Virginia Came Close to Expanding Medicaid. They Were Right Not To.

COMMENTARY Medicaid

Virginia Came Close to Expanding Medicaid. They Were Right Not To.

Feb 26th, 2018
COMMENTARY BY
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.
The Virginia Senate opted not to move forward with expanding Medicaid after the House had voted to do so. Sean Pavone/Getty Images

Every year, we see renewed efforts to push states to adopt Obamacare’s Medicaid expansion.

Virginia drew national attention this year when its House of Delegates signaled that it was warming to an expansion. Many thought the tide had shifted.

But cooler minds prevailed in the Senate, hopefully keeping Virginia from making a huge mistake.

As originally designed, Obamacare directed states to expand their Medicaid programs to all people under 138 percent of the federal poverty line, or else lose all federal Medicaid funding. Under the plan, the federal government would pick up the full cost for the newly eligible groups in the initial years, but would then reduce its share of the funding, leaving the states with a 10 percent share.

A number of parties sued the federal government, arguing that the proposition of either expanding or losing Medicaid funding was coercive. The Supreme Court agreed in NFIB v. SebeliusAs a result, states who chose not to expand would still retain their existing federal Medicaid funding.

Proponents of expanding Medicaid typically point to the generous influx of federal funding as a main reason why the states should expand. The argument is that the new federal funding would free up state funds to be spent on other state priorities.

But that argument only tells part of the story.

First, as noted, the full federal funding expires, leaving states on the hook for 10 percent of the expansion cost. Although heavily subsidized, the 10 percent state share is still significant, and it’s on top of the existing funding that states are already responsible to provide for their existing Medicaid program.

Second, whatever purported “savings” would result from the expansion, in reality, they are a cost shift to the federal taxpayer. As federal taxpayers, Virginians still pay into Medicaid, but they simply pay out of another pocket. And that pocket faces its own challenges. With federal deficits and debt climbing, the need for fiscal reforms at the federal level is inevitable.

Moreover, pointing to Medicaid reforms that the state would get in exchange for expansion misses the bigger point. Improvements in Medicaid are certainly needed, but they are needed without expansion.

Virginia, like many other states, is already stretched in providing care to those who currently depend on the program. Take the disabled and the elderly. They make up a small portion of the total program, but make up a significant share of the costs.

States should stay focused on improving the care and services for those already on the program rather than taking on new responsibilities.

Medicaid, like other entitlements, is on a collision course with fiscal reality. Medicaid is trending in the wrong direction on all fronts. Enrollment, even without expansion, is climbing, and spending is trending upward. The Medicaid expansion would only make matters worse, not better.

Not to be dismissed, Congress is well aware of this fiscal reality. Last year, the major proposals to repeal and replace Obamacare revised federal funding for Medicaid. And while those efforts fell short in the Senate, they are not dead.

Both Sens. Lindsey Graham, R-S.C., and Ted Cruz, R-Texas, have spoken out on their commitment to bringing a repeal-and-replace bill back in the Senate. This is reinforced by the president’s budget, which would double down on repeal-and-replace and would change federal funding for Medicaid.

Some might argue that expanding Medicaid would put states in a better position for such a change. The argument goes: Leveraging additional federal dollars today would enhance the federal share to the state moving forward. However, those decisions are not guaranteed.

Rather than surrendering to the mess that is Obamacare, non-expansion states like Virginia can and should play a lead role in partnering with the federal government to achieve a proper balance, one that rewards fiscal prudence by the states over indifference.

Thankfully in states like Virginia, some legislators are taking the long view—not just for Virginians, but for the country as a whole.

This piece originally appeared in The Daily Signal