The Case Against Medicaid Expansion

By: Nancy Smith | Posted: March 24, 2014 3:55 AM
Medicaid Expansion Cartoon

There are reasons why only half of the 50 states have signed up for Medicaid expansion.

Not that you'll find them easily in the mainstream press. They make boring reading. Stories explaining fiscal restraint usually do. Besides, they're so ... well ... conservative.

What you're more apt to find are stories of poor people dying because uncaring Republicans "who have never been poor in their lives" deny these unfortunates medical care. It's a common liberal litany.

Sadly, the cumulative effect on our psyches makes rejection of Medicaid expansion dollars a hate crime, and the governors and lawmakers who opt to do so evil monsters. Which is plain not true.

They don’t want to deny people access to health care. But they do want to halt expansion of a program that offers limited access to quality care while devouring state budgets.

Nancy Smith

Nancy Smith

I'll risk boring the pants off you and with the help of the Galen Institute and Keith Hennessey, director of the National Economic Council, take a crack at explaining why 24 other governors besides Rick Scott are balking at expanding Medicaid in their states. Not that some of them won't embrace expansion in time. (See the map at the end of this story.)

Medicaid expansion is a complicated business for any governor charged with looking at the well-being of his state, not only today but far into the future.

States are strongly being pressured to expand Medicaid to families earning up to $30,000 a year, as Obamacare allows. In Florida that would add about 1.4 million people. The feds will pay all benefit costs for this new population through 2016, then phase down to a 90 percent federal share from 2020 on. That's less than seven years away.

For each state and each governor, it boils down to these considerations:

There's no such thing as "free money"

The law doesn't offer states money without conditions. It reduces the price to the state of covering these new people. A state must still find the funds to cover its 10 percent of the new Medicaid costs. Sure, that’s a tiny fraction of the total new costs, but Medicaid is a huge program and many states are already in dire financial straits. If a state can’t afford its share, it doesn’t matter how much the feds are offering. A governor has to look at his budget and prioritize the state resources at his disposal. Medicaid spending is one of the two largest components of virtually all state budgets.

Turning the money-spigot on is easy, not so turning it off

Thinking governors recognize that a commitment to expand Medicaid eligibility is likely to be permanent. Can you blame them for being risk averse? Once you grant eligibility to a group of people, you can't just cut it off. Governors have to consider the political and legislative traps Washington sets for them.

True, the feds are offering to pay all benefit costs for the first three years, and most costs after that. But the law might be repealed in the not-too-distant future. Might, not necessarily will. But, then what? Even if it’s not, Congress could cut federal match rates in the future to address federal spending pressures. The point is, choose your scenario: the state and the governor carry the can for the downside of fiscal risk.

Creeping federal requirements

States have some wiggle room in designing benefit packages for their Medicaid recipients and a lot of wiggle room designing insurance structures and setting payment rates. But the feds are looking at this new group of people as part of their “Affordable Care Act eligibility expansions,” along with others who will buy subsidized insurance through state exchanges. What if the feds want to impose new requirements on the exchanges, and then make the states to do the same with their Medicaid programs? Sorry, but the feds have a history of doing this in Medicaid.

Costs you can't see

Whenever a program like Medicaid is expanded, there's what is known as a woodwork effect. Some mothers and their kids who were eligible for Medicaid before Obamacare, but who had not enrolled, would be drawn to enroll with the increased publicity to sign up newly eligible poor, childless adults.

If a governor's focus is on enrolling poor people in Medicaid, this is a good thing. But it is also an increased cost to the state budget, especially because these mothers and their kids aren't eligible for the higher federal match rate in Obamacare. A governor considering whether to expand his program must include these additional costs in his decision, even though they don’t directly impact the target population. A final consideration here is that the state bears the administrative expenses of expanding its program.

More people x more medical care = more spending

Yes, those who lack prepaid health insurance impose uncompensated care costs on hospitals. And, yes, the states pick up some of these costs through subsidies to those hospitals. Both would be reduced if more people had prepaid health insurance. But while expanded Medicaid eligibility means more and better medical care for those who were previously uninsured, it comes at an added cost to both state and local government. There is no free lunch here. Maybe a reduced price lunch.

Saying 'no' adds a bargaining chip with the feds

The feds and states are constantly negotiating over funding and rules for Medicaid and CHIP. It never ends. Governors know the Obama administration needs them to expand their Medicaid populations for Obamacare to approach its coverage goals. Congress wrote the law with an effective mandate on states to cover these people. But the Supreme Court inverted that power dynamic, meaning any governor who says no to expansion gains leverage for more federal funds or flexibility in other areas.

Why do the feds have to mandate it, if it's such a great deal?

The law’s authors knew that subsidies would encourage some people and some states to buy health insurance or expand their Medicaid programs. They knew that others would not take advantage of the subsidies, so they mandated participation with penalties for noncompliance. The individual mandate and penalty tax survived the court challenges, while those imposed on states didn't. I think we can assume that without the mandate, some states will now choose not to expand their biggest (or second-biggest next to education) state spending program.

Just remember that the umbrella problem -- the problem for all of us, not just governors -- is this: If all states were to go along with Medicaid expansion, nearly 90 million people would be enrolled in the program by the end of the decade, including those newly-eligible under the Obamacare expansion.

But, as many as 60 percent of these new enrollees are likely to drop private coverage in order to sign up for Medicaid, moving from private to public insurance that will be funded by taxpayers. That will strain not only federal and state budgets, but shred the safety net for the poor. Why? Because they will be forced to compete with millions more people to get care from the limited number of providers who see Medicaid patients.

It might be easy for a governor to think, well, I'll take the money, this is all going to be somebody else's problem in 2020. But for any state leader with a strong sense of personal responsibility and fiscal restraint, who hasn't a clue where the extra money will come from to expand an already bloated program, there's nothing simple about the decision to participate in Medicaid expansion.

Medicaid Expansion map

Reach Nancy Smith at nsmith@sunshinestatenews.com or at 228-282-2423. 

Comments (7)

Tina Brothers
3:36PM APR 13TH 2014
I am someone who is alive today because of access to health insurance and care. After working all my life (paying taxes), I was diagnosed with a life threatening medical condition. I lost my job, access to health insurance and care, my home, and my hope. I did not qualify for Medicaid because I was a woman without children. I was told if I got pregnant, then I could receive services. I was slowly dying a painful death, while living under a bridge. I never want anyone else to be in my shoes. Denying health insurance to the people who need it the most is barbaric, cruel, and inhumane. I am alive today because an agency finally stepped in and got me the care and treatment I needed. NO ONE should be denied healthcare. We are the richest country in the world.

It is a sad day when we spend billions improving the everglades yet we are reluctant to provide health care to our citizens.
7:36PM MAR 24TH 2014
Oh boy, here come the conspiracy clowns! About the only thing ringing true from JB is here in Central Florida, an alleged "social worker" began insisting money be taken out of our elderly relative's checking account in order for "things to look right" fro the government. She also stated that having a balance in the bank is okay! Must be something new 'cause we never heard that before. Oh well, gov't at it's best, right in in Florida, the carpetbagger state!
JB Smith
3:15PM MAR 24TH 2014
I was asked by a Hampton Social Worker to take $7,500 out of a clients bank account until he qualified for Medicaid and then put it back. She then went around me to a worker and told him to put it on a Walmart card. We allow clients to have a walmart card if they have some ability to handle themselves, but not with nearly $8000 on it. That is fraud. In addition, Virginia State Police are implanting folks with a biochip and charging it to Medicaid - even if you don't qualify. Implanting people is a violation of state statute. Using LRAD aka active denial system is a violation of federal statute. Go to forbes.com and search Brandon Raub. Read "A Note on Ubervaillance" by MG & Katina Michael. Read Safeguards in a World of Ambient Intelligence by Springer page 9 ".... Law enforcement would have us believe we are only safe if they know where we are at all times, what we are doing, and what we are 'thinking'". Check out the "Audio spotlight" by Holosonics. People ARE hearing voices. It enables sound to one person. LRAD is a long range acoustical device with more capabilities than you are being told. I worked with Booz Allen on a job at NAS Oceana Training Auditorium. It would be a shame if all the military vet suicides could be stopped by removing the biochip. I see the man in the paper has attempted to take his own life over 9 times now. Read "Terrorism and Mental Health by Amin Gadit or the JNLWD's 2010 Psyop Manual - how to create suicide victims and mass murderers. We don't need the biochip or Medicaid expansion. I have reported the fraud, but when cops are the biggest perps??? I can prove my story. Pru Salasky's account was so full of holes. They give people potassium because it aids in confusion - and it also damages the heart - hence the heart attack victim that died in court with a CSB agent by his side. Risperdal is such a dangerous drug, Johnson & Johnson are settling $2.2 billion dollars in lawsuits to date. A Virginia Beach Psychiatrist told me he did not participate in the torture - he was hired to dole out Risperdal. Virginia State Police and Newport News Police and Hampton Police are killing people and because it leaves no mark - they're getting away with it. We need to hold them accountable for all the suicides in the jails and the "natural causes" of such young victims. He was 44 - did he have kids? They killed him!
8:20AM MAR 24TH 2014
"Costs you can't see"

How do they compare to the costs you can't see of the people who don't have timely access to medical care, and who have to give up an income in order to qualify for Medicaid should they be diagnosed with a serious illness, or an unplanned pregnancy? Or go bankrupt, putting the burden of their care on other people, or leaving other creditors to hang?

"More people x more medical care = more spending"

True, but if it's a matter of keeping spending in check, why are we excluding the people getting up and going to work everyday and contributing to the health insurance premiums of those with employee sponsored health insurance and chipping in for Medicare?

Wouldn't it be more conservative to work our way down for eligibility? Say, the working poor get added first and those in prison for violent crimes being the ones who are left out first? (Or maternity coverage for the working couple having their first child first before the welfare mother having baby #5?)

Otherwise, Ms. Smith, as far as this: "But, as many as 60 percent of these new enrollees are likely to drop private coverage in order to sign up for Medicaid,..."
Unless you're talking a huge difference, I don't see that happening to that degree. Like you said after that, it's a already a burdened system. I don't see those people that are already willing to pay out of their own pockets for coverage are going to want to exchange their existing coverage for lesser quality coverage to save a little.
8:19AM MAR 24TH 2014
We already supply Medicaid to the poor and for children (period), expanding the definition of poor only entices people away from working but living off the state and giving up their freedoms and liberties. Insurance is not health care but subsidies for the insurance industry. This is not about medical care, it is about "CONTROL" of the state by the central socialist politburo. This is about redefining the purpose and responsibilities of the State Governments, not to grow the economy, jobs or wages for it's citizens but to expand the welfare dependency on a benevolent Tyrant. This is no different than charging actual tax payers for subsidizing illegal aliens for colleges with IN-State Tuition. It subsides the rich (Florida's highest expense) to entice the below minimum wage workers (Agriculture, construction, hospitality, etc...) to stay in the state and drive down the value of labor. There should be a $10,000 fine for each instant of hiring non-citizen or non sponsored (Green Card) foreign laborer. These non-citizens cannot become licensed professional lawyers, engineers or even hair dressers. Both actions (expanding Medicaid & giving In-State Tuition) drives the middle class into poverty and reduces the opportunities to the children of Floridian Citizens.
Tina Brothers
3:45PM APR 13TH 2014
We already pay hospital bills for the uninsured at a rate 10x what it would cost to care for them through Medicaid Expansion. People without health insurance go to the emergency room for things they could go to a primary care doctor for. Emergency room care is 10x as expensive. We pay for that care by subsidizing the hospitals who care for the poor. It is called indigent care and you probably pay for it through your property taxes and as part of your sales tax. Why not expand Medicaid and allow all Florida citizens access to health insurance and care. It will save money.
7:25AM MAR 24TH 2014
Ah yes, until we have cripples and chronically ill people begging and dying in the streets there is no need. Medicaid expansion is a very effective use of money. Yes, nothing is free and therefore it is prident that particularly tax monies be spent on things and in ways that benefit society as a whole. The reality Nancy Smith does not note is chronic conditions whether inchildren or adults take many billions away in lost productivity and opportunity. And the shame, snark intended, of people in need having reasonable access to medical care thus , perhaps , having those good Republican "makers,", they have proven to be on the make constantly after all, have to wait a bit because the "takers" are getting treatment.

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