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WellPoint expects states to expand Medicaid

By Caroline Humer and David Morgan

(Reuters) - A top U.S. insurance industry executive on Wednesday predicted that most states will agree to expand their Medicaid programs under President Barack Obama's healthcare reform law, despite opposition from more than a dozen Republican governors.

"In the long run, the economic benefits to the states will be such that most states will eventually expand Medicaid," said Richard Zoretic, the executive vice president who oversees Medicaid programs at WellPoint Inc., the-second largest U.S. health insurer.

"We'll see significant growth not just in 2014, but beyond in this space," he said during a conference call with analysts to discuss the company's fourth-quarter earnings.

His prediction comes at a time when about 15 state governors are weighing whether to participate in the dramatic expansion of the Medicaid program for the poor advocated by the Patient Protection and Affordable Care Act.

At least 22 governors, including four Republicans, already have decided to back the plan, which would commit the current uneven patchwork of state-run Medicaid programs to a federal standard providing health coverage to most low-income Americans earning up to 133 percent of the federal poverty level, or about $24,000 for a family of three. Thirteen Republican state governors oppose the plan as a costly and unnecessary government expansion.

But a 50-state survey released on Wednesday by the nonpartisan Kaiser Family Foundation showed wide gaps in the current Medicaid program, which is expected to spend more than $490 billion this year.

Eligibility for parents is limited on average to those earning no more than 61 percent of the federal poverty line, which equals about $19,000 a year for a family of three. Thirty-three states required parents to earn less than the poverty rate, with 16 restricting eligibility to less than 50 percent.

Nine states extended full Medicaid coverage to adults without dependent children, while three states, Hawaii, Illinois and Minnesota, reduced eligibility for adults where it was not required by federal rules.

Medicaid, which is run by states with federal funding and oversight, represents a major budget expenditure for state governments. Many have sought to curtail program expenses in recent years because of fiscal constraints imposed by the recession and a slow economic recovery.

Benefits and eligibility can vary widely from state to state, with many limiting Medicaid coverage to defined groups, including children and their parents, pregnant women, the very old and people suffering from certain health conditions.

MOUNTING PUBLIC PRESSURE?

Officials in states that have not opted to join the expansion face intensive pressure from the healthcare industry, which stands to gain millions of new customers. Medicaid currently serves about 60 million people and those ranks could swell by 16 million if all U.S. states participate in the expansion.

WellPoint has made a more than $4 billion bet on the expansion of Medicaid with its 2012 purchase of smaller health insurer Amerigroup. It now offers Medicaid plans in 20 states and expects to gain marketshare where Medicaid expands.

State officials could also face mounting public pressure to participate in the expansion, according to a poll released on Tuesday by the American Cancer Society, which favors expansion. It found that large majorities of registered voters in seven states favor accepting the federal subsidies that would fund expansion. Five of the seven states - Florida, Kentucky, Iowa, Michigan and New Jersey - are undecided. The two others are Texas, which opposes expansion, and New Mexico, whose Republican governor supports it.

The Obama administration's chief officer for Medicaid said the program has made years of progress in enrollment and will become more accessible next year under the reform law, even in states that do not participate in the coming expansion.

"As enrollment barriers are eliminated, participation rates of eligible people increases and the uninsured rate for individuals declines," Medicaid director Cindy Mann said at an event marking the Kaiser survey's release.

Even as state Medicaid programs fail to reach large numbers of the country's poor, Kaiser reported that nearly all states are pressing forward with federally funded technological improvements to streamline their Medicaid enrollment systems and provide online access under the healthcare law.

As of January 1, 37 states had an online application for Medicaid or the federal program for children, up four from a year earlier. Twenty-eight states now allow families to renew their benefits online, an increase of eight since the start of 2012.

"On balance, states made more positive improvements than adverse changes (in 2012), often capitalizing on technology to gain administrative efficiencies and reduce paperwork," the Kaiser survey said.

(Editing by Andre Grenon, Leslie Gevirtz and Dan Grebler)

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