You know the story. A deceptively friendly dealer offers a potential client an addictive substance cheap or free. Once the person is hooked, the costs skyrocket and the abuse begins. That’s also a pretty good description of how the feds treat states addicted to Medicaid.
Now that the U.S. Supreme Court has ruled that the federal government cannot use extortion—in New Jersey Governor Chris Christie’s colorful, but accurate, description—to force them to dramatically expand their Medicaid programs or lose all of their Medicaid subsidies, several states are considering Medicaid rehab.
Like any detox program, breaking the cycle of Medicaid dependency could be painful for a while. But those states that make the break will be stronger and our system of federalism will be more secure.
The addictive substance in Medicaid is known as the Federal Medical Assistance Percentages, or FMAP. These are the federal matching funds, which can range from 50 percent to 74 percent of every Medicaid dollar a state spends, depending on the state.
That financial incentive encourages states to expand their Medicaid coverage, especially in the economic boom years. (I have been in state legislators’ meetings where some argued it was immoral not to expand Medicaid coverage when state coffers were full and with the FMAP so generous.)
Of course, an economic downturn eventually arrives imposing a difficult task on the states, because they now must cut a dollar’s worth of Medicaid coverage to get only 25 to 50 cents worth of savings, even as a growing number of newly unemployed people try to enroll in the program.
The Medicaid reforms in the Patient Protection and Affordable Care Act, or ObamaCare, attempt to lure states into an even bigger trap with a larger match—covering 100 percent of the cost for newly eligible people through 2016, and gradually dropping to 90 percent in 2020. If FMAP is cocaine, this enhanced FMAP is crack.
But there’s another problem: The coverage mandate is supposed to drive most of the estimated 7.3 million Medicaid-eligible but non-participating Americans to join the program, and at the old FMAP rate. Plus the states will have to bear any additional administrative costs for all enrollees. That’s billions of extra dollars in additional state spending in what is already one of the largest budget items for most states—and growing quickly.
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Under ObamaCare, if states refused the deal the feds would cut all Medicaid subsidies, including those the government has been providing since Medicaid’s inception in 1965. That’s the provision the Supreme Court ruled unconstitutional, a step that has opened the door for some assertive federalism.
Some 15 governors have indicated they either will or may not take part in the Medicaid extortion, er, expansion. (See the list here) That decision has angered the dependency crowd, which thinks addiction demonstrates its caring.
Critics of the “just-say-no governors” claim that by refusing to expand Medicaid, millions of lower-income Americans will not get coverage. Maybe, but that’s not clear. Some states might be willing to raise Medicaid eligibility to 100 percent of the federal poverty level (if it’s lower than that now), but not 133 percent (really 138 percent) as the law demands.
Those above 100 percent of FPL would likely be eligible for federal subsidies within a state’s health insurance exchange. So they would be covered, even if it costs them and the federal government more than if they were in Medicaid.
And some states have state-based programs in place—e.g., Wisconsin’s Badger Care and Healthy Indiana—that could cover workers making more than the state’s Medicaid-eligibility level but less than 100 percent of FPL.
In short, states refusing the expansion could find a way to provide coverage for low-income workers—if they have some flexibility. The Republican governors just sent President Obama a lengthy letter seeking clarifications on the rules and requesting more freedom to innovate.
What the opt-out governors claim is that Medicaid is a terrible insurance program that is going broke fast and dragging the states down with it. So why dump an estimated 16 million more Americans in it without fixing its problems?
It’s hard to argue with their logic. For example, the Texas Medical Association just released a survey that shows that
Nor will Medicaid expansion reduce emergency room usage because, as numerous studies have shown, ER patients disproportionately tend to be Medicaid beneficiaries.
What the dissenting governors—as well as many others—want is more flexibility to address the problems of the uninsured in creative ways. Florida Governor Rick Scott and Louisiana Governor Bobby Jindal know more about Medicaid and the health insurance system than any of the leftists who crafted ObamaCare.
Why not block grant the federal money and let governors try their hand at fixing Medicaid, and let the voters hold them accountable if they fail? They certainly can’t do any worse than ObamaCare. All they want is to get clean and begin breaking the cycle of Medicaid dependency. The Medicaid “pushers” in the Obama administration should let them.