How Far is the President Willing to Go to Expand Medicaid?

President Obama is taking his Medicaid expansion pitch to Tennessee this week to urge Republican officials to expand the low-income insurance program through the Affordable Care Act.

Expect more of that. After the law survived its latest potentially devastating legal challenge, Medicaid expansion will be a legacy-defining issue for the president during his last 18 months, one that will determine whether Obamacare achieves its full, desired impact.

But how far can—and will—his administration go to achieve that goal?

Federal officials already have stretched farther than some thought they would after the Supreme Court stymied the ACA's coverage expansion in 2012 by ruling that states could opt out of the Medicaid expansion. More than 20 states still have not expanded, leaving millions more people uninsured than the law's authors intended.

So for the ACA to get closer to its goal of universal coverage, the administration has assented to a lot of conservative demands in exchange for Republican-controlled states accepting the expansion. Administration officials hope that example means more will follow.

"I'm an optimist about the Medicaid issue," Health and Human Services Secretary Sylvia Mathews Burwell said at a briefing with reporters after last week's Court ruling.

"We welcome the conversation, welcome the opportunity to talk about how a particular state needs to do this," she said. "At the same time, we have statute in terms of what the program's about, but we think there's a lot of space to get to an agreement."

The administration has made ample use of that carrot as it has negotiated with GOP-led states to expand Medicaid. But it also is trying the stick, fighting with Florida this year over Medicaid expansion and federal funding for the uninsured while warning Texas that it could do the same there next year.

The White House seems ready to pull out every tool available to get states to "yes."

It has turned at times to the bully pulpit. For years, the administration has held regular conference calls with local officials to draw attention to the Medicaid expansion issue. Now Obama is heading to Nashville to ramp up the pressure on Tennessee lawmakers to act.

But one of his administration's best tools so far has been a willingness to accept alternative Medicaid expansion plans that conservative officials propose. The question now: How far is the White House is willing to bend?

To convince reluctant states to participate, HHS already has allowed them to use Medicaid dollars to pay for private insurance, require some enrollees to make small premium payments, create incentives for healthier behavior, and set up voluntary work-referral programs for their beneficiaries. That has persuaded states such as Arkansas, Iowa, and Indiana—with a Republican governor, legislature, or both—to expand Medicaid coverage to hundreds of thousands of low-income residents, despite their ambivalence toward or outright opposition to Obamacare.

But the agency has its limits. It has denied state requests to require people below the poverty line to pay premiums, as well as to limit benefits packages. One redline for the administration is requiring Medicaid enrollees to work or look for work. Some GOP officials floated the so-called work requirement while their states were developing their plans, but it never made it into a final proposal.

"A year or two ago, there was a lot of debate about this question. How flexible was the administration going to be, how far were they willing to go?" said Joan Alker, executive director of Georgetown University's Center for Children and Families. "That's really not what's happened. There's no waiver that they haven't been able to negotiate to 'yes.'"

"I don't think we'll ever get to the end of flexibility, per se," she added. "I do think we have seen [the Centers for Medicare and Medicaid Services] draw some lines in certain places."

Work requirements are the big one. Republicans have defended them as fiscally conservative policy that will prevent Medicaid eligibility from dissuading people to seek employment. When then-Pennsylvania Gov. Tom Corbett, a Republican, proposed the policy in 2013, he said it would lead to more people getting insurance through an employer—lightening the financial load for Medicaid.

"We cannot afford to expand the current Medicaid program," he said at the time. "It is an entitlement that is unsustainable."

The Obama administration, however, refused to condition Medicaid eligibility on being employed or searching for work, arguing that it violates the basic statutory tenets of the program, and Corbett eventually backed down. Some states have since worked job-referral elements into their expansion plans; New Hampshire plans to automatically refer unemployed enrollees to a state job-counseling service, though participation wouldn't be a requirement to receive benefits.

But beyond that, HHS has accommodated a lot of conservative proposals—more than some expected. Indiana's Medicaid expansion plan might be the most far-reaching. It does not apply enrollee's benefits retroactively, as the program usually does, and enrollees do not start to receive coverage until their first premium is paid. The state also was allowed to temporarily stop or downgrade an enrollee's benefits if they don't make payments.

"I didn't think the administration was going to approve the [Indiana] proposal the way it did. That was more flexibility than I would have predicted," said Matt Salo, executive director of the National Association of Medicaid Directors, in an email. 'However, they've made statements that they acknowledge they've gone outside of their comfort zone and are not going to be approving anything similar until there's some evaluation/analysis of Indiana to see how it's impacted access."

Others say it's hard to tell if HHS is reaching the edges of its flexibility. Each state is starting from a different status quo, and no two waiver applications are alike. What is clear, as Indiana showed, is the administration is willing to stretch pretty far to get Medicaid expanded.

"I really can't say where the outer limit is for CMS, what their feeling is," said MaryBeth Musumeci, associate director of the Kaiser Commission on Medicaid and the Uninsured. "I will say, Indiana did go farther than the other waivers we had seen on the Medicaid expansion."

Burwell herself cited her agreement with Indiana Gov. Mike Pence as an example of her capacity to compromise.

"Is it exactly what he wanted, is it exactly what we wanted?" she said. "We found the space and it's a space that we believe is going to make a lot of difference for the folks in Indiana."

As Alker noted, the agency is 6-for-6 so far in striking Medicaid expansion waiver deals—even if she thought some of them, particularly Indiana's so-called "lockout" provision that temporarily stops benefits for non-payment, were "very problematic and bad health policy." That is the bargain that the Obama administration has proven prepared to make in order to secure the law's legacy.

Montana is next after the state legislature and governor approved Medicaid expansion this year. Federal officials already have stated their concerns about the state's plan for premiums and other cost sharing for poorer enrollees, though both sides have said they expect to find middle ground.

"We still believe there is a lot of space to meet the needs of states," Burwell said. "That's why these conversations are so important, and it is different state by state in terms of how the governors and their state legislatures express what's important to them, and then figuring out how you can meet those needs at the same time that what you're doing is making sure that you're creating accessibility and affordability for these folks."

"I actually think there's a lot of place where you can meet both needs," she said.

The more pressing question, Alker argued, might be whether the Court's decision last week to preserve Obamacare will soften the Republican intransigence to Medicaid expansion. Because if they do come around, evidence suggests they'll be able to wring a lot of flexibility out of HHS.

"It's been the intense politics within the Republican Party that has proven to be the ultimate barrier," she said. "So where do those Republicans go from here? Are they going to fold their tents and accept that the Affordable Care Act is here to stay?"