Pennsylvania Decision to Expand Medicaid Could Prove Costly

Published October 2, 2014

The state of Pennsylvania has announced it will expand its Medicaid program under an agreement reached with the federal Department of Health & Human Services, even after the federal government rejected many of the state’s proposed waiver requests that would have allowed the Keystone State to craft a plan suited to its residents’ needs. Expanding Medicaid is optional for states under the Patient Protection and Affordable Care Act, better known as Obamacare.

The state had originally sought to enroll newly eligible persons in private insurance plans, but the agreement announced on August 28 instead required they be placed into managed care plans largely identical to the plans current Medicaid recipients are enrolled in.

Critics contend the agreement omits needed reforms and will prove costly both for Pennsylvania and for the nation’s taxpayers.

“Pennsylvanians deserve better,” said senior policy analyst Elizabeth B. Stelle of the Commonwealth Foundation, a Pennsylvania-based free-market think tank. “The federal government refused to give us the flexibility we requested to reform Medicaid. The best thing we can do for Pennsylvanians in need of care is to walk away and pursue other ways to expand access to care.”

Flexibility Denied

The centerpiece of the expansion proposed by Pennsylvania Gov. Tom Corbett (R) would have provided premium support to those previously ineligible for the state’s Medicaid program, allowing them to purchase plans on the federal exchange while themselves paying a small premium. For example, a childless adult with income between $11,490 and $15,289 would have paid a monthly premium of $25 under Corbett’s plan.

DHHS rejected that proposal, also scuttling work requirements and a $10 co-pay for nonemergency use of an emergency room. Instead, the newly eligible must enroll in a plan from a managed care organization (MCO) that agrees to provide Medicaid benefits in exchange for a monthly payment from the state.

The newly enrolled will still pay a small monthly premium, and participants who participate in work search activities are eligible for reductions in the premium. Getting a yearly checkup or otherwise engaging in healthy activities can also lead to reductions in enrollees’ premiums.

“The federal government proved unwilling to grant Pennsylvania even minor reforms, like work search requirements or meaningful cost-sharing,” Stelle noted. “Given the lack of flexibility, it’s in the best interest of Pennsylvanians to walk away from a new entitlement and pursue other avenues that truly expand health care access.”

Budget Concerns Raised

Pennsylvania’s taxpayers will have to pay for the premium reductions for the newly eligible, which will put increased strain on the state’s budget. There is also some doubt whether the federal government will be able to pay its share of the expansion in the future.

“The expansion of taxpayer-funded healthcare in Pennsylvania will have major budget impacts on both the state and nation for years to come,” Stelle said. “In Pennsylvania, our Medicaid program is already growing faster than residents’ income and consumes about a third of every dollar sent to Harrisburg. Unfortunately, expanding taxpayer-funded healthcare will only exacerbate this trend.

“Very soon,” Stelle added, “lawmakers will have to make a tough choice between taking resources from other priorities, like education, or raising taxes to fund this expanded entitlement.”

Current Beneficiaries Vulnerable

Because Medicaid is typically a state’s largest budget item, future budget cuts will likely target the program. Jonathan Ingram of the Foundation for Government Accountability argues when it eventually comes time to cut costs the new expansion population will likely emerge unscathed and poorer, needier persons already enrolled will suffer.

“Rather than fixing Medicaid for the truly needy, Obamacare’s Medicaid expansion overloads the safety net with able-bodied adults and prioritizes them over the nation’s most vulnerable patients,” Ingram wrote in a July 2014 report, “Who’s On the Obamacare Chopping Block.”

With the federal government picking up 90 percent or more of the new expansion population’s Medicaid costs, compared to about 52 percent for the current population, states risk losing more funding if they reduce spending on the expansion population than if they reduce it for existing beneficiaries, Ingram noted.

Loren Heal ([email protected]) is a freelance reporter for The Heartland Institute