In the wake of Louisiana governor John Bel Edwards’ announcement last week that his state would expand Medicaid under ObamaCare, the White House rolled out a new scheme to persuade the 19 states that are still holding out to fall into line and expand their programs: throw more money at them.
But these state officials should resist the temptation, for at least three reasons:
- First and most obvious is that expansion states have all experienced the same thing: More people signed up than expected, and it blew a hole in the states’ budgets.
- The second reason is that there’s no such thing as “free” federal dollars. The money comes with conditions, which effectively shifts policymaking from the receiving state’s legislature and governor to a distant federal bureaucracy (in this case, the Centers for Medicare & Medicaid Services), which dictates how states must spend federal Medicaid funds.
- The third reason is less abstract: Medicaid will harm those it’s meant to help. Often lost in the expansion debate is that Medicaid is the worst form of health coverage in the country.
The decision states face of whether to expand Medicaid to non-disabled, working-age, childless adults—the Affordable Care Act primary expansion population—involves tradeoffs. These tradeoffs include higher taxes, reduced spending on items like education, transportation, or infrastructure, or reduced spending on other Medicaid populations such as the disabled, children, or the elderly. The ACA funding formula allows states to pass a much greater share of the costs of covering non-disabled childless adults to federal taxpayers, but the tradeoffs still exist.
President Obama is proposing to boost federal funding for states that choose to expand Medicaid under ObamaCare in a new effort to entice states to make the move.
Obama will propose in his 2017 budget to have the federal government pick up the entire cost of expansion for three years, no matter when a state decides to accept the expansion.
Under current law, states only got three years of full federal funding if they accepted the expansion in 2014. If nothing changes, states newly accepting the expansion would not get full federal funding after 2016 and instead would get payments that are somewhat less, eventually dialing back to 90% of costs.
A recent about-face by the Obama administration on so-called “state innovation waivers” may be the most important change to ObamaCare that no one is paying attention to. These waivers, which will begin in 2017, allow states to take a block grant of funding and waive nearly every major component of the law. A major change, however, is now set to make these experiments mostly impossible. In recent guidance, stealthily released at the close of business on a Friday last month, the Department of Health and Human Services announced that the rules are changing.
Wyoming Gov. Matt Mead announced last month that he would spend the next few months advocating for ObamaCare’s Medicaid expansion in next year’s budget. But so far, Wyoming legislators have taken a thoughtful approach, carefully reviewing all of the evidence and ultimately rejecting ObamaCare expansion. Just 26 out of 90 lawmakers supported the issue during the last legislative session. With expansion costs exploding in other states and federal funding now on the chopping block, it’s clear that their decision was the right one.
On Wednesday, Kentucky Governor Matt Bevin announced that he was planning to keep ObamaCare’s Medicaid expansion, but would seek federal waivers to “transform” the program. But Bevin’s plan is already hitting an a snag: he wants to use a Section 1332 waiver to “transform Medicaid.” The snag: Section 1332 doesn’t provide any authority for Medicaid reform.
On December 14, former Secretary of the Department of Health and Human Services Kathleen Sebelius made news by calling the decisions of Kansas and Missouri to turn down the Medicaid expansion contained in the Affordable Care Act “morally repugnant and economically stupid.”
Heated political rhetoric does not alter the fact that a state’s decision to expand Medicaid involves complicated tradeoffs.
According to the Organization for Economic Cooperation and Development (OECD), the United States spends $8,713 per person on health care — more than double the OECD average. But under ObamaCare, that high level of spending isn’t buying the best care. The law’s numerous regulations and intrusions have simply inflated the nation’s healthcare tab — without actually improving the quality of care available to patients. The US has long spent more than other nations on care. ObamaCare has just accelerated that trend, despite the law’s goal of reducing health spending. Last year, health expenditures jumped 5.3%, up from an average of 3.9% over the previous six years, according to data from the Centers for Medicare and Medicaid Services.
Instead of more federal regulation and subsidies, what U.S. health care needs is adoption of market principles, starting with broad empowerment of the patient-consumer. The proposals advanced in this volume would replace many counterproductive and outdated federal policies with practical, market-based reforms that aim to provide all Americans with access to high-quality health care at affordable prices.
ObamaCare is performing worse than expected when it became law: plans are less attractive, enrollment is lower, premium increases are higher, and risk pools are sicker. Medicaid expansion is a key problem with the law. The main problem with Medicaid, which existed before the ACA took effect, is that enrollees receive little value from the program. The joint federal-state health care program needs large scale reform so that it provides better value for both enrollees and taxpayers.