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Pennsylvania is expanding Medicaid. Here's how.

Pennsylvania governor Tom Corbett
Pennsylvania governor Tom Corbett
Patrick Smith/Getty Images

Pennsylvania — a state with a Republican governor and GOP-controlled legislature — became the 27th state (alongside the District of Columbia) to join Obamacare's growing Medicaid expansion.

The decision is a long time coming: Pennsylvania has been pursuing an alternate Medicaid expansion since late 2013, which would allow it to tweak the public program's rules. Today, the Centers for Medicare and Medicaid Services announced final approval of the state's waiver application, wrapping up several months of negotiation between Pennsylvania and the feds.

The White House has estimated that 300,000 of Pennsylvania's low-income residents are eligible under expansion.

Here's what the feds approved in Pennsylvania

Pennsylvania's expansion doesn't look terribly different from their standard Medicaid program. The state is not pursuing the "private option" model being implemented in Arkansas; beneficiaries will get Medicaid coverage, not a marketplace plan.

Unlike Arkansas, Pennsylvania already relies on managed care, meaning the state uses private intermediaries to run its Medicaid program. There's already overlap in the insurers participating in Medicaid and the state marketplace.

Starting in 2016, beneficiaries with incomes above the poverty line (about $11,670 for an individual) are required to pay monthly premiums. In accordance with federal law, those can't exceed 2 percent of household income. Beneficiaries can lose their coverage for failing to pay premiums, following a required 90-day grace period. However, these individuals can re-enroll in Medicaid without an additional waiting period.

Pennsylvania is also building wellness initiatives into their Medicaid expansion, like Michigan and Iowa have. Medicaid enrollees who demonstrate that they're taking active steps to improve their health — like by having routine check-ups — can lower their out-of-pocket costs.

But the state didn't get everything it wanted

Pennsylvania asked for a lot of flexibility in their Medicaid expansion. As originally conceived, "Healthy PA" called for 24 distinct waivers of federal law. They got four.

Initially, Pennsylvania Governor Tom Corbett wanted to tie Medicaid eligibility to employment: beneficiaries would have to either be working, actively searching for work, or engaged in job training to qualify for enrollment.

Recognizing this wouldn't win support from the administration, the state softened on that provision: as proposed, the waiver would allow Pennsylvania to charge different premiums based on whether a beneficiary was working or actively looking for employment, with people who weren't looking for work being charged higher premiums. Advocates worried that this would result in discrimination against people who are disabled or otherwise unable to work due to health conditions.

The federal government did not yield on this point. Pennsylvania will set up a new program called Encouraging Employment to link Medicaid enrollees to job training and and placement, but CMS has stated that it won't affect Medicaid eligibility, coverage, or costs.

The premiums are also structured differently than the state initially proposed.

Pennsylvania had requested authority to charge premiums for individuals living below the poverty line — a request that CMS did not grant — and to charge people above the poverty line $25 a month, or $300 a year. Several organizations noted that for some individuals, premiums at this level would be a greater financial burden than they would face in the subsidized marketplace. As approved, the waiver caps monthly premiums at 2 percent of income.

The Pennsylvania expansion will take effect in January 2015. As with all Medicaid expansions, the feds will foot the entire bill through the end of 2016. After that, the states start financing a fraction of the cost, an amount that phases up to 10 percent in 2020.

Pennsylvania's waiver lasts through 2019 (after which they can petition for renewal), three years longer than the waivers approved in Arkansas, Iowa, and Michigan.

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