Friday, September 21, 2012

The Medicaid Controversy––The Republican Governors Should Put Up or Shut Up

Indiana, New Mexico, and Wisconsin are asking the federal government to exempt people making between 100% and 133% of the poverty level from the upcoming Medicaid expansion.

These Republican governors need to put up or shut up.

Ever since the passage of the Affordable Care Act (ACA), Republican governors have been clamoring for block granting Medicaid.

The Supreme Court ruled that a state doesn't have to accept the new Medicaid expansion money under the ACA.

Many Republican governors––all of them actually––were saying before the Court ruling that the Medicaid expansion was yet another unfunded federal mandate they could not afford. Now the Court has told them they don't have to do it.

Be careful what you wish for.

The Congressional Budget Office (CBO) has already done some modeling estimating the impact on the federal budget if some states don't take the federal money and expand their Medicaid program.

Because of the Court ruling giving the states the option to refuse it, the CBO estimates that Medicaid and the related Children's Health Insurance Plan (CHIP) will cover 6 million fewer low-income people. However, the CBO believes about half that number, 3 million, will become eligible for subsidies in the insurance exchange and take advantage of them. Further, the CBO calculates that for every person who is not enrolled in Medicaid because their state opted out, the feds save $6,000 in spending. But for every one of those otherwise Medicaid eligible that ends up in the exchange, the feds will spend $9,000.

So, on a net basis, the CBO estimates that the federal government will save money if the state opts not to expand Medicaid because 3 million people will have no coverage of any kind.

But just how many states ultimately opt out of Medicaid expansion is anyone's guess. Maybe a bigger point here is that Medicaid is a lot less expensive than having to subsidize someone in the insurance exchange.

My own sense is that the Supreme Court ruling could be a fabulous opportunity. Republicans have been calling for Medicaid to be moved to a block grant program under the complete control of the states––the feds simply promise a flat amount of money and the states get to spend it on the kind of Medicaid program they determine to be best.

Presuming Obama is reelected, the administration will want to see Medicaid expanded. What a terrific opportunity this could be for Republican governors to come to Washington, DC to do a deal. The federal government has a history of granting Medicaid waivers––the Bush administration did so for Massachusetts enabling that state to set up its universal health plan.

A number of Republican governors have so far said they have no intention of taking the Medicaid money.

But I will suggest that this is a debate that is still to come in each of these states. In Texas, for example, the feds would pick up 95% of the cost over ten years to expand that state's meager Medicaid program––the ACA expansion would pick up another 1.8 million Texans. The provider lobby is desperate for Texas to take that money––the uninsured continue to be unreimbursed care in their hospitals and clinics if Texas doesn't take the money.

Florida stands to gain 94% of the cost to cover another 950,000 Floridians. Indiana would cover 298,000 and Wisconsin would cover 206,000.

As a unilateral mandate from Washington to cover these people in a federally driven program it is easy to sympathize with these Republican governors and their position. But if these governors were to go to DC and:
  • Get themselves that federal Medicaid money in the form of a block grant through the waiver process, 
  • Which also gave them wide latitude in setting benefits and using the private sector to deliver care and funding, 
  • And, covered the same number of people the ACA intended to cover, 
  • And did it with only the federal portion of the money (the 95%), 
It is hard to see how Obama would reject it.

Already, stalwart Republican governors like Virginia's McDonnell, Nebraska's Heineman, Utah's Herbert, Tennessee's Haslam, and Wyoming's Mead all have said they could be interested if the Obama administration was willing to be "flexible."

My guess is that Texas's Perry and Florida's Scott will become just as flexible as soon as the Texas and Florida medical associations are done with them.

But the request by Indiana, New Mexico, and Wisconsin to carve out those making between 100% of poverty and 133% of poverty and send them to the exchange makes no sense at all.

First, every person that went to an exchange would receive $3,000 more in taxpayer subsidies––Medicaid is simply the most efficient way to subsidize people. Second, the exchange subsidies are tied to the "Silver Plan"––which will pay only about 70% of a person's health care costs. To start with it will likely have at least a $1,500 deductible. And, people will have to pay a premium equal to 2% of their income.

A family of four at 100% of the poverty level makes $23,000 a year––at 133% it is $31,000 a year. What good will it do for a family making this kind of income to get a policy designed to pay 70% of costs? And, what good would that do taxpayers at a cost of $3,000 more than if these people were in Medicaid?

What would make sense is for these Republican governors to put up or shut up. They say if the feds give them block grants they can run their Medicaid programs far more efficiently.

So why can't they put a plan together that would cover everyone up to 133% of poverty and do it for the 95% of the original cost the feds were going to pay––leaving the state with no expansion cost?

These Republican governors don't believe their better way can't save just 5% of their Medicaid costs?

The Supreme Court ruling on Medicare could be catalyst for enormous experimentation and competition between the states with Democratic governors taking the traditional Medicaid approach within the ACA, while any number of Republican governors got the block grant and the flexibility they have been calling for to launch a variety of state experiments in health care delivery for the poor.

Why have these Republican governors so quickly lost their confidence that they can do a better job if only the feds would just give them the money and let them do it their way?


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