spiral” in which premiums rose to cover the costs of care for sick people, healthy people dropped coverage, and premiums spiked still higher.

By mandating individuals to buy coverage and providing tax credits to help them afford it, the ACA brought New York’s direct-pay market back from near-death. Repealing those supports, in the absence of changes to the state’s regulatory structure, would likely bring back the vicious cycle of spiraling premiums and plunging enrollment.

About the Author

Bill Hammond

As the Empire Center’s senior fellow for health policy, Bill Hammond tracks fast-moving developments in New York’s massive health care industry, with a focus on how decisions made in Albany and Washington affect the well-being of patients, providers, taxpayers and the state’s economy.

Read more by Bill Hammond

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