HARRISBURG — Gov. Tom Corbett has notified the federal government that he does not intend to approve an expansion of Medicaid that would make 1-in-4 Pennsylvanians eligible for medical assistance coverage.

Advocates say the decision is not only unfortunate for the hundreds of thousands of Pennsylvanians who will not gain insurance. The move could be fatal to small, rural hospitals that find themselves providing too much uncompensated care.

The reason? The federal government plans to reduce the amount it reimburses hospitals because there were supposed to be fewer people without insurance showing up for medical care due to the Affordable Care Act.

“Federal (disproportionate share) payments are significantly cut beginning in 2014 with the start of the ACA coverage. The monkey wrench is that the Supreme Court decision made the Medicaid expansion optional for states by essentially removing the enforcement mechanism of denying all Medicaid funding if states did not expand,” said Ann Bacharach with the Pennsylvania Health Law Project.

Pennsylvania hospitals received more than $500 million in these disproportionate share payments in fiscal 2011.

“So, if Pennsylvania does not expand Medicaid, hospitals will still be required to provide care to the uninsured under federal law but will see their compensation for those patients seriously curtailed,” Bacharach said.

The Center for Rural Pennsylvania estimated that one-quarter of Pennsylvania’s rural hospitals are already financially distressed and the strain of absorbing more of the cost of treating uninsured people could be more than many can bear, advocates warn.

Pennsylvania’s reduction in uncompensated care reimbursements from the federal government is expected to be $1.9 billion over the next decade.

“Many Pennsylvania hospitals, especially those in rural areas, may not survive,” according to a study released in January by the health law project and the Office of Rural Health, based at Penn State.

A spokeswoman from the governor’s office did not dispute the concerns about the uncompensated care costs, but suggested that the federal government was to blame for holding hospitals hostage.

“We are aware and have strong concerns with the federal government’s proposal to take away millions of dollars for Pennsylvania hospitals,” said Corbett spokeswoman Christine Cronkright.

“Payments to hospitals have always been partly based upon the amount of uncompensated care delivered, and it appears that the federal government is trying to leverage hospitals and place them unfairly in the middle of states’ expansion decisions.”

The Corbett administration and Republican lawmakers said the decision to pass on expanding Medicaid was influenced by concerns about the local costs required to get the federal match, suspicion that the federal government may not meet its obligation to fund the effort, and frustration over the lack of flexibility provided to states in determining how to participate. The governor’s office also pointed to problems with poor accountability with the medical assistance program.

The Corbett administration said it estimated that participating in the Medicaid expansion that would add 800,000 to medical assistance would cost Pennsylvania about $1 billion through 2014-15 and a total of $4.1 billion.

Advocates say the governor is overestimating the number of people who would be added to the Medicaid rolls and misrepresenting the costs. Bacharach, with the health law project, said that census estimates suggest about 475,000 people would be eligible for Medicaid under the expansion.

The study by the health law project and the Office for Rural Health found that the expansion would save the state more than $300 million and generate more than $50 million in new tax revenue on managed care companies that would expand to meet the demand created by the increased number of people enrolled in Medicaid. And the state’s investment would pave the way for $43 billion in federal contributions to the cost of expanding Medicaid over the next decade, said Antoinette Kraus of the Pennsylvania Health Access Network.

“That is a lot of money to walk away from,” she said.

In rejecting the expansion of Medicaid, Pennsylvania would join Maine, Idaho, South Dakota, Texas, Oklahoma, Louisiana, Alabama, Mississippi, Georgia and South Carolina.

State Rep. Bryan Barbin, D-Johnstown, said that even conservative strongholds such as Arizona and New Mexico have agreed to expand Medicaid.

Other lawmakers pointed out that Ohio, which also has a Republican governor, has decided to expand Medicaid, as well.

The Corbett administration anticipates that more than 800,000 Pennsylvanians would join Medicaid beginning in 2014 by expanding the federal-state medical program for the poor and disabled that already provides care for one of every six residents in the state. There are now 2.2 million Medicaid recipients in Pennsylvania.

In a fact sheet issued along with the governor’s announcement, the administration said it objected to the federal guidelines which made no distinction between people who may be buying insurance now but decide to drop it if they are eligible for Medicaid under the new guidelines. The Corbett administration also said the federal government’s guidelines did not take into account the potential that there may be people who are eligible for Medicaid now but have not enrolled.

Republicans also expressed concern about the local match that would be required.

“Unfortunately, at this time the Medicaid expansion ‘opt in’ is an ‘all or nothing’ option. Meaning you need to opt in 100 percent or not opt in at all.  That is an unfortunate set of choices,” said Sen. John Gordner, R- Lycoming County.  

“The governor’s office and our Senate staff believe that the cost to Pennsylvania will run into billions of dollars in annual expenses for this expansion in the out years.  Plus, based on past experience, there is no assurance that the federal government will even keep its commitment to provide the funding that it says it will provide.”

“It does not make sense not to cover people who are working but cannot afford health insurance,” Barbin said.

Denying them access to Medicaid only discourages the working poor from seeking preventative care, even though tax dollars end up being spent to pay for medical care when those people turn up in the emergency room, Barbin said.

“If you get diabetes so bad that they need to amputate your leg, taxpayers have to pay for it,” Barbin said.

Barbin added that expanding Medicaid also would create job opportunities in health care as doctors and other providers boost staff to accommodate new patients who suddenly can afford ongoing and preventative care.

“There will be less people working in hospitals and less working for doctors,” Barbin said.

Barbin said that he hopes the governor reconsiders. In each of the prior two years, there have been times when the governor has indicated that he planned to turn down federal money over concerns about matching costs.

“In those cases, whoever advises the governor told him not to be shortsighted,” Barbin said, and the state ended up taking the money.

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