Sixteen years ago, Virginia’s governor didn’t want to expand the state’s Medicaid program as one way to take advantage of federal funds that otherwise would be spent in other states.
A showdown with the General Assembly ultimately produced a budget compromise that created a children’s health insurance program that wasn’t Medicaid, even though it looked like it, and ultimately evolved into a commercial insurance program for uninsured children who didn’t qualify for Medicaid.
Now, Virginia’s governor wants to accept billions of dollars in federal funds for a commercial insurance option as an alternative to expanding Medicaid for hundreds of thousands of uninsured adults — and the legislature is divided and deadlocked over the issue.
“The more things change, the more they stay the same,” said Eugene Lewit, a Stanford University professor who wrote a recent national report on the parallels between Virginia’s political battle over children’s health insurance from 1998 through 2002 and the current impasse over expanded health insurance for adults.
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While the bumpy road for expanded children’s health insurance coverage in Virginia ended in success, the outcome remains in doubt for Marketplace Virginia, the proposed alternative to Medicaid expansion that pits the Senate and Gov. Terry McAuliffe against the Republican-led House of Delegates in a budget stalemate.
“I think it’s perceived by an awful lot of people as a reasonable way to address these problems,” said M. Boyd Marcus Jr., who as chief of staff to then-Gov. Jim Gilmore, a Republican, helped lead the fight against expanding Virginia’s Medicaid program for children’s health coverage in 1998.
Gilmore vetoed legislation adopted by the General Assembly that he said “would create the largest expansion of welfare in Virginia history” by using $56 million in federal funds to expand children’s health insurance coverage under Medicaid.
“I don’t think the people of Virginia want Medicaid expanded,” Marcus told the Richmond Times-Dispatch then. “That’s what we’ve been doing the last four years — dismantling the welfare state. Once you’ve done Medicaid expansion, you can never go back.”
The political solution was the creation of the Children’s Medical Security Insurance Plan (CMSIP), a Medicaid look-alike plan that evolved three years later into the Family Access to Medical Insurance Security program (FAMIS) as Virginia struggled to overcome political barriers to enrolling children for health coverage.
The opening for compromise was provided, ironically, by the federal government, which allowed states to fashion their own solutions to accomplishing the goals of the Children’s Health Insurance Program adopted by Congress in 1997.
“It did have some flexibility for each state to do it in its own way,” said Marcus, who credited then-Rep. Thomas J. Bliley Jr., R-7th, who was chairman of the House Commerce Committee and an opponent of expanding Medicaid.
Sixteen yearslater, the Virginia Senate and governor are counting on the federal government to give the state room to fashion its own solution to providing health coverage to mostly low-income parents and childless adults who would be covered by expansion of Medicaid under the Affordable Care Act.
“The feds have kind of let (states) do that within parameters because they want to get the people covered,” said Lewit, who wrote on the history of CHIP implementation in Virginia and Texas as a lesson for the current battle over expanding health coverage as a state option under the federal health care law.
The policy brief, “Lessons from CHIP for Implementation of the Affordable Care Act,” was released by First Focus, a national children and family advocacy organization that commissioned the study.
The key, Lewit wrote, is “a strong, collaborative relationship between the federal and state governments.”
“That relationship works best when the federal government focuses on desired outcomes while providing support to states and allowing states flexibility in program implementation,” he concluded.
It remains to be seen whether states such as Virginia are willing to take advantage of that flexibility, Lewit said, “but the CHIP experience suggests that allowing states the flexibility to implement programs ‘their way’ can result in both higher levels of state participation and more experimentation and innovation leading frequently to significant program improvement.”
Participation inCHIP remained a major issue in Virginia even after the state adopted FAMIS in 2001 because the barriers to enrollment were so high that the state gave back $16 million in unspent federal funds for other states to use. An additional $40 million in unused funds had to be returned at the end of 2001.
“In Virginia, they created a CHIP program but they weren’t invested in making it work very well,” said Ed Walz, vice president of communications at First Focus.
Democrat Mark R. Warner made that failure an issue in his successful run for governor in 2001 and ordered his new administration to fix the problems after taking office in January 2002.
“Why are we turning back money that should go to Virginia for other states that are signing up these kids?” he recalls asking.
Warner, now a U.S. senator, is asking the same question about billions of dollars in federal funds — raised by higher taxes on Virginians and businesses under the Affordable Care Act — to extend insurance coverage to the uninsured.
“That was a powerful argument 13 years ago when I was coming in as governor, and I think it’s still a powerful argument today,” he said Monday.
House Majority Leader M. Kirkland Cox, R-Colonial Heights, sees major differences between the argument then and the debate over expanded health insurance now.
First, Virginia always has covered children through its Medicaid program, although FAMIS extended benefits to families earning up to 200 percent of poverty. It never has covered childless adults; parents don’t qualify if they make more than 31 percent of the federal poverty limit — $7,300 a year for a family of four.
“This is a new population. This is not a population we traditionally have covered,” said Cox, an ardent foe of expanding Medicaid for nondisabled adults.
Second, Cox said, the CMSIP and FAMIS programs were created through stand-alone legislation, while the Marketplace Virginia plan is proposed as part of the two-year state budget.
“Nobody at that point tried to slip it into the budget to try to get their way,” he said.
But CMSIP was enacted through the 1998 budget, after Gilmore vetoed two proposed bills and the assembly sustained his vetoes.
“We came up with this thing in the budget and that’s the way it happened,” said Sen. John Watkins, R-Powhatan, who was in his first year in the Senate after 16 years in the House.
“We had to do some gyrations to convince (Gilmore) that this wasn’t just an expansion of Medicaid,” said Watkins, principal author of the Marketplace Virginia plan that is trying to accomplish the same thing.
One of the key players in transforming the children’s insurance program into a success is also a lead state official negotiating with the federal government for reforms to Virginia’s existing Medicaid program and, if allowed, a private option insurance program as an alternative to expanding Medicaid.
Cindi B. Jones was the project leader on a report for the Joint Legislative Audit and Review Commission, issued in late 2001, about state barriers to enrolling children in the health insurance program.
When Warner took office early the next year, he hired Jones as chief deputy director of the Department of Medical Assistance Services — the state Medicaid agency, which she now leads as director.
During Warner’s four-year term, the number of children enrolled in Medicaid and FAMIS — depending on family income — rose by almost 139,000 to 425,114. As of last month, 579,718 children were enrolled in either Medicaid or FAMIS — a 102 percent increase from January 2002.
“We were able to improve enrollment for eligible kids just by taking down some of the administrative barriers that were put in place,” Jones said recently.
Warner regards the bolstering of the children’s health insurance program as a pillar of his administration’s legacy. He believes the experience offers “a very similar analogy” to the debate over filling the health insurance coverage gap now.
“We got to use our federal money,” he said. “For the most part, we were actually saving the state money.”
Those are the same arguments that a coalition of Senate Democrats and moderate Republicans are making for Marketplace Virginia, which they are trying to distance from the traditional Medicaid program as much as possible.
They want to use federal funds raised under the Affordable Care Act to buy insurance for uninsured Virginians. They also want federal permission to require recipients, depending on income, to share in the cost of premiums, take responsibility for their health care to reduce costs and improve outcomes, and encourage them to work or seek work, although more than two-thirds of those eligible live in working households.
But the marketplace plan would depend primarily on expanding use of a federal Medicaid waiver that has allowed Virginia to enroll more than 700,000 recipients — mostly children, pregnant women, and extremely low-income parents — in managed-care health plans run by private insurance companies.
Senate supporters want the federal money to flow to a new “Taxpayer Recovery Fund” established by the state outside of the Medicaid program, but Jones said that while the program and funding stream would be separate, as it is for FAMIS, the federal money would have to go through her agency.
“We still administer the FAMIS money — there’s no way around that,” she said. “The feds are not going to give the state the money without the oversight that comes from the Medicaid program.”
Watkins said, “If that has to be, that has to be.”
However, he added, “I’m going to try to keep it as separate from (Medicaid) as I can.”