The Battle Over Medicaid Expansion

Published March 19, 2014

Consumer Power Report #411

The political battles over Medicaid expansion are continuing across the country as states take up warmed-over versions of the so-called private expansion in Arkansas. What should opponents of these expansions be highlighting in their conversations about the Medicaid issue? The Foundation for Government Accountability has guidance in the form of a poll conducted in Virginia that outlines the messages that resonate with people:

When Virginia voters learn that ObamaCare’s Medicaid expansion slashes seniors’ Medicare, gives taxpayer-funded Medicaid coverage to former prison inmates and could deplete funding for critical state priorities, their support for ObamaCare’s Medicaid expansion plummets; this according to a new poll released today by the Foundation for Government Accountability (FGA), a multi-state free-market think tank based in Florida.

The 10-question poll was conducted between March 7 and March 9, 2014, with 469 likely Virginia voters responding to all 10 questions. Respondents were first asked whether they supported or opposed expanding Virginia’s Medicaid program to give taxpayer-funded Medicaid coverage to up to 400,000 more mostly working-age, able-bodied adults without children, with results showing a razor thin plurality, 42 percent, supporting expansion and 40.9 percent opposing expansion–well within the poll’s margin of error of 4.5 percent. When asked if they would be more or less likely to support expansion once they knew key facts about its impact, opposition only grew …

Medicaid expansion, now being debated in the Virginia Legislature, has resulted in dramatic attempts at political power plays. Newly-elected Virginia Governor Terry McAuliffe has threatened to shut down state government if the Legislature presents him with a budget proposal that does not include ObamaCare’s Medicaid expansion. That move, however, lacks support among Virginia voters. When asked about Mr. McAuliffe’s government shutdown threat, 56.5 percent of respondents expressed their opposition while just 29.6 percent indicated their support.

FGA also has a new video on the subject. The important thing to recognize is the persistence of the inaccurately described “private option” for expansion, which is already well on the way to dramatically increasing Arkansas’ tax burden:

ObamaCare advocates repeatedly promise that Medicaid expansion is fully funded by the federal government, at least through 2016. Advocates repeated this promise for the Arkansas “Private Option” Medicaid expansion, which sought to use Medicaid funding to deliver Medicaid benefits to a new class of working-age, able-bodied adults through private ObamaCare exchange plans.

But under terms of the Private Option federal waiver signed by Governor Beebe, state taxpayers could soon be on the hook for any cost overruns. The special terms and conditions of the Private Option waiver feature monthly per-person caps on federal spending for each of the next three years. A common feature of Medicaid waivers, these caps are meant to protect the federal taxpayer if the Private Option ends up being more expensive than previously estimated. Under the terms of the waiver, the state taxpayer is responsible for all costs which exceed these per-enrollee caps.

At the end of the waiver period, the federal government will calculate how much Arkansas spent on the Private Option Medicaid expansion and compare it to the annual budget caps agreed to in the waiver. Any amounts over those caps must then be repaid to the federal government from state tax dollars.

There is no justifiable case to be made for accepting the Obamacare Medicaid expansion at this juncture as a fiscal conservative. The funds will not end up in another state if you deny them; you will be putting able-bodied adults ahead of the disabled in the line for care; and the federal government will put your state taxpayers on the hook for more tax dollars. There is no such thing as free money, and the strings attached to this “free money” will be a problem for states for decades to come should these expansions go through.

— Benjamin Domenech



Federal officials are planning a workaround that would effectively extend the March 31 deadline to enroll for health-care coverage for some users if technical glitches hamper a last-minute surge of signups on, people familiar with the matter say.

Despite improvements since its rocky Oct. 1 launch, the website still faces problems, including some involving the same software that stymied users in the fall. Problems with the site at least three times this past week kept some users from being able to log on, including an almost hourlong outage that struck Friday morning, some of the people said.

“We are struggling to achieve stability,” said one of the people familiar with the site’s technological underpinnings.

Under the workaround plan, people who can demonstrate that they tried to enroll in a plan before the deadline, but failed because of website troubles, would be able to sign up after March 31.

Details are still being hammered out, including how long the so-called special-enrollment period would last and what documentation people might need to offer as proof they were blocked by glitches, say people familiar with the matter. If the final days of enrollment go well, the administration could opt to forgo the backup plan, one person said …

Obama administration officials say they won’t formally extend the open-enrollment period to all shoppers and they don’t believe they have the legal authority to do so. But in congressional testimony on Wednesday, Health and Human Services Secretary Kathleen Sebelius seemed to allude to the backup plan, saying of potential enrollees “if, through no fault of their own, they were unable to enroll, that eligibility extends to a delayed enrollment period, and they will have a special enrollment.”

An official at HHS on Friday declined to comment directly on planning for the workaround but said the agency would monitor’s operations closely and “respond appropriately.”

A workaround plan would follow a series of major delays and alterations to the law during the rollout, many of which have added uncertainty for insurers and tarnished the Obama administration’s handling of the president’s signature policy initiative. The administration on March 5 urged insurers to keep in force health plans that were expected to be canceled under the law through 2016, and deadlines were earlier delayed for December sign-ups. On Friday, officials extended a deadline for shuttering a federal high-risk insurance program.

SOURCE: Wall Street Journal


Back in January, CMS warned that the absence of a financial management platform puts the entire health care reform policy at risk because of the potential for inaccurate payments to carriers that could lead plans to default, as well as the higher costs of administering workarounds.

Since then, CMS has put in place workarounds to keep money moving between the Treasury and carriers. The contracting document “includes timeframes that are no longer an accurate assessment,” said CMS spokesperson Patti Unruh in an emailed statement. “We have collaborated with stakeholders to put in place successful, interim solutions to carry out critical functions. CMS’s business and technical contract teams are continuing the work to complete the back-end systems for the Marketplace as quickly as possible,” she said.

In terms of complexity, the financial system is a much taller order than the initial portal, says Stephen Parente, a health care policy and finance professor at the University of Minnesota, who has been critical of the administration’s overall health care policy.

“Can it be built? Yes. But this is an IT infrastructure project that has no parallel both in terms of money and integration,” he said. “It’s a big deal if Accenture cannot get their act together to move the money.”

For example, calculating risk corridors requires the state claims data to be anonymized and routed through CMS to get a sense of what spending is like on each individual plan in every state. That information is compared against actuarial benchmarks to see if carriers are owed money for taking on excess risk. The subsidy payment function requires routing money from Treasury systems to carriers based on their number of enrollments.



Federal health officials dropped regulations late Friday outlining how they plan to help insurance companies stuck with unanticipated costs due to ObamaCare’s botched rollout.

In a 279-page document, the Department of Health and Human Services (HHS) detailed adjustments to the healthcare law’s “risk corridors” program, a means for shifting money from insurers who fare better under the new system to those who fare worse.

Risk corridors have been decried by conservatives as a bailout that could leave taxpayers on the hook for billions of dollars. The administration said Friday that it will implement the program in a budget-neutral way.

Under the proposed rules, the administration would tweak the formula that determines how much money insurers pay and receive through the risk corridors.

The change will mean that some companies see higher payments, or higher charges than under previous rules. The calculations will correspond with insurers’ administrative costs and on average, “suitably offset” any unexpected spending, according to the administration.

Specifically, HHS would raise the administrative cost ceiling from 20 percent to 22 percent, and increase the risk corridors’ profit margin floor from 3 percent to 5 percent.

The notice stated that the change would apply on a national basis in 2015 because “these additional transitional costs and uncertainties will be faced by issuers in all states.”

SOURCE: The Hill


The Cover Oregon health insurance exchange is one of the worst in the country at attracting younger enrollees, according to a new federal report.

Only 18 percent of those who’ve enrolled through the Oregon exchange fall between the ages of 18–34, a healthier age bracket considered crucial to keeping future premiums down. The age-related data for Oregon is available for the first time.

The Oregon number, which ties with West Virginia as the nation’s worst, falls well below the national average of 25 percent. The national goal was about 40 percent. Exchange officials and insurers had expected a higher portion of enrollees would be young, and premiums were set accordingly.

Cover Oregon had gone out of its way to attract the young, spending millions on television and radio ads that featured Oregon musicians such as Laura Gibson and the hip hop band Lifesavas. A Washington Post reporter observed that the ads “seriously could have been pulled straight out of Portlandia.”

The exchange conducted special outreach to the Portland music scene and sponsored local concerts with banners featuring slogans like “Enjoy Life and CYA,” intended to capture the modern zeitgeist for young adults.

The poor Oregon mark is not surprising, however, given the problems with the state’s exchange, said Ralph Prows, head of Oregon’s Health CO-OP, one of two new consumer-oriented insurance plan set up in Oregon by the federal government to compete with traditional providers.

Oregon remains the only state exchange that does not let the public self-enroll in a single sitting, which could deter a younger, more web-savvy crowd. For insurers trying to keep premiums down, “It’s not good news,” Prows said.

SOURCE: The Oregonian


Massachusetts is dropping the contractor that created the state’s dysfunctional online health insurance marketplace, ending a troubled partnership that has left thousands of consumers frustrated and many without coverage for months.

The state notified CGI last week that it was being terminated, and officials have started negotiating a transition. The $68-million contract with the Montreal-based technology consulting company expires in September, and Sarah Iselin, who was hired last month by Governor Deval Patrick to oversee repairs to the Health Connector website, said that exactly when CGI finishes its work and how much the state pays for it are subject to bargaining.

Massachusetts has paid just $15 million to CGI and has not made any payments since the fall.

“We have made the decision we are going to be parting ways with CGI,” Iselin said Monday during a meeting of the Massachusetts Health Connector Authority board.

Iselin said she decided against scrapping the website entirely and starting again, an option that was being considered a few weeks ago. Instead, she is leaning toward working with a new company to rebuild key portions of the website.

The website is supposed to tell consumers whether they qualify for a subsidized plan, calculate the cost of coverage, and enable them to compare plans and enroll. It has not worked properly since it was launched in October, leading the state to encourage people to fill out paper applications instead.

“The reality is we have a long way to go,” Iselin said. “People still get stuck in the system. They get errors, and they can’t complete their applications. We wouldn’t see over half of the applications come in on paper if it was working well.”

Massachusetts will not meet the June 30 deadline to move more than 200,000 people into insurance plans that comply with the federal Affordable Care Act, she said. The state intends to ask the federal government for another three-month extension. The enrollment deadline was previously delayed from the end of March. A federal official she spoke to over the weekend signaled that the government wants to “work with us and be as flexible as they can,” Iselin told the board.

SOURCE: Boston Globe


In February, the Congressional Budget Office (CBO) released a budget outlook that showed significant changes in the effect of Obamacare on the supply of labor. This led to a furious outcry from Obamacare proponents and critics. However, one additional bit of conversation seemed to get lost in the shuffle: The CBO clearly states that Obamacare will lower aggregate labor compensation by about 1 percent.

This 1 percent represents about a $1.016 trillion reduction in labor compensation from 2017 to 2024, according to the Senate Budget Committee. When we attempt to look at this information on an individual basis, it is clear that low-income individuals will be hit the hardest.

The CBO states: “Because the largest declines in labor supply will probably occur among lower-wage workers, that reduction in aggregate compensation (wages, salaries, and fringe benefits) and the impact on the overall economy will be proportionally smaller than the reduction in hours worked.” This implies that low-income workers will be affected the most by Obamacare through the new incentives and benefits they could receive.

In order to illustrate this on an individual basis, we modeled the incidence of a 1 percent decline in aggregate compensation within the Heritage Health Insurance Microsimulation Model. According to the CBO, each year, aggregate compensation will be 1 percent lower due to Obamacare, but the individual response–and, consequently, the per person reduction–is unknown. When we model the response and solve for this number year to year, the result is the percent reductions below, separated by population and federal poverty level …

In terms of the per capita effect, on average, individuals will receive between $700 and $900 less in labor compensation each year between 2017 and 2024, while nominal compensation reductions appear to be closer to uniform across all income levels. For example, in current terms, this represents a 6 percent reduction in labor compensation for an individual at the federal poverty level. In other words, lower-income individuals lose a level of compensation similar to that of all workers, but as a percentage of their income, the negative effect is far greater than 1 percent.

SOURCE: The Heritage Foundation


A once-bipartisan proposal to finally reform the deeply flawed way that Medicare pays doctors succumbed Friday to the partisan politics of Obamacare, particularly the unpopular individual mandate.

The House voted 238–181 to replace the payment formula – the complicated equation that for more than a decade has required annual “doc fixes” – and to pay for it by delaying Obamacare’s individual mandate for five years.

A dozen House Democrats joined Republicans in the vote, but the bill is dead on arrival in the Democratic-controlled Senate.

The Senate plans to return a volley after next week’s recess with a plan that appears just as unlikely to move in the House because it completely avoids the issue of how to pay for the reform proposal. However, newly minted Senate Finance Committee Chairman Ron Wyden has said that he wants to see a bipartisan vote and could end up adding a pay-for – or the promise of one.

The underlying policy voted on Friday has been agreed to by the top Republicans and Democrats on the Finance Committee as well as the House Energy and Commerce and Ways and Means committees. And after years of bitter complaint about the Sustainable Growth Rate, lawmakers’ bipartisan, bicameral consensus on a replacement has been widely applauded, especially by medical groups.

The bill would eliminate the SGR and replace it with a new formula that would drive physicians to meet quality metrics tied to their payments – a critical, fundamental shift. The goal is to pay providers for treating a person’s disease or illness instead of focusing on the quantity of the tests or treatments they prescribed.

But when the six committee leaders failed to settle on a way to afford the $138 billion reform plan, the leadership of both chambers began pushing partisan pay-fors that stand little chance of becoming law.

SOURCE: Politico