A government report finds that the cost of expanding Medicaid to millions more low-income people is increasing faster than expected, raising questions about a vital part of President Barack Obama’s health care law.

The law provided for the federal government to pay the entire cost of the Medicaid expansion from 2014 through the end of this year.

Obama has proposed an extra incentive for states that have not yet expanded Medicaid: three years of full federal financing no matter when they start. But the new cost estimates could complicate things.

In a recent report to Congress, the Centers for Medicare and Medicaid Services said the cost of expansion was $6,366 per person for 2015, about 49 percent higher than previously estimated.

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Americans should be more worried than ever about Medicaid, which provides health insurance for America’s most vulnerable. The cost of the $500 billion program is expected to rise to $890 billion by 2024, according to the Centers for Medicare and Medicaid Services. Yet more spending doesn’t necessarily mean better care for beneficiaries, 57% of whom are low-income minorities. The expansion of Medicaid is one of the most misguided parts of ObamaCare—shamefully expanding second-class health care for the poor.

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With Donald Trump’s presidential campaign faltering, Republican health policy experts are gaming out Plan B for working with a Hillary Clinton administration to achieve conservative healthcare goals.

Their focus is on a possible “grand bargain” that would give conservative states greater flexibility to design market-based approaches to make coverage more affordable and reduce spending in exchange for covering low-income workers in non-Medicaid expansion states. A key element, conservative experts say, would be for a Clinton administration to make it easier for states to obtain Section 1332 waivers under the Affordable Care Act. Those waivers allow states to replace the law’s insurance exchange structure with their own innovative models.

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The implementation of major legislation such as the Affordable Care Act (ACA) often results in fiscal outcomes that differ significantly from prior projections. Whenever this happens it leads to many questions, much confusion, and several claims and counter-claims. Rarely is it immediately clear whether the law is working differently than envisioned, or whether the unexpected outcomes are due to inevitable projection errors having nothing to do with the law.

On rare occasion, however, a prior projection proves so far off that its significance must be noted. Two weeks ago my colleague Brian Blase uncovered such a development with respect to the ACA’s Medicaid expansion. Recall that the ACA considerably expanded Medicaid eligibility – an expansion made optional for the states in a later Supreme Court ruling. It turns out that the 2015 per-capita cost of this Medicaid expansion is a whopping 49% higher than projections made just one year before.

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Pence has always been a vocal opponent of the Affordable Care Act, even after the federal law passed in 2010 and was upheld by the Supreme Court.

But when faced with the choice of whether to expand Medicaid to cover Indiana residents who earn incomes that are 138 percent or below the federal poverty level — a key part of the ACA — Pence made a compromise. He debuted a conservative-friendly version of the expansion, one that requires Medicaid recipients to pay a monthly contribution, based on income, into a health savings account.

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The Department of Health and Human Services’ (HHS) annual report on Medicaid’s finances contains a stunning update: the average cost of the Affordable Care Act’s Medicaid expansion enrollees was nearly 50% higher in fiscal year (FY) 2015 than HHS had projected just one year prior. Specifically, HHS found that the ACA’s Medicaid expansion enrollees cost an average of $6,366 in FY 2015—49% higher than the $4,281 amount that the agency projected in last year’s report.

The government’s chief financial experts appear not to have anticipated how states would respond to the federal government’s 100% financing of the cost of people made eligible for Medicaid by the ACA. It appears that the enhanced federal funding for the ACA expansion population has led states to set outrageously high capitation rates—the amount government pays insurers—for the ACA Medicaid expansion population. The rates are much higher than the amounts for previously eligible Medicaid adult enrollees and suggest that states are inappropriately funneling federal taxpayer money to insurers, hospitals, and other health care interests through the ACA Medicaid expansion.

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This refrain may sound familiar: If you qualify for Medicaid but you like your “Obamacare” plan, you can keep it … unless you can’t.

That’s the confusing and mixed message residents are getting from the state and insurance companies now that Louisiana has become the 31st state to expand Medicaid coverage under the Affordable Care Act.

About 375,000 people — mostly the working poor — are expected to get free health insurance coverage through the expanded program, which is mostly subsidized by the federal government.

Tens of thousands of those Louisiana residents — the total is not known — already have health insurance policies through what is called the federal marketplace, an Obamacare program that pays most of their insurance premiums.

The state says people who bought individual policies through the federal marketplace but now qualify for Medicaid under the state expansion can keep their Obamacare plans if they prefer them over Medicaid. They just have to keep paying their share of the premiums.

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For six years, it has been abundantly clear that Americans want Obamacare to be repealed—but only if a well-conceived conservative alternative is positioned to take its place. That’s why the recent release of the House GOP health care plan is a big deal. The new plan would of course repeal Obamacare. But it would also fix what the federal government had already broken even before the law was passed and made things so much worse.

The proposal pairs an Obamacare alternative with Medicaid reforms and the crucial Medicare reforms (amounting to a kind of “Medicare Advantage Plus”) that Speaker Paul Ryan and House Republicans have long championed. As Ryan put it after the proposal’s release, “The way I see it, if we don’t like the direction the country is going in—and we do not—then we have an obligation to offer an alternative….And that’s what this is.” He called the plan not merely “a difference is policy” but “a difference in philosophy.”

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States that expanded Medicaid realized a 49.5 percent decline in the uninsurance rate, compared to a 33.8 percent decline in the uninsurance rate in non-expansion states since 2012, according to a Department of Health and Human Services report released today.

The department is touting the results of the study, which was conducted by its Office of the Assistant Secretary for Planning and Evaluation, as evidence that the roughly 20 states that have not yet expanded the program should do so.

“Today’s report is a clear reminder of the important role Medicaid expansion plays in improving access to quality, affordable care while addressing and improving overall health for millions of Americans,” HHS Secretary Sylvia Burwell said in a statement.

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Gov. Matt Bevin of Kentucky promised big changes were coming to Medicaid — and on Wednesday, he unveiled his plan. Bevin said the plan, “Kentucky Helping to Engage and Achieve Long Term Health” (or Kentucky HEALTH), will ensure the program’s long-term fiscal stability. Bevin’s predecessor, Steve Beshear, expanded Medicaid in Kentucky to adults making as much as 138 percent of the federal poverty level. Kentucky HEALTH is for that same population, plus all non-disabled adults currently covered under traditional Medicaid. The plan has two pathways: an employer premium assistance program and a high-deductible, consumer-driven health plan.

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