The expansion of Medicaid programs in some Republican-controlled states under the false mantle of a “free market alternative” to Obamacare has emboldened some Republican governors to reconsider their opposition to Medicaid expansion. Idaho Gov. Butch Otter (R) has twice assembled a legislative task force to review options for expanding Medicaid and make recommendations. Each time, the task force recommended expansion.
Otter previously voiced concerns about Medicaid expansion but has recently become more open to it. One plan considered by the task force and supported by some health care groups is the “private option” model first proposed in Arkansas, in which the federal government provides a subsidy to the state to help the poor buy private health insurance.
According to the Deseret News, Otter has begun to show interest in a private option plan, especially one resembling the Healthy Utah plan. Like the Arkansas plan, Healthy Utah would, if approved by the Obama administration, assist residents within a certain income range by providing subsidies for health insurance in private markets. Under the plan, recipients would have “skin in the game” because they are required to make copayments.
This approach presents several major problems. First, despite various private-market characteristics of the programs, they still represent an expansion of a failed Medicaid system, where the federal government dictates multiple aspects of an insurance plan and the beneficial aspects of real market competition are lost.
The second major problem with the private option model is funding. Medicaid is one of the fastest-growing liabilities in both state and federal budgets. Under the Affordable Care Act, the federal government promises it will provide 90 percent of expansion costs. Mitch Coffman of the Idaho Freedom Foundation (IFF) says contrary to expansion supporters’ depiction of the new federal funds as “free money,” Medicaid expansion is expensive, creating new costs the federal government may not always be able to cover, leaving state taxpayers on the hook for new liabilities.
Opponents of Medicaid expansion note the program is stretching states’ already thin budgets and has a poor track record at providing cost-effective and efficient care for those in need. Medicaid is currently the largest category of state spending; according to the National Association of State Budget Officers, Medicaid accounts for 23.6 percent of state government expenditures. Brandon Hershey, writing for IFF, points to the rocky experience of the Arkansas plan as a cautionary tale. He says the Arkansas Private Option, the “champagne of Medicaid expansions,” exceeded its budget by $7.7 million by the end of May 2014.
Without significant reform, Medicaid will remain fiscally unsustainable. Instead of expanding a flawed program that is costly, delivers subpar health care, and shifts more power to the federal government, state lawmakers should focus instead on demanding flexibility to modernize Medicaid by petitioning for a block-grant funding model.
The following articles examine state Medicaid reform from several perspectives.
‘Skin-in-the-game’ Medicaid Expansion did not Work in Oregon
http://idahofreedom.org/skin-in-the-game-medicaid-expansion-did-not-work-in-oregon/
Brandon Hershey of the Idaho Freedom Foundation examines Medicaid expansion in Oregon, the problems it has faced, and the lessons Idaho could learn from its experience: “Oregon’s attempt to fund Medicaid expansion via high premiums and copayments proved an unsuccessful endeavor. As Medicaid costs grow—dramatically should Idaho choose to expand—implementing cost sharing will not help the poor in Idaho. As alternatives and solutions are discussed, this is one idea that should be thrown away. Medicaid expansion—no matter what the packaging is—will do nothing but place a burden on Idaho’s most vulnerable.”
Research & Commentary: States Should Innovate, Not Expand Medicaid
http://heartland.org/policy-documents/research-commentary-states-should-innovate-not-expand-medicaid
Matthew Glans of The Heartland Institute discusses how expanding Medicaid can have repercussions beyond state budgets and the health care industry and notes better options exist: “It is important to remember government spending creates little or no income or economic growth; it is merely the redistribution of tax dollars taken from the pockets of taxpayers.”
Beware of Funding Promises Made by Medicaid Expansion Proponents
http://idahofreedom.org/beware-of-funding-promises-made-by-medicaid-expansion-proponents/
Brandon Hershey of the Idaho Freedom Foundation questions the ability of the federal government to cover the costs of Medicaid expansion: “Expanding Medicaid in Idaho relies on federal funds and the promise that the federal government will pay 90 percent of the costs. Really? With a debt of more than $17 trillion? The federal government rarely follows through with funding promises to the states. Medicaid expansion will bring the state’s hospitals a pile of reimbursements, but at what cost to state’s taxpayers and future generations?”
Idaho’s Emergency Room Costs Could Climb Under Medicaid Expansion
http://idahoreporter.com/idahos-emergency-room-costs-could-climb-under-medicaid-expansion/
Dustin Hurst of Idaho Reporter writes about the increased costs created when Medicaid expands. Hurst focuses on the increases in emergency room costs. “Idaho’s emergency room costs for the state’s Medicaid population grew last year, though the increase is nothing compared to what could happen if the state swells the health care program. A records request delivered to IdahoReporter.com reveals the state spent $53.8 million on emergency room services for Medicaid recipients in fiscal year 2014, which ended June 30. That’s up from $53.6 million just a year before,” Hurst wrote.
Policy Tip Sheet: Medicaid Expansion
http://heartland.org/policy-documents/policy-tip-sheet-medicaid-expansion
Kendall Antekeier of The Heartland Institute explains why states should avoid Medicaid expansion and instead reform this fiscally unsustainable program in ways that offer better care at a lower cost to taxpayers.
A Medicaid Cure: Florida’s Medicaid Reform Pilot
http://www.floridafga.org/2011/11/a-medicaid-cure-floridas-medicaid-reform-pilot/
The Foundation for Government Accountability explains the success of its Project Medicaid Cure: “When the patient is the priority, government and HMO bureaucrats are finally held accountable. Costs flatten and patient health and satisfaction improves.”
The Private Option: Medicaid Expansion by Another Name
http://heartland.org/policy-documents/private-option-medicaid-expansion-another-name
Nicole Kaeding of Americans for Prosperity forecasts the effects of the decision to expand Medicaid in Arkansas.
Why States Should Not Expand Medicaid
http://heartland.org/policy-documents/why-states-should-not-expand-medicaid
Writing for the Galen Institute, Grace-Marie Turner and Avik Roy outline 12 reasons states should not expand Medicaid and should instead demand from Washington, DC greater control over spending to fit coverage expansion.
Research & Commentary: Utah Medicaid Expansion Update
http://heartland.org/policy-documents/research-commentary-utah-medicaid-expansion-update
Gov. Gary Herbert’s (R) “Healthy Utah” Medicaid expansion plan awaits approval by the Obama administration, but it remains unpopular with many Utahans. The plan would provide assistance to citizens making less than $15,500 per year in order to help them pay for health insurance in private markets, and it includes the state’s recommendation that able-bodied applicants who receive insurance subsidies be required to work. In this Research & Commentary, Matthew Glans discusses the Healthy Utah plan, where it currently stands, and why the program is not the best option for the people of Utah.
Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit Health Care News at http://news.heartland.org/health, The Heartland Institute’s website at http://heartland.org, and PolicyBot, Heartland’s free online research database at www.policybot.org.
The Heartland Institute can send an expert to your state to testify or brief your caucus; host an event in your state; or send you further information on a topic. Please don’t hesitate to contact us if we can be of assistance! If you have any questions or comments, contact John Nothdurft, Heartland’s director of government relations, at [email protected] or 312/377-4000.
Matthew Glans joined the staff of The Heartland Institute in November 2007 as legislative specialist for insurance and finance.
