Research & Commentary: Medicaid Expansion and Marketplace Virginia

Published March 21, 2014

State legislators in Virginia are now considering legislation that would expand the state’s Medicaid program, the most prominent of which is Marketplace Virginia. Like several other programs now being considered in other states, Marketplace Virginia emulates Arkansas’ premium assistance model. The new proposal, written by State Sen. John C. Watkins, would expand 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. 

According to the Washington Post, the state would create a health-care exchange of private managed-care plans, and Virginians living at up to 138 percent of the federal poverty line would receive direct assistance for purchasing health insurance, while families living at up to 400 percent of the poverty line would receive subsidies and tax credits to buy insurance. The plan would expand Medicaid in Virginia to as many as 400,000 new low-income residents. 

Like the Arkansas “private option,” Marketplace Virginia has several shortcomings. First, despite the private-market feel of the program, it still represents an expansion of Medicaid, where multiple aspects of the insurance plan, such as cost-sharing, are dictated by the federal government, and the beneficial aspects of real market competition are lost. Second, once expansion occurs, it will be extremely difficult to roll back. Critics of the Arkansas expansion note there is no guarantee the federal government will allow the program to continue once it is up for renewal, and could replace it with a less market-based system. 

Marketplace Virginia faces an uphill battle toward passage. According to the Associated Press, the bill has already failed a symbolic vote in the House. Republican leaders argue the state’s current Medicaid program needs to be overhauled and made more cost-effective before any large-scale expansion is allowed. Supporters of Marketplace Virginia characterize the plan as bipartisan, and Watkins added several wrinkles to the plan in an attempt to make it more palatable for conservatives, including work requirements and a requirement for users of the marketplace to pay up to 5 percent of their household income into the system. 

Medicaid expansion is an expensive endeavor. Under Obamacare, the federal government would pay all the additional premium costs for the first three years, and 90 percent thereafter. The costs of expansion after three years would not be insubstantial for Virginia to cover, especially with its current budget problems. In using federal dollars to expand the state’s Medicaid program, Marketplace Virginia would create new costs the federal government may not always be able or willing to cover, leaving state taxpayers on the hook for the increased liabilities. 

Instead of expanding a flawed model that is very costly to taxpayers, delivers subpar health care, and shifts more power to the federal government, state lawmakers should focus instead on reform options like those piloted in Florida that reduce costs and offer better care to patients in the existing system. 

The following articles examine Medicaid expansion from multiple perspectives.

Ten Principles of Health Care Policy
This pamphlet in The Heartland Institute’s Legislative Principles series describes the proper role of government in financing and delivering health care and provides reform suggestions to remedy current health care policy problems. 

Research & Commentary: Examining the Arkansas Medicaid Expansion Model
In this Research & Commentary, Matthew Glans examines the Arkansas Medicaid expansion model and argues that, instead of moving toward a private option model, state lawmakers should consider reform options that reduce costs and offer better care to patients in the current system, like the system being tried in Florida. 

Medicaid Expansion Will COST Virginians, In Many Ways
The Galen Institute argues states should resist any Medicaid expansion until the federal government reforms the program and gives governors and state legislators more control over how the money is spent to get the best care at the lowest price to their own citizens.

No Miracle in Medicaid Expansion
Michael Tanner of the Cato Institute criticizes Gov. Terry McAuliffe’s efforts to expand Medicaid in Virginia and argues expanding Medicaid would “cost Virginia taxpayers a substantial amount while providing the poor with substandard coverage. It would encourage some recipients to drop private coverage and could make ER crowding and costs worse.”

Medical Care for the Needy
Michael Thompson of the Thomas Jefferson Institute examines several alternatives to Medicaid expansion and considers what can be done to reform the current program and help many people who do not have health insurance. 

The Empty Promises of Arkansas’ Medicaid Private Option
The Foundation for Government Accountability examines the empty promises of Arkansas’ Medicaid Private Option—using supporters’ direct quotes from sources including media interviews, floor speeches, and social media posts—and rebuts them point by point. 

Policy Tip Sheet: Medicaid Expansion
Kendall Antekeier of The Heartland Institute explains why states should avoid Medicaid expansion and instead reform their fiscally unsustainable programs in ways that will offer better care at lower costs to taxpayers. 

Research & Commentary: The Medicaid “Cure”
The Heartland Institute’s Kendall Antekeier examines the Medicaid Cure, a pilot program established in five large Florida counties by Gov. Jeb Bush, a premium support model in which 290,000 Medicaid recipients are given a range of premiums and plans from which to choose. 

A Medicaid Cure: Florida’s Medicaid Reform Pilot
The Foundation for Governmental Accountability gives insight into the Medicaid Cure’s success, stating, “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
Americans for Prosperity’s state policy manager, Nicole Kaeding, breaks down what could be in store for Arkansas after the vote to expand Medicaid in the state. 

Why States Should Not Expand Medicaid
Writing for the Galen Institute, Grace-Marie Turner and Avik S. Roy outline 12 reasons states should not expand Medicaid and should instead demand from Washington greater control over spending to better fit coverage expansion with their states’ needs, resources, and budgets.

12 Reasons Why Virginia Should NOT Expand Its Medicaid Program
In this article from the Galen Institute, Grace-Marie Turner and Avik S. Roy outline 12 reasons Virginia should not expand its Medicaid program, ranging from its high cost to the ineffectiveness of Medicaid in improving health outcomes.

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, The Heartland Institute’s website at, and PolicyBot, Heartland’s free online research database at

If you have any questions about this issue or the Heartland Institute Web site, contact Heartland Institute Government Relations Director John Nothdurft at [email protected] or 312/377-4000.