Ignore the Rumors: No Deals on Medicaid

COMMENTARY Health Care Reform

Ignore the Rumors: No Deals on Medicaid

Apr 14th, 2013 2 min read
Edmund F. Haislmaier

Senior Research Fellow

Ed is an expert in health care policy and frequently is asked to help lawmakers design and draft reforms to the health systems.

Pressure is mounting on Florida lawmakers — who have resisted expanding a dysfunctional program — to agree to the Medicaid expansion included in Obamacare.

Many of them are justifiably concerned about the long-term costs and consequences of “super-sizing” a program that already crowds out other state budget priorities, distorts the health-care system and delivers substandard care. Yet they are being heavily lobbied by hospitals and other special-interest groups wanting to get their hands on the increased funding Obamacare offers states that expand Medicaid.

Faced with the same pressures, lawmakers in other states have sought to “square the circle.” They have been trying to find ways to either adopt only a partial expansion, or to minimize the expansion’s inevitable costs and problems by using the new funding to provide coverage with more limited benefits and more sensible patient cost-sharing, such as higher co-pays to discourage inappropriate use of hospital emergency departments.

However, a short memo released on Good Friday by the Centers for Medicaid and Medicare Services now makes it clear that the Obama administration will not offer states any “deals” or additional flexibility on the Medicaid expansion.

In CMS’s own words, “Under all these arrangements, beneficiaries must remain Medicaid beneficiaries and continue to be entitled to all benefits and cost-sharing protections. States must have mechanisms in place to ‘wrap-around’ private coverage to the extent that benefits are less and cost-sharing requirements are greater than those in Medicaid.”

Not only won’t the administration agree to partial expansions, but states also won’t be allowed to cover new enrollees through private plans with co-pay and benefit designs that offer more appropriate incentives than traditional Medicaid — even if such plans provide better access and care. CMS essentially reiterated that the Obama administration considers the Medicaid expansion an all-or-nothing proposition.

In 2006 Congress did give states the option of using “premium assistance” to enroll Medicaid beneficiaries in private coverage, but subject to federal rules requiring comprehensive benefits and no more than nominal cost sharing. Congress set those restrictive parameters on the assumption that if states adopted Medicaid premium assistance most of the enrollees would be children from low-income families. Indeed, over half of all current Florida Medicaid enrollees are children.

However, the Obamacare Medicaid expansion would cover a very different population. Since Medicaid already covers poor children, the expansion population will consist exclusively of adults, of whom almost all are able-bodied. Furthermore, in Florida 83 percent of them do not have dependent children, and nearly half (48 percent) are young adults age 19 to 34. If there is any group whose health care coverage should include benefit limits and co-pays that encourage greater personal responsibility — and also be conditioned on a strong work requirement — it’s this group.

Given that adults without children have no one else depending on their income, and no child-care responsibilities limiting the hours they can work, the more relevant question is not why they lack health care coverage, but why they lack income.

To put the issue into perspective, someone employed full-time (40 hours a week, 50 weeks per year) at just the federal minimum wage of $7.25 an hour has an annual income equal to 130 percent of the poverty threshold. Starting next year federally subsidized Obamacare exchange coverage will be available to individuals above the poverty line who don’t have Medicaid or employer-sponsored coverage.

Thus, if Florida does not expand Medicaid, about one-quarter of the potential expansion population will get coverage anyway. For the remaining adult Floridians below the poverty line, 87 percent of whom do not have dependent children, the principle explanation for their low incomes is that they are either unemployed or underemployed. That involves issues of education, workforce training, and the general economic climate — not health care.

Indeed, expanding Medicaid to this population without a work requirement (which federal law prohibits) will actually make it even more attractive for employers to cut workers’ hours to avoid Obamacare’s costly employer mandates.

In short, if Florida agrees to the Medicaid expansion it will get exactly what the term “expansion” implies — just a bigger version of the same expensive and dysfunctional program.

First appeared in The Tampa Tribune.

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