The Obama Budget Illustrates Why States Should Delay Medicaid Decision

Published April 15, 2013

Consumer Power Report #369

Today is the big day for the Arkansas Medicaid reform, and states across the country will be paying attention to what’s done in the legislature there. The plan failed to capture the supermajority needed to come out of the state House, where it came in six votes short of the 75 necessary for passage.

The actual legislation is here. I suggest reading it, despite the fact that HHS Secretary Kathleen Sebelius hasn’t.

Dan Greenberg writes in opposition to the plan here:

Employers create jobs, and employers hire employees. The expansion of Medicaid will create large incentives for businesses both to reduce the work hours of their employees and to split full-time jobs into part-time jobs. As a general matter, low-wage employees under Medicaid expansion will lose coverage as their wages rise. For instance, a $7.50/hour wage-earner can stay on Medicaid if he or she works less than 42 hours a week; however, any material salary increase will disqualify that worker from Medicaid eligibility rapidly …

Under Medicaid expansion, employees who earn too much money – or who work too many hours – face a set of unpleasant choices. They can quit. They can work fewer hours. They can decline raises. Realistically, a large number of employees who face such choices will opt to preserve Medicaid coverage by reducing the hours they legally work.

Recall the four options I have outlined in the past – blocking expansion, delaying the decision, negotiating with HHS, or full expansion – and note option three seems to be shrinking all the time in terms of utility. Delaying, on the other hand, is looking better and better. President Obama’s budget illustrates one reason why: those DSH cuts just aren’t going to happen.

A big argument for taking up the Medicaid expansion is that Obama’s health care law takes away from hospitals even as it gives. Skipping the Medicaid expansion would deny hospitals some of the law’s biggest benefits.

Mississippi Gov. Phil Bryant (R), a prominent health care reform opponent, already cited the White House proposal as another reason not to expand Medicaid. “I have long advocated that cuts to this program should not be used to affect budgets in states that choose not to expand Medicaid. This move should give us additional time to make a reasonable decision about any changes to the Medicaid program,” he said in a written statement Wednesday.

Bryant’s argument could find sympathy in state Capitols as Republican legislators scramble to make a decision on whether to take Obama’s Medicaid funding and expand the program.

Read more on this front here. The DSH payment reduction was always dependent on the fiscal responsibility of future Congresses, an unlikely bet if there ever was one. Now even the White House has admitted this to be an unlikely bet, and that we’re likely to see ongoing “DSH fix” votes in addition to the “doc fix” votes that have become so familiar. In the absence of these DSH payment cuts, providers have far less incentive to yell about their budgetary strains in the absence of Medicaid expansion, and state legislators would do well to treat these claims as the exaggeration they are.

— Benjamin Domenech



How little we actually know:

According to the new White House budget, from the time the exchanges open in 2014 to 2021, the administration expects to spend about $606 billion on subsidies, a massive commitment of federal resources.

That’s about 27 percent more than the $478 billion projected in the president’s budget last year, and 65 percent more than the $367 billion for the same period in the 2012 budget.

But experts – and government actuaries – attribute much of the jump to the Supreme Court’s changing the rules of the game when it made the Medicaid expansion under the health law optional for states.

So in states that choose not to expand – still a very fluid situation with only a handful of “hell no” states but many more still up in the air – some of the people who would have been covered by Medicaid will be eligible for subsidies on the exchanges.

The law provides generous premium subsides to make coverage affordable for individuals earning from 100 percent to 400 percent of the federal poverty level. And the subsidies are expensive, especially for those in the lower end of that range.

The Congressional Budget Office estimates that it will cost about $9,000 in subsidies for a person who would have qualified for Medicaid under the expansion – compared to $6,000 for Medicaid coverage.

On the other hand, CBO projects that 3 million fewer people will be covered in 2022 because of state decisions not to expand Medicaid. On balance, CBO projects the ruling will save the government about $80 billion through 2022.

The Supreme Court ruling might be “a blessing in disguise,” said Len Nichols, director of the Center for Health Policy Research and Ethics at George Mason University and a supporter of the health law. “It provides some savings upfront, which is welcome and will give states some time to buy in.”

But the budget makes the numbers difficult to compare. It projects the expected premium subsidies specifically but does not break out the expected spending on the Medicaid expansion in a similar way. This year, the budget did revise down its total expected Medicaid spending in 2020 by about $135 billion, although the reduction is only partly due to consequences from the court.

The truth is that the cost is still a guessing game. States are still trying to make up their minds on what to do. And it’s not known how many people will enroll in the state-based exchanges, with or without Medicaid expansion.

SOURCE: Politico


Avik Roy makes the case for the Florida alternative:

Here’s how the Weatherford-Corcoran bill stacks up against the other alternatives. Under Obamacare, everyone under 138 percent of the federal poverty level – $32,499 for a family of four – will get coverage through Medicaid. If Florida does nothing, those between 100 and 138 percent of poverty will get coverage through Obamacare’s exchanges. In addition, some Florida adults below the poverty line already get coverage through Medicaid: jobless parents (below 22 percent of FPL) and working parents (below 56 percent of FPL). At present, childless adults below the poverty line do not get Medicaid in Florida.

Under the new Florida House proposal, parents below the poverty line who didn’t already qualify for Medicaid would get $2,000 a year deposited into a health savings account called a CARE account (CARE stands for “Contribution Amount for Reasonable Expenditures”) in exchange for an individual contribution of $25 a month, for a total HSA contribution of $2,300 per year. The proposal would also offer this benefit to disabled individuals below the poverty line who are ineligible for Medicaid.

Beneficiaries could use their CARE accounts to purchase whatever health coverage products they want, through a health-insurance clearinghouse called Florida Health Choices. Unlike Obamacare’s subsidized insurance exchanges, which force insurers to adhere to a bevy of mandates and regulations in order to participate, the Florida insurance clearinghouse allows insurers to sell a broad range of insurance products, including catastrophic coverage.

Alternatively, a CARE beneficiary could keep the $2,300 in the health savings account and use that money to pay for out-of-pocket expenses. Any unused expenditures would roll over into the following year. Or, the CARE funds could be transferred to a health savings account that the beneficiary already controls.

Employers who wanted to offer coverage to their employees could also use the CARE system to make a defined contribution to their workers’ health expenses. And the plan contains a work requirement similar to the one that accompanied Nineties-era welfare reform. CARE beneficiaries would be required to work between 20 to 35 hours a week, depending on the age of their children and other considerations.

It’s exactly what you’d want a subsidized, free-market-based system to look like.

More on House Speaker Will Weatherford’s role in the state’s Medicaid decision here.

SOURCE: Forbes


She’ll try again next year:

A Denver doctor who serves in the state Senate killed her own proposal to bring universal health care to Colorado, saying Friday she didn’t have the votes to get her measure on the ballot.

Sen. Irene Aguilar needed all 20 Democrats and at least four Republicans in the Senate to get her measure out of the Senate and to the House, and she didn’t have the votes.

She clearly was disappointed she couldn’t round up more support. “Health care is not a partisan issue,” she said. “It affects all of our constituents.”

She vowed to try again in 2014, saying, “We need to be willing to be mavericks and design our own Colorado solution.”

Aguilar told her colleagues that even after full implementation of the federal Affordable Care Act, Colorado will have 400,000 people without insurance.

Because insurance companies will have to insure those with pre-existing conditions, she said premiums are expected to jump as much as 30 percent.

Her proposal would have imposed a payroll-based tax on employers and employees, based on their ability to pay, to fund a minimum set of health care services for each resident. Opponents called it a $16 million tax increase, but Aguilar said “ultimately we pay for everybody’s health care, so we might as well do it wisely.”

SOURCE: Denver Post


From Obama’s budget:

President Barack Obama’s plan to raise Medicare premiums for upper-income seniors would create five new income brackets to squeeze more revenue for the government from the top tiers of retirees, the administration revealed Friday.

First details of the plan emerged after Health and Human Services Secretary Kathleen Sebelius testified to Congress on the president’s budget. As released two days earlier, the budget included only a vague description of a controversial proposal that has grown more ambitious since Obama last floated it.

“Means testing” has been part of Medicare since the George W. Bush administration, but ramping it up is bound to stir controversy. Republicans are intrigued, but most Democrats don’t like the idea.

The plan itself is complicated. The bottom line is not: more money for the government.

But does it really only hit upper incomes?

Retired as a city worker, Sheila Pugach lives in a modest home on a quiet street in Albuquerque, N.M., and drives an 18-year-old Subaru.

Pugach doesn’t see herself as upper-income by any stretch, but President Barack Obama’s budget would raise her Medicare premiums and those of other comfortably retired seniors, adding to a surcharge that already costs some 2 million beneficiaries hundreds of dollars a year each.

More importantly, due to the creeping effects of inflation, 20 million Medicare beneficiaries would end up paying higher “income related” premiums for their outpatient and prescription coverage over time.

Administration officials say Obama’s proposal will help improve the financial stability of Medicare by reducing taxpayer subsidies for retirees who can afford to pay a bigger share of costs. Congressional Republicans agree with the president on this one, making it highly likely the idea will become law if there’s a budget deal this year.

But the way Pugach sees it, she’s being penalized for prudence, dinged for saving diligently.

It was the government, she says, that pushed her into a higher income bracket where she’d have to pay additional Medicare premiums.

IRS rules require people age 70-and-a-half and older to make regular minimum withdrawals from tax-deferred retirement nest eggs like 401(k)s. That was enough to nudge her over Medicare’s line.

“We were good soldiers when we were young,” said Pugach, who worked as a computer systems analyst. “I was afraid of not having money for retirement and I put in as much as I could. The consequence is now I have to pay about $500 a year more in Medicare premiums.”

Currently only about 1 in 20 Medicare beneficiaries pays the higher income-based premiums, which start at incomes over $85,000 for individuals and $170,000 for couples. As a reference point, the median or midpoint U.S. household income is about $53,000.

Obama’s budget would change Medicare’s upper-income premiums in several ways. First, it would raise the monthly amounts for those currently paying.

If the proposal were already law, Pugach would be paying about $168 a month for outpatient coverage under Medicare’s Part B, instead of $146.90.

SOURCE: Yahoo News


A challenging issue:

Do companies have the right to patent your genes? The Supreme Court will wrestle with that highly charged question on Monday, when it hears oral arguments in a case that could have far-reaching implications for the future of medical research.

The federal government itself is divided over the issue. The federal patent office has been approving patents on human genes since the 1980s, but the Justice Department on Monday will ask the court to invalidate those protections and rule that human genes cannot be patented.

The lawsuit deals with patents on two genes that can identify a woman’s risk of developing breast cancer.

Critics, including the Obama administration and a group of cancer survivors, say private companies shouldn’t be able to patent parts of the human body. The patents are standing in the way of important research, they argue.

The company that owns the patents, Myriad Genetics, says its patents protect a highly effective and life-saving method for determining women’s risk of developing cancer.

“The court has gotten itself into what is basically a morality fight,” said Kevin Noonan, a partner at the law firm McDonnell Boehnen Hulbert & Berghoff who specializes in patent law.

The implications for medical research are significant.

Genetic testing has emerged as a major tool in diagnosing risk. Scientists are also trying to develop a new generation of medicines that will respond specifically to the genetic mutations that cause certain diseases – such as breast cancer.

SOURCE: The Hill


This is rich:

The District of Columbia’s Obamacare czars – the board that sets rules for the phony insurance marketplace, or “exchange,” that the law creates – have decided that henceforth insurers shall be forbidden by law to charge smokers higher rates than non-smokers. Smoking, as it turns out, “is a preexisting medical condition,” according to Dr. Mohammad Akhter, the chairman of the D.C. Health Exchange Board. Two liberal states, California and Connecticut, have decided likewise, while Colorado and Alaska have rejected the idea.

As expected, the definition of “preexisting condition” is proving infinitely malleable, with behaviors born again as conditions. If smoking is a condition, then drug addiction is a condition, self-mutilation is a condition, a penchant for BASE jumping is a condition, juggling ampules of penicillin-resistant syphilis – practically anything qualifies as a condition under such a plastic understanding.

There are many ways to implement a bad idea. For instance, Congress might have passed a law requiring that all U.S. insurance companies no longer charge smokers more for their coverage. The state of Connecticut might have passed a similar law. New York City might have passed that law. But in each case, voters who saw that stupidity for what it is would have somebody to vote against. Obamacare eliminates the option for democratic response. Instead, it creates a body of political appointees immune from being held accountable at the ballot box. And who are those appointees? In the case of D.C., you will find few surprises: The SEIU has a man on the board, along with a lot of time-serving political types, a fellow from the Brookings Institution, a lobbyist, etc. Don’t like their boneheaded decisions? Too bad.

There will be thousands and thousands of decisions like this in the coming years, and voters will have very little recourse against them. That is part of the genius of bundling the welfare state with the regulatory state: Whether you are a Democrat who basically likes Obamacare and wants to revisit a few of its flaws or a Republican committed to tearing it up root and branch, you have basically the same hurdle to clear. It might be easier to sell the idea of revision to the general public, but the structural legislative barrier is the same as if you were repealing the law wholesale. The question of ending “discrimination” against smokers is so many levels removed from democratic accountability that even those who are strongly opposed to the idea will probably have no effect. To get to the board, you basically have to fire the mayor, which is no small thing in a corrupt and backward place like our nation’s capital.

Obamacare was sold as a way to help poor people and sick people get health insurance, but, as the D.C. decision shows, the actual intent of the law is the abolition of health insurance. The notion of insuring a preexisting condition is an oxymoron; insurance is by nature concerned with that which may happen in the future rather than with that which already has happened. In very large groups, human health outcomes are predictable with a fair degree of precision: Given 10 million people, actuaries can make pretty accurate predictions about how many people are going to get lung cancer and how many are going to be in car accidents. Some factors are relevant to some conditions: Being 17 years old and getting in a car accident, for example, or smoking and heart disease, emphysema, cancer, etc. Insurance, which places a price on calculated risks, will take some of those factors into account. But you cannot in any meaningful sense insure somebody against cancer when they already have cancer.

SOURCE: National Review Online