[UPDATED at 1 p.m. ET]

At least 2.2 million low-income adults — nearly all in Texas and the Southeast — would be eligible for government-funded health insurance under the Democrats’ $1.75 trillion social spending and climate change plan.

That’s the number of people who are eligible for Medicaid under the Affordable Care Act but have been left uninsured because they live in one of the dozen states that have not expanded coverage under the 2010 law. They are in the coverage gap — with incomes too high to qualify for Medicaid, but below the $12,880 annual federal income minimum for an individual to qualify for subsidized coverage in the insurance marketplaces created by the ACA.

An estimated 60% of those caught in that Medicaid coverage gap are Black or Hispanic, according to the Center on Budget and Policy Priorities. And nearly two-thirds of those in the gap live in one of three Republican-controlled states: Texas (771,000), Florida (415,000) and Georgia (269,000), according to a KFF analysis.

Under the plan announced by President Joe Biden after negotiations with key Democratic lawmakers in Congress, those in the gap would qualify for ACA marketplace subsidies for four years starting in January. They would get additional cost-sharing protections starting in 2023 that would bring their out-of-pocket costs close to zero.

To encourage existing Medicaid expansion states to maintain their coverage levels, the bill would raise the 90% federal matching rate for the expansion population to 93% from 2023 through 2025.

To help pay for that coverage and incentivize holdout states to expand Medicaid, starting in 2023 the plan would permanently cut billions in special federal Medicaid funding to the non-expansion states that helps hospitals with disproportionately high rates of uninsured or Medicaid patients.

Those cuts have unsettled hospital industry officials, who worry that losing those special funds would mean less money to pay for services. “We always are in favor of coverage expansion,” said Beth Feldpush, senior vice president of America’s Essential Hospitals, which represents hospitals that treat many poor and uninsured patients. “Our concern is it is paired with cuts to the safety net, and … that is a double-edged sword.”

The American Hospital Association has estimated those funding cuts would total as much as $7.8 billion over 10 years. Industry groups say hospitals need the extra Medicaid funding to handle the more than 25 million people who would remain uninsured even after the coverage expansion.

But an analysis by Matthew Fiedler for the USC-Brookings Schaeffer Initiative for Health Policy released Thursday found the expanded coverage would lift profit margins of hospitals in the non-expansion states by $11.9 billion in 2023 alone. The report cites two main factors for the improvement: hospitals getting paid for care that they already deliver but don’t currently get paid for, and hospitals seeing more demand for care as people gaining coverage seek more services.

Marketplace health plans generally pay higher reimbursement rates than Medicaid — but they also often come with higher deductibles that can be difficult for patients to pay and providers to collect.

The massive spending package hinges on Sen. Joe Manchin (D-W.Va.), whose support is critical. Democrats can’t afford to lose one party member vote in the 50-50 Senate, where Vice President Kamala Harris would break any ties and the GOP stands firmly against any government expansion. But Manchin has not yet said whether he will vote for the package.

Consumer advocates are ecstatic that Congress may no longer wait for intransigent Republican-controlled legislatures and governors to expand Medicaid. Republican leaders have cited a host of reasons for resisting, including that their states can’t afford the 10% match and that nondisabled adults don’t deserve Medicaid. States could not block the coverage expansion because it falls outside of Medicaid, which is jointly funded by the federal and state governments.

“This is a big deal,” said Anne Swerlick, a public interest attorney in Tallahassee who has lobbied Florida’s legislature to expand Medicaid. “It would make an extraordinary difference in the quality of life for tens of thousands of Floridians caught in the gap. In many instances, it will be a lifesaver.”

Sen. Raphael Warnock (D-Ga.), a key lawmaker advocating for the provision, said Congress needs “to close the coverage gap in Georgia and the 11 other states where hardworking families wake up every day without health care coverage their neighbors in 38 other states enjoy.” But, on Wednesday, he said he and Georgia’s other congressional Democrats oppose the cuts to special Medicaid funding for hospitals.

While most states expanded Medicaid in 2014, no state legislature has adopted it since Virginia’s in 2018. Since 2017, six states have enacted expansion as a result of ballot initiatives, most recently Missouri.

Those that haven’t adopted it are in the South, save for Wyoming, Kansas, South Dakota and Wisconsin. Wisconsin already covers adults on Medicaid up to the federal poverty level but has not expanded it to match the 138% of that federal level called for under the ACA.

In Georgia, Gov. Brian Kemp and other GOP leaders have sought federal approval for a partial Medicaid expansion, which would require work or other activities for eligibility. But the Biden administration has so far resisted this approach.

R.D. Williams, CEO of Hendry Regional Medical Center in Clewiston, Florida, said the Democrats’ plan would cover about 60% of the uninsured who use his hospital, which serves one of the poorest parts of the state. “It will definitely have an impact,” he said.

Expanding coverage, he said, would help many patients better manage their health by getting access to primary care doctors and specialists. Medicaid enrollees make up 25% of Williams’ patients, while more than 30% have no coverage. “Our largest payer group is the uninsured,” he said.

However, Williams said he was still trying to figure out how much money he might have to give up in Medicaid funding under the bill. Those cuts would occur unless Florida expands Medicaid.

Elijah Manley, 22, of Fort Lauderdale, Florida, racked up more than $2,000 in bills after going to a hospital emergency room for covid-19 treatment last year. Without insurance, he has no way to pay and fears it will hurt his credit. He’s been uninsured since he aged out of Medicaid when he turned 21.

Manley works part time in a bar and also is one of several Democrats running for a special primary election for a state House seat in January. He hopes Congress will pass a plan that gives him access to free or low-cost insurance so he doesn’t have to think twice about going to the doctor. “It would be very helpful to me, as I have a couple things I want to check out,” he said, noting he has a family history of diabetes.

It’s been nearly a decade since the Supreme Court in 2012 narrowly upheld the ACA but made its Medicaid expansion provision optional for states.

Joan Alker, director of the Georgetown University Center for Children and Families, said the Democrats’ plan should motivate states to expand Medicaid because they could do so without losing their special Medicaid funding.

“If it moves states, that would be great, but it ain’t going to happen,” said Chip Kahn, president of the Federation of American Hospitals, which represents for-profit hospitals.

Mississippi hospitals welcome the Democrats’ plan despite concerns about funding cuts.

“Hospitals would prefer a straight-up Medicaid expansion, but at this point a thirsty man is not going to be really choosy about whether it’s bottled water, mineral water or tap water,” said Richard Roberson, a vice president at the Mississippi Hospital Association. “An opportunity for some coverage is better than nothing.”

The Medicaid gap has contributed to the financial problems of rural hospitals in Georgia, leading to recent closures, said Sen. Jon Ossoff (D-Ga.). On people stuck in the coverage gap: “It’s unfair, and folks are suffering and dying needlessly.”

Anne Dunkelberg, health policy expert for the advocacy group Every Texan, said 80% of Texans in the coverage gap are in working households. “I obviously am not going to celebrate till the ink dries, but I’d be thrilled for the working poor in Texas to get coverage.”

 

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Phil Galewitz, Kaiser Health News and Andy Miller

Kaiser Health News

Kaiser Health News is a nonprofit news service covering health issues. It is an editorially independent program of the Kaiser Family Foundation, which is not affiliated with Kaiser Permanente.

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