Virginia Businesses Push to Expand Medicaid

Published March 27, 2013

Virginia business groups that fought President Obama’s law are now pushing a very different crusade: Expand Medicaid.

Chambers of Commerce across the commonwealth, who opposed the health care law originally, now support adding 300,000 Virginians to the Medicaid rolls by embracing the White House’s expansion.

The philosophical flip-flop is driven by the lure of federal dollars. President Obama’s plan would pay states to enroll residents earning up to 133 percent of the poverty level—$30,657 for a family of four. The current cutoff ranges from 25 percent to 100 percent of poverty.

‘Hardly Seems Wise or Fair’

Republican Lt. Gov. Bill Bolling agrees with the push. He said estimates show Virginians will pay $26 billion in additional taxes and fees to finance Obama’s law between 2014 and 2022.

“If we do not move forward with the proposed expansion of [Medicaid] coverage, Virginians will still be required to pay these taxes and fees, but they will receive no benefits from the program. That hardly seems wise or fair,” Bolling said.

The Virginia Chamber of Commerce and several of its affiliates around the state share Bolling’s sentiments. So do hospitals and other health care providers that have been absorbing the costs of uninsured care.

“We held our nose and said [expansion] was inevitable,” said Adam Fried, a homebuilder and chamber member. But he added, “I’m dubious about this working.”

‘Single-Sided Bookkeeping’

Chris Conover, a senior scholar with the free-market Mercatus Center in Arlington, Virginia, calls signing on to a federally funded expansion a “naïve” move that requires “single-sided bookkeeping.”

“Budget discussions in Washington are already talking about taking money out of Medicaid. This involves a politically unsustainable level of taxation,” Conover said from Duke University, where he works at the school’s Center for Health Policy & Inequalities Research.

Conover said rosy short-term fiscal projections wrongly assume Virginia comes out a winner in the long run. He calls Medicaid expansion “perverse” in the way it ratchets up state spending.

“They forgot that Virginians already ship a whole lot of tax dollars to the feds. These [favorable] studies are not measuring the adverse effect” of higher downstream costs that would have to be borne by the state under an expanded program.

Calls for More Flexibility

Del. John O’Bannon (R-Richmond), a physician and vice-chair of the House Health, Welfare, and Institutions Committee, said flexibility via federal waivers is essential to a more efficient Medicaid program.

“If you expand right now, you’ve given away all your negotiating power with the [U.S.] Department of Health and Human Services,” O’Bannon said.

Because the 2012 General Assembly passed a two-year budget that runs through June 30, 2014, state House leaders say adding Medicaid amendments now would not only be unneeded but unwise.

“Medicaid is the fastest growing part of our budget, even before expansion. It’s crowding out education and public safety. Let’s not just grab the money without getting some reforms with it,” O’Bannon said.

Gov. Bob McDonnell agrees.

“The governor believes the entire program needs to be reformed and improved before a costly expansion is considered,” Tucker Martin, McDonnell’s communications director, told the Richmond Times-Dispatch.

Health Effects Questioned

Conover questioned the health effects of extending Medicaid coverage above the poverty level.

“Medicaid is inferior to private insurance in terms of access and outcomes. Government programs might save lives below the poverty level, but [expansion] precludes the above-poverty group from the federal health-care exchanges,” said Conover, noting Washington will contribute more funding to the exchanges than for Medicaid, starting in 2014.

According to one legislative projection, Virginia could save $150 million over the first seven years of Medicaid expansion but lose $700 million in the following three years.

“The Obama plan pulls the ‘133 percenters’ out of the private-insurance market,” Conover notes.

As an alternative, Conover favors block grants to the states.

“There would be a fixed amount of dollars under block grants, and states could decide how to allocate them. This would promote a wise use of resources because every dollar a state spends is a dollar of state money,” he said. “If you look at it strategically, if enough states just say no to expansion, maybe the feds will have to renegotiate.”

Cuccinelli Opposes Expansion

Virginia Attorney General Ken Cuccinelli, the first attorney general to challenge Obamacare in court and now a Republican candidate for governor, opposes expansion.

“The proposed Medicaid expansion could swell Virginia’s Medicaid rolls by about 40 percent, which would cost hundreds of millions of dollars more each year by 2019—even with the federal government paying for most of it—and that amount would continue to rise in 2020 and beyond,” Cuccinelli said.

“Virginia doesn’t have money just lying around to pay for these expenses. Are we going to take that money from an already struggling transportation system? Or from our education system? Or are we going to burden more families with higher taxes?” Cuccinelli asked. “While for the first three years the feds promise to cover 100 percent of the costs of the Medicaid expansion and then 90 percent thereafter, let’s remember where these promises of all this money are coming from: the federal government, which is broker than broke.”

Cuccinelli concludes the Medicaid expansion just doesn’t make fiscal sense.

“Governors and state legislatures are likely to find themselves holding a lot of worthless IOUs for increased Medicaid funding down the road, and the states are going to be stuck with the bill. And whether the states or the feds ‘pay for’ the expansion, ultimately it’s Virginia families who pick up the bill,” Cuccinelli said.

Kenric Ward ([email protected]) writes for Virginia Watchdog.