State could face big revenue loss if Affordable Care Act is overturned

With the U.S. Supreme Court to rule this week or next on national health care reform, Connecticut officials are holding their collective breath, waiting to see if they must choose between cutting health care benefits for the poor and spending more state money to replace the hundreds of millions in federal dollars that will vanish.

Both Connecticut’s Medicaid for Low-Income Adults — commonly known as LIA — and the state’s plans to serve a dramatically expanded general Medicaid population, could be thrown into legal limbo, depending on how the high court interprets the U.S. Patient Protection and Affordable Care Act.

Shortly after the act passed in 2010, Connecticut became the first state to move its state-funded health program for poor adults without children under the federal Medicaid umbrella.

“It could be a real headache,” state Sen. Toni Harp, D-New Haven, co-chairwoman of the Appropriations Committee, said this week. “It could make it very difficult to grow our coverage” for the poor.

By essentially converting State Administered General Assistance into LIA, Connecticut immediately qualified for 50 percent federal reimbursement.

With Connecticut struggling to climb out of the last recession, Department of Social Services officials noted that demand for health care among poor adults without children was growing.

In addition, state legislators broadened the program when it was converted to LIA, allowing young adults who meet income guidelines to qualify for coverage up to age 26, if they still live with their parents. Lawmakers also said insurers couldn’t exclude patients under age 19 from coverage because of pre-existing conditions.

And by moving LIA under the Medicaid umbrella, Connecticut must operate under federal entitlement rules. That means all residents who qualify under federally approved rules are entitled to benefits, regardless of whether the state has budgeted enough money to serve them all.

While 47,000 general assistance clients had been transferred to LIA when the latter program was launched in mid-2010, more than 74,750 individuals were covered by LIA at the beginning of 2012, and nearly 77,800 are now, according to DSS.

The conversion to LIA immediately gave Connecticut an extra $53 million in federal reimbursement funds.

And under the patient protection act, that program would get a huge infusion of federal aid 12 months from now.

In the state fiscal year that begins July 1, 2013, federal reimbursement would jump to 90 percent.

But the program already is budgeted at more than $460 million for the fiscal year that begins next month. Even if costs were to remain flat in 2013-14, the difference between 90 percent and 50 percent federal reimbursement is nearly $185 million.

And while federal reimbursement under the patient protection act gradually shrinks from 90 percent back to 50 percent in subsequent years, Connecticut could lose millions of additional federal dollars after 2013-14 if the Supreme Court strikes down that portion of the law.

Neither Harp nor any of the other state officials interviewed by The Mirror tried to predict how the court might rule.

But Harp said if the LIA program is undermined, it could stymie efforts to bolster the state’s safety net for years to come. “It’s one of the few times Connecticut was first in the nation to do anything,” she said, adding that if the extra federal aid is pulled away, “we’re probably going to be less likely to step up to the plate and try again in the future.”

Gov. Dannel P. Malloy’s budget director, Office of Policy and Management Secretary Benjamin Barnes, said in that event, Connecticut would face some hard choices.

“That (scenario) would create a budget problem for us to a significant degree,” he said. “We would have to reconsider what we could afford to do on our own.”

Senate Minority Leader John P. McKinney, R-Fairfield, said state officials shouldn’t assume — if the health care act is struck down — that Connecticut would be able to pull LIA out of Medicaid just because enhanced reimbursement no longer would be available.

“I don’t think anyone knows yet what alterations we could do, or what would be (legally) permissible,” he said. “But we know it would put us in a real financial quandary. I think getting the Democrats who championed those benefits to reduce them would be extremely unlikely.”

When Malloy proposed a $20.73 billion budget for the 2012-13 fiscal year in February, his administration estimated that plan would run $424 million in deficit by 2013-14.

The governor and his fellow Democrats in the legislature’s majority cut about $190 million off Malloy’s original bottom line when they approved a $20.54 billion budget last month.

But while those cuts helped mitigate long-run deficit projections, fiscal analysts for the executive and legislative branches agreed at the same time to downgrade revenue expectations for the coming year by $234 million and by more than $310 million in 2013-14.

And if federal Medicaid revenues shrink by $180 million or more in 2013-14, “I think we will not be able to maintain our coverage groups,” Harp said. “It would be very difficult.”