Medicaid Expansion: An Unquenchable Thirst

In The Patient Protection and Affordable Care Act (ACA), we see the worst of both baron and busybody. Having combined forces, each receives from ObamaCare the nutrition he craves -- the crony capitalist devours lucre, and the busybody feasts on control. The venal nature of their union is seen at its most naked in the arguments being made in favor of Medicaid expansion among the states. Expanding Medicaid was pretty much the only portion of the ACA Chief Justice John Roberts appeared to dislike. Consequently, he ruled that states could not be compelled to expand their Medicaid programs; rather, they could do so on a voluntary basis.

This made for great wailing and gnashing of teeth in the White House, as Medicaid expansion was intended to be a linchpin of universal coverage. Unsurprisingly, states opted out at a dizzying pace, leaving the White House scrambling for ways to shift the insupportable burden of their outsized coverage mandates to insurance companies and individual citizens, now that the states had wriggled out from underneath their thumb. Under the ACA expansion rules, the Feds will pay for 100% of the costs incurred in covering the expanded population for the first three years. After that, the reimbursement rate drops each year until it reaches a floor of 90% in the year 2020. Not a bad deal on those terms. The politician gets to take credit for covering low-income voters while footing only 10% of the bill. What politician wouldn't feel the burn of temptation in his pandering cheeks? After months of pressure, enticement, and promises, some governors have cracked -- swallowing the bait, hook and all. Others, like Governor Dave Heineman here in Nebraska, have remained steadfastly opposed to this budget-ballooning proposal, only to see their legislatures devise an end-run around their decision, presenting bills to expand Medicaid despite their objections. In Nebraska, that end-run is Legislative Bill 577. Two hundred and forty-six thousand people are already covered by Medicaid in Nebraska. At a recent legislative hearing, it was estimated by state officials that as many as 80,000 Nebraskans would become newly eligible for Medicaid under LB 577. While that's a lot of grateful potential voters, they aren't the whole story. According to Vivianne Chaumont, director of Medicaid services for Nebraska, there are an additional 48,000 people who are eligible for Medicaid, but not presently enrolled. Nebraska spends roughly three-quarters of a billion dollars annually covering its share of Medicaid expenses. The federal government chips in another billion for their share. This is already the state's biggest single budget item, before LB 577 bloats Medicaid enrollment by another 35%-40%. Of course advocates of expansion cite the "bargain" rate for coverage under the ACA, making much hay out of the 100% reimbursement for the first three years, claiming loudly before every camera and microphone that we can't afford to let other states grab this money. Aside from avoiding the always irresponsible decision of assuming that the federal government will live up to its funding promises, there is a more compelling reason to halt Medicaid expansion -- that being the 48,000 presently eligible but un-enrolled Nebraskans who will be shepherded into the system when the individual mandate takes effect. These people will be seeking to avoid penalties for lack of coverage. They will be guided through health exchanges to the coverage that is least expensive for them -- Medicaid. So what's the problem, you may ask? It won't cost us anything for the first three years, and a maximum of 10% going forward, right? Wrong. Under ACA rules, those 48,000 souls won't qualify for the generous reimbursement rates offered for the newly eligible under expansion. The taxpayers of Nebraska will have to cover them under the standard reimbursement split, as if they had been enrolled all along. All of a sudden, the situation changes dramatically. What would've been an estimated 75 million dollar increase under the 90% reimbursement rate, instead swells to just shy of a quarter of a billion dollars, bringing our total annual Medicaid expense in Nebraska to nearly a billion dollars. Bear in mind that even this less-than-rosy scenario is predicated on the Feds keeping up their end of the bargain as promised, instead of chiseling away at their contributions as federal debt and deficit continue their rocket-trip to insolvency. So why would legislators, insurance companies, and other advocates for Medicaid expansion press forward with this idea, once realizing the prohibitive cost? The answer lies in a fight we already had -- choosing a state or federal health insurance exchange. ObamaCare requires a decision be made by each state regarding the form its health insurance exchange will take. The options were to build a state-based exchange, build a state-federal partnership exchange, or do nothing and default to a federal exchange. The ACA established two sets of rules for subsidies and penalties regarding insurance coverage; one set applies to exchanges established under sec. 1311 of the bill (state exchanges) and the other under sec. 1321 (federal exchanges). Under the 1311 model, subsidies and taxes triggered by that section created a financial windfall to the insurance companies, large hospital groups, and affiliated physicians involved, but under the 1321 model -- which Nebraska has chosen -- those transfer payments don't flow. When Governor Heineman opted to let the feds build our exchange under sec. 1321, a whole bunch of folks saw their visions of mansions, Mercedes, and bulging bankbooks evaporate in a puff of fiscal economy. They haven't really gotten over it yet. There was immediate talk of bypassing the governor by legislating a state exchange over his objections, but that was abandoned with the realization that there was insufficient support in the legislature to override a certain veto. By expanding Medicaid under the rubric of the ACA, proponents of ObamaCare intend to back the state into a corner. The behemoth spending required under an expanded model cannot be sustained without finding new revenue. It's not possible to raise taxes high enough to cover the shortfall without decimating economic vibrancy in an already shaky and uncertain economic climate. There is no mechanism for shifting costs to the broader backs of the privately insured under the ACA, so the state will be forced to repurpose monies from other projects and services to feed the Medicaid/ObamaCare leviathan, or...they can come back to the federal government, hat in hand, and submit to a state-based exchange in the hopes of migrating a fiscally significant number of Medicaid beneficiaries into federally subsidized private policies sold through such an exchange. The inevitable result of Medicaid expansion will likely involve all of the above indignities -- tax increases, service reductions and subsidy-seeking -- leading finally, to abject capitulation to the statist dependency that is the Patient Protection and Affordable Care Act. As C.S. Lewis said, the most dangerous weapon of the do-gooder is his absolute belief that his are acting in our best interest. Beware the crony capitalist, but fear the busybody. The author writes from Omaha and welcomes comments and visitors to his website at www.readmorejoe.com.