Virginia Should Hold its Ground on Medicaid Expansion

Published December 5, 2015

The Affordable Care Act (ACA), also known as Obamacare, allows states to expand Medicaid to cover individuals making up to 133 percent of the federal poverty level. Thirty states and the District of Columbia have chosen to expand their Medicaid programs under the ACA, and 20 states, including Virginia, have refused to do so.

Democratic Gov. Terry McAuliffe’s previous attempt at Medicaid expansion, Marketplace Virginia, emulated Arkansas’ premium assistance model, but it failed to pass in 2014. Marketplace Virginia would have expanded Medicaid to cover uninsured people earning up to 138 percent of the federal poverty level and use $1.7 billion a year in federal taxes collected in the state under the Obamacare law to purchase private health insurance for the newly eligible individuals.

McAuliffe told The Washington Post he will craft a plan conservatives will support to extend health care benefits to 400,000 uninsured citizens at no cost to the state. McAuliffe did not give any concrete details about his plan. Republican leaders speculated his new proposal would center on the creation of a bed or provider tax. The Washington Post noted a similar proposal was discussed by Virginia’s Provider Assessment Work Group, which examined the possibility of charging hospitals a new tax of 1-3 percent of gross revenues to fund Medicaid expansion. Peter Ferrara, a senior fellow of The Heartland Institute, warns total future costs to state governments for Medicaid expansion are estimated to exceed the costs picked up by the federal government by an additional 66 percent.

It is important to note any plan generated by McAuliffe would require legislative approval to enact. This check on the governor’s power was added during the previous legislative session, after concerns arose he might impose Medicaid expansion unilaterally.

Such programs still represent an expansion of the failed Medicaid system, in which multiple aspects of the insurance plan are dictated by the federal government and the beneficial elements of real market competition are lost. Although some of the “private insurance” models proposed by the states include more substantive reforms, such as copays and employment requirements, the Centers for Medicare and Medicaid Services (CMS) have largely rejected those proposals. The waiver process under which these proposals would be implemented is expensive, slow and arbitrary. There is no guarantee any waiver would be granted or renewed down the road.

Medicaid expansion, at its core, builds on a failing model. It’s a system where the federal government dictates multiple aspects of the insurance plan and the beneficial aspects of real market competition are lost. Once expansion occurs, it will be extremely difficult to roll back. Federal law blocks states from backing out of the expansion under a provision called “Maintenance of Effort,” which requires states to fund a program at the level initially agreed upon regardless of the amount of federal funding received.

Medicaid is an expensive program that provides very poor quality care, yet health care providers and employers continue to push states to expand the program. Instead of expanding a flawed model that is unnecessarily costly, delivers subpar health care, and shifts more power to the national government, state lawmakers should focus on reform options, such as Florida’s Medicaid Cure, which reduce costs and offer better care.

Medicaid expansion is supposed to improve both health outcomes and financial costs, but the results have been less than promised. In 2008, Oregon expanded its Medicaid program by 30,000 more people, selected randomly from a waiting list of 90,000. A 2013 study published in The New England Journal of Medicine found that while Oregon’s Medicaid expansion did create some improvements, such as overall health care use and financial assistance, the state’s expanded Medicaid program failed to achieve the principal goal of all health care reform: improving overall health.

Virginia legislators should continue to resist Medicaid expansion and instead reform their fiscally unsustainable program in ways that provide better care to enrollees and offer lower costs for taxpayers.

[Originally published at the Richmond Times-Dispatch