Virginia Senate Considers Medicaid Expansion

Published April 29, 2018

During a special session called by Gov. Ralph Northam, the Virginia House of Delegates  approved a $115 billion biennial budget expanding eligibility for Medicaid to include families and single adults earning up to 138 percent of the poverty level.

The state Senate received the budget bill for consideration on April 17, after the chamber rejected a budget with similar Medicaid provisions before the General Assembly’s regular session concluded in March.

The federal Affordable Act Care, commonly known as Obamacare, rewards states by substantially subsidizing Medicaid expansion with federal taxpayer funds.

Warns of Delayed Costs

Matthew Glans, a senior policy analyst for The Heartland Institute, which publishes Health Care News, says expanding Medicaid eligibility is a costly mistake in the long run.

“While many expansion supporters depict the new federal funds as free money, Medicaid expansion is expensive,” Glans said. “It creates new costs for states through myriad regulations and mandates the federal government doesn’t cover or will not cover forever, leaving state taxpayers on the hook for new liabilities. The matching rate will continue to decline over time, so states will eventually have to find other ways to pay for the newly eligible population.”

Doubts Federal Funds Available

Caleb Taylor, director of policy at the Virginia Institute for Public Policy, says the money for expanded Medicaid eligibility may not even be available now.

“The Democrats and some of the more progressive Republicans believe there is going to be $2 billion annually from the federal government to cover the costs of Medicaid expansion in Virginia, but the federal Office of Management and Budgett’s official statement said the federal budget was not going to include that money, and it [OBM] was specifically addressing the Virginia General Assembly.”

Glans says Medicaid spending is worsening the federal government’s spending problem

“There is no established long-term source of funding for Medicaid,” Glans said. “The national government is $20 trillion in debt and will eventually have to trim its budget. Given the rate at which Medicaid is growing, this is a problem that will only get worse.”

Unexpectedly High Spending

Studies from the U.S. Department of Health and Human Services suggest Medicaid expansion is fiscally unwise, Glans says.

“Previous reports from the U.S. Department of Health and Human Services found the average cost of the Affordable Care Act’s Medicaid expansion enrollees was nearly 50 percent higher in fiscal year 2015 than the levels HHS had projected the previous year,” Glans said. “In 2015, the Medicaid expansion enrollees cost an average of $6,366; this is 49 percent higher than $4,281, which HHS projected the previous year. All told, HHS found Medicaid spending reached $554.3 billion in fiscal year 2015. This is 5 percent higher than its projections.” 

Suggests Risk Pools

Glans says Medicaid is not the only option for lawmakers who want to help low-income individuals get health care.

“One proven solution for covering patients with preexisting conditions is the creation of high-risk pools,” Glans said. “High-risk pools are state-created nonprofit associations which provide comprehensive health insurance benefits for people who have been turned down for coverage in the private health insurance market due to a chronic illness and for those who cannot afford a private market plan due to poor health or who would have restricted coverage. Risk-pool insurance already exists in 35 states.

“States would cover this difference through assessments on health insurance or other tax or lottery revenue,” Glans said. “The premiums are capped. The benefit to taxpayers is the decreased risk burden of these patients is taken off other insurance plans, allowing overall rates to decrease.”

Before applying big-government responses to health care, lawmakers should give the free market a chance, Taylor says.

“Instead of expanding Medicaid, I would like to see some market ideas,” Taylor said. “What I’d prefer is for them to stop meddling with everything, so that the market can get used to what the world is and start changing things. There are a lot of really awesome innovations in health care out there, like telemedicine and direct primary care. There is a lot of stuff out there, but the market needs time to catch up.”