Even before Democratic lawmakers passed — and Gov. Paul LePage instantly vetoed — a bill that would expand health insurance coverage for the poor, Republicans have signaled some potential alternatives. 

House minority leader Rep. Kenneth Fredette, R-Newport, has proposed a study commission to weigh the impacts of Medicaid expansion. Skeptics immediately noted that study commissions are the graveyard for policy initiatives.

But Fredette has also hinted at a more substantive option, although he hasn’t clearly articulated it. The Affordable Care Act will require most Americans to purchase health insurance and those that can’t will receive federal subsidies through state-run exchanges, or insurance marketplaces, to help absorb the cost. To qualify for the subsidies, residents would have to earn between 100 and 400 percent of the federal poverty level.

Residents would have to earn below 138 percent of the federal poverty level to qualify for Medicaid expansion. Critics of expansion argue that the income threshold is a disincentive: If you know you’ll lose health insurance if you make a dollar more than 138 FPL, what’s the incentive to take a slightly higher paying job that may not offer health insurance?  

With private insurance subsidized through the exchanges, the argument goes, low income residents would be less susceptible to the so-called "eligibility cliff." 

That’s why some states, most notably Arkansas, have struck deals with the federal government that would allow them to use Medicaid expansion dollars to help low income residents purchase private insurance through the exchanges.

Advocates say the "premium assistance" route gives states more flexibility over their Medicaid program, while the free market-based approach could create more competition among insurers and lower premiums. 

But skeptics are quick to note the potential shortcomings: The private route may ultimately be more costly to the federal government, and if so, states. That’s because private insurance is more costly than Medicaid, at least according to the Congressional Budget Office, which last year predicted that some states may seek private options:

" .. the federal costs for each additional person enrolling in the exchanges (most of whom would have enrolled in Medicaid under CBO and JCT’s prior estimate) will be approximately $9,000 in 2022, on average. That amount is calculated by dividing the total increase in federal spending in the exchanges in 2022 ($28 billion) by the number of additional enrollees (3 million people). The extra exchange costs per person are larger than the decrease in Medicaid costs per person primarily because, in CBO’s and JCT’s estimation, private health insurance plans in the exchanges will pay providers at higher rates than Medicaid pays and will have higher administrative costs than Medicaid, although there are other, partially offsetting, factors as well."

The same CBO report noted that Medicaid is expected to cost $6,000 per person following last year’s Supreme Court ruling that made participation in the expansion voluntary.  

Advocates for expansion argue that the additional costs could make the private route less stable if states are forced to quickly cutback the number of people they insure. Meanwhile, as Maine lawmakers can attest, it’s more difficult politically and administratively to reduce coverage eligibility in Medicaid (although the result of can be cuts in other state spending).

There’s other questions about the private path, including LePage and Republicans’ rejection of a state-based insurance exchange through the Affordable Care Act.

According to an analysis by the Kaiser Family Foundation, states that run their own exchanges or partner with the federal government will have more control over the coverage plans — and presumably the costs — that will be available to consumers. States can also customize the plans to their residents’ health care needs.  

Congressional Budget Office on Medicaid 2012