Why Medicaid Expansion Is Still Wrong for the States

COMMENTARY Health Care Reform

Why Medicaid Expansion Is Still Wrong for the States

Feb 5th, 2013 2 min read
Nina Owcharenko Schaefer

Senior Research Fellow, Health Policy

Nina Owcharenko Schaefer is well known as a champion of patient choice and robust competition in America’s health insurance markets.

Governor John Kasich now joins the list of governors that are looking to expand their Medicaid programs. In some instances, the logic of such a decision makes sense. Democratic governors have traditionally supported expanding the role of Medicaid. But the decision by Republican governors, such as Governor Jan Brewer (Ariz.), Governor Jack Dalrymple (N.D.), Governor Susana Martinez (N.M.), Governor Brian Sandoval (R., Nev.), and now Governor John Kasich (R., Ohio), is puzzling.

Like most government programs, Medicaid promises more than it delivers. While it consumes an ever increasing portion of state budgets — crowding out other state priorities, such as education and transportation — its track record for delivering quality health care to those in need falls short. Endorsing the expansion ignores these underlying problems and in some instances seems to make them worse.

Of these five Republican governors, four joined the lawsuit against the Obama administration regarding the coercive nature of the Medicaid expansion. It is troubling that now that the Medicaid expansion has been deemed voluntary not mandatory by the Supreme Court, these governors are perfectly happy to have the federal government coerce them into the expansion with the enticement of new federal dollars.

Second, many of these governors argue that the Medicaid expansion is actually good fiscal policy. These governors may be looking at a short-term bump in new federal dollars, but the longer view shows that over time this new revenue disappears and the cost of expansion continues to rise. A recent study in support of the expansion in Ohio supports this conclusion. There are also many underlying assumptions that raise further questions related to the true cost of the expansion.

One is the assumption that the federal funding will remain constant. However, here too the longer view indicates the opposite. As federal policymakers debate the course for fixing the country’s fiscal woes, it is inevitable that if these efforts are serious, entitlement programs such as Medicaid will need to be on the table. Although the administration is trying to distance itself from its previous recommendations on federal financing of Medicaid, it is impossible to guarantee that the federal dollars will remain untouched.

Some governors have made their willingness to expand the program contingent on the federal government’s keeping its funding promises. They that if the federal funding changes, the states will opt out of the expansion. Such an opt-out strategy seems difficult. It is the exception not the norm for a state to scale back its Medicaid program. As a matter of fact, while there may be periods of slowing enrollment, overall enrollment continues to climb. From a practical position, it also remains unclear the process by which a state would opt out and the role that the secretary of HHS would have in that process.

Some expansion supporters argue that choosing not to expand Medicaid would mean that a state opting out would just be leaving money on the table, and that this money will include money from the non-expanding state’s federal taxpayers. Rather than a race to the bottom to scoop up as much federal tax dollars as possible in support of a program with poor results, the better solution would be for the states to recommend that Congress eliminate the enhanced federal matching funds. That would remove the temptation of federal dollars to do bad policy.

By 2017, one in four Americans is expected to be on Medicaid. In states that are trying to jumpstart their economy, it seems governors should be working to reduce dependence on the welfare state, not add millions more to it. It should be focused on getting people back to work, not creating incentives that keep people out of work. And states should be focused on fixing the program for those who are on it today rather than dumping more people into an already broken government program.

There needs to be a better solution. Simply because a governor wants to expand Medicaid doesn’t mean the legislature has to agree. State officials should be advancing reforms at the state level that move Medicaid in the right direction, not the wrong one.

— Nina Owcharenko is Director of the Center for Health Policy Studies and the Preston A. Wells Jr. Fellow at the Heritage Foundation.

First appeared in National Review Online's "The Corner."

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