The Leaflet – Questions To Ask Before Expanding Medicaid

Published February 15, 2013

Despite the Supreme Court’s ruling last year that states could not be forced to expand Medicaid under the Patient Protection and Affordable Care Act, some states have decided “free” federal money is too hard to pass up. Just this week Ohio Gov. John Kasich became the fifth Republican governor to endorse the expansion of Medicaid. Wisconsin’s Scott Walker and Indiana’s Mike Pence rejected the expansion in their states. To date, 22 states and the District of Columbia have said they will move forward with expansion, while 13 states have said they will not.

Heartland’s Policy Tip Sheet on Medicaid expansion succinctly summarizes the issue facing states:

“The federal matching rate starts at 100 percent for newly eligible enrollees, but it declines over time, leaving states to find other ways to pay for the newly eligible population.

“Moreover, the new federal matching rate applies only to newly eligible enrollees. But due to the individual mandate, residents who are currently eligible for Medicaid but not enrolled will be forced to enroll. Those enrollees will be subject to the regular matching rate, so state costs for Medicaid will be increasing dramatically even without expanding the program.

“States that choose to expand, instead of reforming an already broken system, will subject even more of their lower-income residents to a program that provides inferior care.”

Before a state decides to accept or reject Medicaid expansion, they should get answers to the following questions:

– Are doctor’s taking existing Medicaid patients and will they take more of them?

– Is our state’s Medicaid system currently financially sustainable, and what effect will putting more people into the system have on that?

– What is the total amount that expanding Medicaid will cost the state?

– Is the current care received by Medicaid patients better, worse, or the same as those with private insurance?

This week’s edition of The Leaflet features research and commentary addressing Ohio Medicaid expansion, North Carolina tax reform, the Marketplace Fairness Act, Fannie and Freddie, Heartland’s testimony in Kansas, and expanding government-funded preschool.


John Nothdurft
Director of Government Relations
The Heartland Institute

Research & Commentary: Ohio Medicaid Expansion
Health Care

As states implement provisions of the federal health care law, many are debating whether to expand their Medicaid programs in order to receive a larger federal subsidy. Gov. John Kasich recently announced expansion “makes sense for the state of Ohio,” but state taxpayers may disagree.

If Ohio expands its Medicaid program to individuals at 100 to 138 percent of the federal poverty level, the federal government will provide 100 percent of the additional money for 2014–16, 95 percent in 2017, 94 percent in 2018, 93 percent in 2019, and 90 percent in 2020 and beyond. Expansion proponents argue it would be unwise to reject this “free money” and say expansion will provide insurance coverage for more Ohioans.

Opponents, however, note expansion will lock in even larger Medicaid costs without improving the quality of care. According to federal government statistics from 2010, more than 20 percent of Ohio’s population already depends on the health care entitlement program, and the Kaiser Family Foundation found expansion would increase enrollment by 31.9 percent by 2019.

In 2010, Ohio spent roughly $4 billion on Medicaid. The Heritage Foundation calculates expansion would cost Ohio an additional $407 million in the first five years and increase the state budget by around $1 billion by 2022, over and above federal matching money. That would happen because the federal matching rate applies only to newly eligible Medicaid enrollees. Ohio residents who are already eligible but have not enrolled will be forced to do so because of the individual mandate in the federal health care law, and the state will have to bear the cost of those additional enrollees.

Manhattan Institute Senior Fellow Avik Roy notes a report from The University of Virginia found “Medicaid patients were almost twice as likely to die as those with private insurance; their hospital stays were 42% longer, and cost 26% more. Compared to those without health insurance, Medicaid patients were 13% more likely to die, stayed in the hospital for 50% longer, and cost 20% more. It is hard to see how this problem doesn’t get significantly worse when Obamacare’s expansion of Medicaid is fully phased in.”

Instead of expanding a program that already provides inferior health care, Ohioans would be better off rejecting the “free money” and finding alternative ways to expand health care access.


Research & Commentary: North Carolina Tax Reform
Budget & Tax

This year North Carolina joined the growing number of states considering major changes to its tax system. Republican legislators proposed in early January a tax reform plan that would eliminate personal and corporate income taxes and offset the cuts with increases in state sales taxes while expanding the latter to cover all services, some of which are currently untaxed. The proposal also would eliminate tax breaks.

In this Research & Commentary, Senior Policy Analyst Matthew Glans argues that eliminating personal and corporate income taxes could dramatically improve North Carolina’s economy and generate new jobs. According to a study published by the North Carolina-based John W. Pope Civitas Institute, tax reforms similar to the current proposal could have gained North Carolina an estimated 217,000 to 378,000 jobs over the past decade.

Neither Fair nor Equitable: The Marketplace Fairness Act

In the past few years, members of Congress have proposed several bills to expand states’ ability to tax purchases made online and from mail-order catalogs. U.S. Sens. Mike Enzi (R-WY), Dick Durbin (D-IL), and Lamar Alexander (R-TN) this week introduced the Marketplace Fairness Act, which expands states’ ability to charge sales taxes on out-of-state retailers regardless of whether the retailer has a physical presence in the state.

In this article from The Heartlander digital magazine, Matthew Glans examines the proposed act and speaks with several Heartland Institute experts on what effect the act will have on the e-commerce market. “Removing the physical presence or ‘nexus’ standard for sales taxes reduces states’ accountability to taxpayers and enables a dramatic expansion of state taxing powers, essentially allowing state taxing authorities to target not just businesses in their state, but businesses nationwide,” he writes.

More Housing Rescues May Be Needed Because of Fannie and Freddie
Finance, Insurance & Real Estate

Five years after the housing collapse of 2008, the government’s role in the mortgage market could have taxpayers on the hook for another multibillion-dollar rescue of Fannie Mae and Freddie Mac. In this article, Carten Cordell of discusses how some economists are voicing concern over the long-term solvency of Freddie Mac and Fannie Mae and warns taxpayers that additional housing rescues may be on the horizon.

“But in more than four years of financial oversight by the FHFA – known as conservatorship – there has been little talk of reforming Freddie Mac and Fannie Mae by either shuttering them, converting them to private companies or allowing them to remain government-backed enterprises with modest reforms.

“This year – 2013 – appears to be a solid housing year. But some economists worry that another market downturn without reforms to Fannie Mae and Freddie Mac could put taxpayers on the hook for billions more dollars.”

Testimony to Kansas House Energy and Environment Committee

Senior Fellow James M. Taylor testified before the Kansas House Energy and Environment Committee on HB 2241, a bill to delay implementation of the state’s renewable portfolio standard, which Taylor says harms the economy and the environment.

Among Taylor’s key points: “If Kansas electricity prices mirrored those of neighboring Nebraska and Oklahoma (two states that do not have mandates), the net savings would be enough to balance the state’s budget deficit without raising any taxes or cutting any government services.”

Op-Ed: President Ignores Evidence Government Preschool Hurts Children

In an op-ed for the Daily Caller, Research Fellow Joy Pullmann reacts to President Barack Obama’s State of the Union address call for expanding government Head Start programs.

Joy writes, “Federal researchers have been studying Head Start for decades and have never found significant, long-lasting benefits. The research consistently shows that kids who attend Head Start are, four or five years later, no different from their peers who did not attend.”