Tennessee Governor Bill Haslam has chosen to expand Medicaid by making a deal with the Obama administration. Florida Speaker of the House Steve Crisafulli, with Governor Rick Scott’s tacit approval, has said no to Medicaid expansion. Which decision makes the most sense?
Governor Haslam’s plan, called Insure Tennessee, still must meet the approval of the Tennessee legislature. Their decision could have a big influence on what other Republican states might do, according to Christie Herrera and Justin Owen in an article printed in The Wall Street Journal.
Haslam’s plan calls for adding an additional 400,000 Tennesseans earning about $16,000 a year, plus another 125,000 to 150,000 who are already paying for health insurance through their employer. Enrollees would have two options:
- Traditional Medicaid with meager premiums and copay
- A so-called “private option” under which they would receive a subsidy to pay for insurance through their employer
Herrera and Owen say there is nothing fundamentally different about this Medicaid expansion plan from that originally envisioned by the architects of ObamaCare. They point out five important things to know:
- There are no free federal dollars – Just because the federal government agrees to pick up 100% of the costs (until 2016), every dollar used to finance the expansion of Medicaid is a dollar borrowed and added to the national debt (which now exceeds $18 Trillion!
- Decreased access for current Medicaid enrollees – By flooding the market with more Medicaid patients without increasing the provider fees – and therefore increasing the providers – there will be the same limited number of willing physicians to treat the increased number of patients. The result will be decreased access to care for all Medicaid patients in the state.
- Private option (The Volunteer Plan) is bad for the public – This provides a premium subsidy for workers eligible for ObamaCare’s Medicaid expansion. To get the subsidy, employers only need to pay 50% of an enrollee’s premiums. Since Tennessee employers currently pay 65% or more of an employee’s premiums, this option incentivizes employers to drop their share of premiums down to 50% so taxpayers can “volunteer” to pay the rest.
- Dis-enrollment threats are meaningless – The plan calls for new enrollees to pay a monthly premium equivalent to 2% of income. While this is a good idea, it is meaningless unless the threat of dis-enrollment is real. Indiana Governor Mike Pence tried the same provision but the federal government prohibited more than three-quarters of that state’s Medicaid-expansion enrollees from being dis-enrolled for nonpayment.
- Funding scheme is questionable – Hospitals are supposed to front the state money through a provider tax, which the state then uses to prove to the federal government that it has funded its portion of the program in order to get additional federal tax dollars. Both Tennessee Senators Bob Corker and Lamar Alexander have called for ending this deceptive financing mechanism.
Florida Says No
In Florida, where I live, the newspapers have been flooded with articles calling for the expansion of Medicaid. This pressure comes largely from the work of a coalition of hospitals and business interests called A Healthy Florida Works. This group is pushing for Medicaid expansion in order to capture the federal dollars promised by ObamaCare. They point to the presumed economic benefits of this influx of federal money to the state.
In an earlier post , entitled Lessons On State Expansion of Medicaid, I pointed out the dubious economic benefits of Medicaid expansion according to Devon Herrick of The National Center for Policy Analysis:
“Proponents of Medicaid expansion often tout the “economic benefits” that additional Medicaid funds might create within states. A study by economist Robert Book found that rather than stimulating the economy, Medicaid expansion is a drain on employment and slows economic growth. If all states expanded Medicaid, his analysis shows Texas would suffer a $46 billion negative economic impact over 10 years. Moreover, Texas employment losses would amount to 54,445 work-years from 2014 to 2017.”
There’s another important issue. An analysis of past Medicaid expansions in the 1990s by ObamaCare advisors David Cutler and Jonathan Gruber found that when Medicaid eligibility was expanded to those who already have private insurance, 50 to 75 percent of the newly enrolled drop private coverage. Therefore, a conservative estimate is that Medicaid rolls might have to rise by 1.4 people in order to reduce the uninsured by 1 person. This raises the cost considerably because the government is now paying for those who previously paid for their own insurance.
The Insure Tennessee plan calls for Medicaid expansion through employer-sponsored insurance as described above in The Volunteer Plan. Applying the work of Cutler and Gruber, this means the Medicaid rolls in Tennessee would have to increase by 1.4 people in order to reduce the number of uninsured by 1 person. When you consider this expansion is at the expense of the taxpayers, it is an expensive and poorly efficient plan. Looks to me like Florida is making the correct call – at least until a better plan than Insure Tennessee comes along.