Medicaid Expansion Remains a Bad Idea for Georgia

Published July 1, 2016

Thirty-one states, in addition to the District of Columbia, have chosen to expand their Medicaid programs under Obamacare, and 19 have refused to do so. Medicaid is already placing severe financial strain on state budgets, and the program has a proven track record of failing to provide cost-effective and efficient care for those in need. Georgia is among the states that have chosen not to expand Medicaid because of concerns regarding ongoing costs and federal mandates.

In recent weeks, several state senators have once again stated to discuss Medicaid expansion in Georgia. Critics of expansion, including the Georgia Public Policy Foundation, argue expanding Medicaid eligibility poses many challenges, including uncertainty regarding funding and costs, questions about the effectiveness of the Medicaid program as a whole, and the impact on current recipients.

While no plan has been announced, the discussion has centered on the possibility of pursuing a waiver from the Centers for Medicare and Medicaid Services (CMS) to implement a private-option model similar to the system now used in Arkansas. Under the Arkansas premium assistance model, an estimated 250,000 new enrollees have been added to Arkansas’ Medicaid rolls. These enrollees purchase private health insurance from the state’s Obamacare health insurance exchange and receive a premium support payment to help offset costs.

Emulating Arkansas’ model is problematic for several reasons. First, despite various private-market characteristics of the program, it still represents an expansion of a failed Medicaid system. The federal government would dictate multiple aspects of insurance plans, effectively reducing many of the benefits linked to real market competition. These so-called “private option” plans are merely machinations by Medicaid expansion supporters to give conservative legislators cover to expand Medicaid and grab what they incorrectly claim is “free money.”

It’s true many of these programs attempt to include some limited free-market reforms, such as copays and employment requirements, but CMS has largely rejected similar proposals in the past.

A second significant problem is related to funding. According to The Washington Post, the initial projections by an actuary firm hired by Arkansas to review the plan found the premium support model would cost federal taxpayers $18.9 billion over the next ten years and an additional $1.59 billion from Arkansas taxpayers. Peter Ferrara, a senior fellow of The Heartland Institute, warns total future costs to state governments are estimated to exceed the funds provided by the national government, with the shortfall reaching as much as 66 percent of state expenditures. States will find the situation unsustainable.

The federal government has promised to cover 100 percent of the costs of newly eligible enrollees until 2017, but the matching rate declines over time, so states will eventually have to find other ways to pay for the newly eligible population. Moreover, the 100 percent match applies only to newly eligible enrollees. Those who were eligible for Medicaid before expansion and required to enroll under the individual mandate are subject only to the lower, regular matching rate. This means state costs for Medicaid are increasing even for those states not expanding their Medicaid programs.

A 2013 study published in The New England Journal of Medicine found Oregon’s Medicaid expansion created some improvements, such as overall health care use and financial assistance, the state’s expanded Medicaid program failed to achieve the principal goal of all health care reform: improving overall health.

Making matters worse, if Medicaid expansion occurs in Georgia, it would be extremely difficult to roll back, as it has been in other states. Federal law effectively blocks states from backing out of expansion under a provision called “Maintenance of Effort,” which requires states to fund a program at the initially agreed-upon level, regardless of the amount of federal funding received.

Georgia legislators should continue to resist Medicaid expansion and instead reform their fiscally unsustainable program in ways that offer better care to enrollees and lower costs for taxpayers. Instead of expanding a flawed Medicaid model that is too costly, delivers subpar health care, and shifts more power to the national government, state lawmakers should focus instead on reforming the current system before choosing to expand it.