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Gov. Gary Herbert likens his Healthy Utah plan to lemonade squeezed from federal lemons.

"I don't support the Affordable Care Act, but it's the hand we have been dealt," Herbert said Wednesday in his State of the State address.

Sweetened as it is, though, his alternative Medicaid expansion plan still may be too sour for legislators who will decide in coming weeks whether or which poor Utahns will get health care coverage.

If put to a vote today, the Utah House likely would kill Healthy Utah, which would provide health care coverage next year for 95,000 low-income Utah adults, including 63,000 in the coverage gap who have no low-cost options.

The state Senate is more receptive but could go either way on Healthy Utah, several observers say.

While the speaker of the House and Senate president have both said that doing nothing on Medicaid expansion is not an option, there's little for the Legislature to debate in the second week of the session. The only bill published by Monday afternoon was Senate Minority Leader Gene Davis' bid for full-on Medicaid expansion, an idea that's been rejected before and is unlikely to gain traction this session.

Instead, lawmakers are waiting for a bill proposing a much smaller Medicaid expansion, one that would cover an estimated 10,000 people below the poverty level who have disabling mental disorders, serious physical illnesses or substance-abuse issues.

In other words, those deemed neediest of those in need.

If that's the path the Legislature takes, Utah will be the first state to expand Medicaid only to the medically vulnerable or frail.

And even as modest an expansion as it would be, "It would be the largest Medicaid expansion in decades," says sponsoring Sen. Allen Christensen, R-North Ogden, co-chairman of the Health Reform Task Force.

The task force spent much of the past year learning about Healthy Utah, but snubbed it last month in favor of recommendations to cover only the very sick or addicted poor.

House Majority Leader Jim Dunnigan, R-Taylorsville, says he's not sure what his own bill will look like — if he proposes one at all. An insurance company owner and co-chairman of the task force, Dunnigan has sway with other lawmakers on health care reform.

Dunnigan remains undecided about the governor's plan.

"I'm not necessarily persuaded it's not the way to go," he says.

Perhaps Dunnigan's indecision is one reason the governor's spokesman, Marty Carpenter, says Healthy Utah is "far from dead."

The governor surrounded himself with top business and religious leaders at a December news conference pushing for his plan.

The Utah Hospital Association and Salt Lake Chamber are running pro-Healthy Utah ads, and The Church of Jesus Christ of Latter-day Saints' endorsing statement, issued the day of the governor's news conference, provided an important boost.

Utahns and Utah companies are paying nearly $800 million a year in new taxes related to the Affordable Care Act, the governor says.

"We can either watch our hard-earned tax dollars remain on the table in Washington, D.C., primarily benefiting other states, or we can bring back a significant amount of our own money to Utah," Herbert said in his State of the State address.

Yet lawmakers resist embracing Healthy Utah for practical and philosophical reasons. Key among them is the long-term cost.

The pricetag rose last month when a consultant released new projected enrollment numbers.

The Utah Department of Health now estimates Healthy Utah will cost the state $78 million in 2021, the year after the federal share of the expansion settles down to 90 percent per year. That's nearly double the cost estimate from a year ago.

The feds will pay 100 percent next year, and the share drops from there, according to the deal Herbert struck over months of negotiations with the U.S. Department of Health and Human Services.

The $78 million figure presumes 146,000 people will be covered by Healthy Utah plans in 2021, including many of those who now qualify for Medicaid but don't bother to apply, people considered to be in "the woodwork."

By contrast, if the state were to cover only the medically vulnerable — an estimated 12 percent of those below poverty level, or 10,300 people — the pricetag for the state would be $28 million in 2021.

On a per-person-covered comparison, Healthy Utah is much cheaper for the state: $533 per year versus $2,728 per year, according to a health department analysis.

That's because of the higher federal match rate for full expansion and the fact that it's cheaper to insure a larger group that includes healthy people than it is to cover a smaller group of sick people.

Dunnigan says he's worried about sustainability.

"Can we keep it going? We were told $40 million last year," he says. "What if we're off and it's actually going to cost $160 million?"

It also angers him that the Obama administration, while claiming to offer states flexibility, is demanding Utah's Healthy Utah plan cover some people who already qualify for subsidized health care on the federal marketplace — those earning incomes at poverty level up to 138 percent of poverty. It's a group estimated at 32,000 Utah adults next year, about a third of the Healthy Utah total.

Without full expansion to include them, Utah won't get as good a match from the feds.

"That makes no sense," says Dunnigan "They are making it much more difficult than it needs to be."

The governor and supporters are exploring possible revenue sources to pay for Healthy Utah, including a tax on e-cigarettes and surcharges on hospitals and other medical providers.

The Utah Hospital Association would support a roughly 50 percent increase in the assessment on hospitals' inpatient revenues if other medical providers also kick in more, says Greg Bell, president of the association.

Utah's Medicaid program got nearly $50 million from the hospital assessment last year, and could garner $25 million more per year from an increase equal to 0.8 percent of revenues.

Herbert's e-cigarette tax would raise $10 million next year. Healthy Utah proponents say it could bring in $15 or $20 million a year in 2021 and that could go toward covering low-income Utahns.

Besides the cost, some lawmakers think it foolhardy to make a Medicaid deal with the feds when so much is in flux.

"There's a lot of uncertainty out there. And we're not even talking of … whether the federal government will live up to this [deal]," Dunnigan says.

Bell, who served in the Legislature and was Herbert's lieutenant governor before joining the hospital association, says disdain for the president undergirds some of the opposition.

"If it weren't part of Obamacare, it would be an entirely different debate," he says.

"Politically, that's where the landmines are."

The Health Reform Task Force wanted to carve out a smaller population of the poor to cover as, in the words of Rep. Dean Sanpei, R-Provo, an "incremental and measured approach."

There also is an advantage to covering those with mental illness or substance abuse disorders: Insurance to pay for treatment might mean fewer people go to jail or prison or return there when paroled.

But by zeroing in on the sick and addicted, lawmakers are ignoring a broad swath of the working poor, says Lincoln Nehring, senior health policy analyst at the nonprofit Voices for Utah Children.

"If you ask a conservative Republican who is most deserving of coverage in this population, they would say low-income working adults," says Nehring. "But with these proposals, that's the exact individuals that are going to be left out — those working parents."

That's just not true, Dunnigan retorts. "There is no exclusion because you have a job," he says, noting that most of the Utahns who shared their wrenching stories with the task force over the past year would qualify as medically vulnerable, or frail.

Doug Thomas, director of the Utah Division of Substance Abuse and Mental Health, says such a plan could create its own problems.

"That would leave out a member of the National Guard returning home with no job and needing help," he says.

It also would create an incentive for people to be sick — or at least to persuade their doctors they are sick. "It's going to encourage people to get worse rather than get better," Thomas says.

Rep. Ed Redd, R-Logan, a family physician, says it may be impractical to cover only the medically vulnerable because it's not a static group of people.

"People who are not medically frail today might be next week," he says.

Redd wonders if the state will be able to respond quickly enough to changing health statuses to ensure coverage. He has seen patients die because they lacked insurance. "You don't know who is going to get sick. That's what insurance is for."

Redd says he is preparing legislation that would provide coverage to more of the poor, along the lines of Healthy Utah.

A lot of his colleagues, he says, don't want to commit to a benefit that later might have to be yanked because of high costs, he says.

"That would be politically very painful," says Redd. "But the question is, What are we doing right now? We're basically saying, 'You're on your own.'"

Twitter: @KristenMoulton —

Mind the gap

The coverage gap refers to low-income adults earning below the poverty level ($11,770 for a single person this year) who don't qualify for traditional Medicaid because they make too much, aren't disabled or are not parents. They also make too little money to qualify for subsidies on the federal health insurance marketplace, so they are left out of reform intended to give everyone access to coverage. The Affordable Care Act envisioned these people would be covered by states' expanding their traditional Medicaid programs, but the Supreme Court ruled states can opt out of such expansions. Utah so far has opted out, but Gov. Gary Herbert's proposed Healthy Utah plan would cover the estimated 63,000 adults in the gap next year as well as 32,000 earning between poverty level and 138 percent of poverty. Lawmakers also will consider a proposal to cover only the medically vulnerable, an estimated 10,000 of the 63,000 in the gap.› XX