In the spirit of the 4th of July, we thought we?d provide an update on the progress of US health care reform. A major pillar of the Affordable Care Act (ACA)?increasing overall health insurance coverage by extending Medicaid eligibility to most adults earning up to 138% of the federal poverty level?continues to face an uphill climb. Since the Supreme Court's June 2012 ruling that states are free to opt out of the federal initiative, the number refusing to sign on has grown. Currently, 21 states are not moving forward with implementation ahead of the January 2014 start date and 6 continue to debate the issue. Owing to large populations and/or high existing rates of uninsurance, states rejecting reform are home to a sizable number of the intended beneficiaries of the Medicaid expansion (as many as two-thirds by one recent estimate). This is likely to result in the persistence of a large uninsured population, particularly for those with incomes below the poverty level and thus ineligible for subsidized individual coverage on the newly established insurance exchanges, which were designed largely with the Medicaid expansion in mind. It will also ensure widespread disparities across states, with coverage gaps most pronounced in the South.

While some states have expressed concerns about costs, the federal government has committed to bearing the full weight of expanded Medicaid rolls for the first three years, with federal contributions gradually scaled back thereafter to a minimum of 90%. This could end up being a relatively modest expense for a notable increase in the insured population?one Urban Institute study found that state spending of less than $100 billion over ten years could unlock nearly $1 trillion in federal funding ?but political opposition to all things Obamacare and perceived federal intrusion remains fierce.

Widespread nonparticipation by states could have particular negative implications for the medtech sector given evidence that Medicaid enrolment tends to increase both health care access and utilisation. Moreover, increased demand for health services as a result of expanded coverage is a key element of the tradeoff for the industry implicit in the ACA, weighed against measures such as the medical device excise tax and efforts to rein in provider spending. Indeed, the Medicaid expansion could offset certain hospital reimbursement reductions stipulated elsewhere under the act. Ultimately, while there is some potential for pressure from the public or providers that stand to benefit to sway states? decisions, even optimistic projections of eventual state buy-in predict coverage will be foregone for around four million individuals. 

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