Shortly after noon Saturday, Utah’s governor, House speaker and Senate president confirmed reporting from The Washington Post that the Trump administration plans to reject the state’s request for enhanced federal health care funding under a partial Medicaid expansion plan.

The three state leaders said in a joint statement that they were “deeply disappointed by this latest development,” while assuring residents that the state’s existing Medicaid benefits will continue, and that work would be ongoing to find cost-effective ways of providing health care to low-income Utahns.

“In the coming days and weeks, the governor and Legislature will work in close partnership to evaluate the current situation to ensure Utah continues to provide a Medicaid program with long-term fiscal sustainability,” read the statement, signed by Gov. Gary Herbert, Kaysville Republican Rep. Brad Wilson and Layton Republican Sen. Stuart Adams.

The news arrived just days before the Utah Department of Health was expected to submit the state’s application for a waiver from the requirements of the Affordable Care Act, or Obamacare.

And while state law still requires submission of the waiver request, a health department representative said Saturday that no decision had yet been made on whether, or how, to proceed in light of the administration’s preemptive rejection.

Sen. Allen Christensen, R-North Ogden, said he still holds out hope that portions of Utah’s waiver could be approved.

But Christensen — who sponsored the Legislature’s rewrite of a voter-approved Medicaid expansion law — also acknowledged that the setback makes it likely a fallback provision in his bill, SB96, will be triggered, and that a fully expanded Medicaid program similar to 2018′s Proposition 3 will take effect in the state.

“We probably have to implement the thing,” Christensen said.

During the 2019 legislative session, Christensen led the state’s effort to reject and replace Prop 3, which had passed with 53 percent of the statewide vote in November. Full expansion could bankrupt the state, he and other lawmakers warned, and the federal Centers for Medicare and Medicaid Services (CMS) had given verbal assurances the Legislature’s plans ultimately would be approved.

“That’s what we acted on, and we told everybody they were wrong and we were right,” Christensen said. “And then when ours doesn’t come through — if, in fact, it doesn’t come through — then they were right and we were wrong.”

Critics not surprised

Under full Medicaid expansion, the federal government covers 90% of the health care costs for individuals earning up to 138% of the federal poverty level, with states responsible for the remaining 10% of costs.

Utah previously requested, and received approval for, a 70-30 funding match for patients earning up to 100% of poverty.

But the state’s next request under SB96 sought the more favorable 90-10 match while keeping Medicaid enrollment limited to those under 100% of poverty. That arrangement would leave roughly 50,000 otherwise eligible Medicaid patients to buy subsidized health insurance through the Obamacare individual marketplace.

In exchange for the additional federal funds, the state would agree to a per-capita funding structure — which leaves the state responsible for increases in health care costs — and the imposition of work requirements and enrollment caps on beneficiaries.

Critics of SB96 — most of whom support full expansion — predicted that the state’s plans would fail. The waiver’s elements were too far outside the scope of the Affordable Care Act to be approved, they argued, and a favorable decision by CMS ultimately would be challenged in court.

On Saturday, Utah Health Policy Project analyst Stacy Stanford said that while the failure of SB96 had arrived sooner than expected, the result is not a surprise.

“In a way, it changes things,” she said, “but, in a way, it really doesn’t.”

Stanford said she’s grateful that lawmakers included fallback provisions in SB96, which allows full expansion to proceed automatically.

Under SB96′s terms, the failure of the per-capita cap waiver will be followed in January by a new request for 90-10 funding covering the full expansion population up to 138% of poverty, but with the imposition of work requirements. If that request is also denied, and assuming the Legislature takes no further action to alter the Medicaid program, a final fallback provision will see a traditional expansion — comparable to Prop 3 — take effect in July 2020.

“I hope that they will keep their word and uphold the legislation that they drafted and that they approved,” Stanford said of Utah lawmakers. “However, I’m not naive, and I know that it’s probably an uphill battle to hold them to that.”

In their joint statement, the governor and legislative leaders allude to additional work on Medicaid, while also signaling toward the fallback provisions of SB96. None of the three men was available for additional comment Saturday, but staffers suggested a special legislative session is not currently being considered.

Stanford said the focus of Medicaid expansion proponents will shift from voicing their objections to state and federal administrators to lobbying legislators to allow full expansion to proceed under SB96.

The issues around the expansion costs have been addressed by the fallback elements in the law, Stanford said, and it’s time for lawmakers to listen to the evidence and provide Medicaid to the state’s poorest residents.

“We absolutely can afford it, and we can’t afford not to,” she said. “Right now, they’re paying three times more than they would be under a full expansion.”

‘Glad we have the fallback in place’

Rep. Ray Ward, R-Bountiful, is one of a handful of physicians serving in the Legislature, and his alternate bill preserving the bulk of Prop 3 was effectively folded into SB96 as the law’s fallback element.

He said Saturday that his adjustments put full expansion on a sound financial footing for the foreseeable future.

“When you go further out than that," he said, “it’s hard to predict what will happen with any of the choices we make.”

Asked for his reaction to the Trump administration’s decision to reject Utah’s plan, Ward said the specifics of the federal government’s denial will be revealing but that it ends some of the mystery surrounding the state’s proposal.

“For better or for worse,” Ward said, “the Trump administration has answered us — if this is the answer — far faster than the Obama administration ever did.”

According to The Washington Post, the denial of Utah’s waiver is less about the specifics of the state’s expansion plan and more a result of ongoing litigation by several states — including Utah Attorney General Sean Reyes — challenging the constitutionality of the Affordable Care Act.

In a prepared statement, Reyes’ spokesman Richard Piatt said the attorney general expects the case to be resolved at the Supreme Court, where the “impermissible unconstitutional overreach” of Obamacare will be “exposed.”

“Utah’s executive and legislative leaders were united with our office in the decision to proceed,” Piatt said. "We look forward to assisting the Utah Legislature in preparing for this outcome and begin working now on a new system of health care that makes Medicaid sustainable and accessible into the future, safeguards preexisting conditions and assures coverage doesn’t lapse while the legal case is resolved.”

Rep. Brian King, D-Salt Lake City, the House minority leader, suggested that the potential for the 5th U.S. Circuit Court of Appeals or the U.S. Supreme Court to uphold a recent ruling striking down the ACA could prompt Utah’s legislative leaders to take a wait-and-see approach to SB96.

He added that he expects some legislators to mount new attempts to delay or subvert the fallback to Prop 3.

"You’re going to see a not-insignificant number of lawmakers who say, ‘Let’s take another run at dismantling Medicaid expansion,’” King said.

Every Democrat in the Utah Legislature, as well as a few Republicans, voted against SB96. King said he expects his caucus to continue advocating for the adoption of a fully expanded Medicaid program.

“We should accept that and recognize that it is the will of the people in the state of Utah,” King said. “There are going to be a lot of individuals who benefit from that.”

Multiple attempts have been made during the past several years to expand Medicaid, including a proposal developed by the governor that was rejected by lawmakers and various incremental expansions aimed at the state’s most vulnerable residents.

Ward said he would not expect a special session to be convened, but, beyond that, he was unable to speculate on how his legislative colleagues might react to the failure of SB96 between now and the expansion of Medicaid next year.

“I’m glad we have the fallback in place,” he said. “That’s really my short answer.”