Dr. David Mielke is the Retired Dean of the College of Business at Eastern Michigan University
In less than 5 months, on October 1st, the Affordable Care Act’s insurance exchanges will go live online. A key provision is the expansion of Medicaid. Michigan has been offered $2 billion a year for 2 years to expand Medicaid to as many as 400,000 additional people. The Governor supports this expansion, while the legislature says “no”. In fact, the Republicans in the state instead are supporting a bill to limit Medicaid benefits to 4 years if a person can be gainfully employed. More than half of the states are on track to sit out the law’s Medicaid expansion goal, at least initially. This means that millions of low income people won’t have access to health insurance through Medicaid as the law anticipated. Is this the “Right Thing to do?” Should the states refuse to expand Medicaid? Let’s look at some issues:
1. You may remember that the law initially required states to expand Medicaid. However, that is the one provision that the Supreme Court overturned and ruled that Congress cannot coerce states into expanding Medicaid by threatening to withhold federal dollars for a state’s existing program.
2. Based on figures from the Congressional Budget Office and analysis by the Kaiser Family Foundation, Washington is expected to spend roughly $950 billion expanding Medicaid between 2014 and 2022.
3. Using the same information, the cost to the Federal government has been reduced by more than $424 billion in new spending over the next 8 years because 18 states have already opted out of the Medicaid expansion. If the 12 states still undecided also decide to opt out, there will be additional savings of $185 billion.
4. The federal government has promised to pay the total cost of expansion for 2 years, in Michigan’s case $2 billion. After 2 years the states will be required to pay 10% of the cost. Many states worry that the federal government will renege on its promises and the states will be required to pay more than 10%. The GAO reported last week that the average state has a fiscal gap of 14.2% in their budgets over the next 50 years primarily as a result of health care costs—before the new Medicaid kicks in. That means taxes will have to be raised or budget cuts will need to be made in other areas.
5. In general, the states opting out have Republican governors. However, Michigan’s Republican governor is not alone trying to expand Medicaid. John Kasich of Ohio, Rick Scott in Florida, and Jan Brewer of Arizona also want to expand but are experiencing trouble convincing their legislatures to do so. Only the Republican governor in North Dakota has sold a GOP legislature.
6. The US health care system is already larger than the economy of France.
7. Given the latest news about the IRS, do we trust them to be involved with the new health care system and expansion? Obamacare has 47 separate provisions that involve the IRS. It is the second-largest agency, after the U.S. Department of Health and Human Services, charged with implementing the act. The IRS has to implement Obamacare’s required purchase of health coverage, checking whether millions of Americans are in compliance.
What is the “Right Thing to do?” There is no question that people need health care insurance. However, at what cost and in terms of priorities what is the best way to accomplish this goal? Before we expand Medicaid, are we convinced that it is working as is? Medicaid was passed years ago—and has never been reviewed for a possible overhaul. Florida has an innovative pilot project that allows low income people to choose health plans on a “Medicaid marketplace”. That has saved them about $1 billion a year. Spending more money on a outmoded program does not make things better at a time when all budgets are severely challenged. Let’s fix Medicaid first and fix the federal budget.