Do you remember that “free money” guy? He used to appear on TV commercials wearing a goofy jacket covered in question marks, telling Americans how they could get “free money” from the federal government. “You can get free money to do anything,” he’d say. “How about free money for health care? … Once you learn what is there, you’re going to want more … for free!!!”
Those commercials aren’t on TV anymore, but a different “free money” guy is back. His name is President Obama and he has a bunch of “free money” for your state to implement the Medicaid expansion prescribed by Obamacare.
Last month, when Chief Justice John Roberts upheld Obamacare’s individual mandate as a legitimate use of the federal government’s taxing power, he also struck down a provision that forced states to provide Medicaid for every citizen, up to 133 percent of the poverty line.
This was no minor provision. Over half of the uninsured Americans whom Obamacare proposed to insure (30 million) were supposed to get coverage through Medicaid (17 million). Why did Obama choose to rely so heavily on Medicaid for such a large percentage of his new entitlement program? Because its cheap. Medicaid pays doctors 25 percent less than most private insurers do.
This would be a great deal for the government if Medicaid patients got the same quality health care as those with private insurance. But they don’t. Because of the low reimbursement rates, Medicaid recipients not only have trouble finding doctors who will see them, but they also wind up facing longer wait times and have worse health outcomes when they do.
So why would any state want to expand such substandard care to its citizens? The Washington Post‘s Sarah Kliff explains: “The federal government will pay the complete cost for the Medicaid expansion for three years, 100 percent of the bill for enrolling the newly eligible … States get loads of free money to pay their residents’ health-care bills.”
Except that there is no such thing as “free money.” For starters, the Obamacare expansion only pays 100 percent of the cost of the benefits. States still have to come up with the administrative costs on their own, which can be as high as 5.5 percent of all Medicaid spending.
Even then, that 100 percent match rate only lasts for the first three years. After that, it begins to decline each year until the feds are only covering 90 percent of the benefits for each new enrollee by 2020. This will leave states on the hook for billions in new mandates. Texas alone would have to spend $7.2 billion more on Medicaid in 2020 if they opt in to the Obamacare expansion.
As Lando Calrissian might say, “This deal is getting worse all the time.”
On the other hand, thanks to a fluke in how Roberts’ rewrote Obamacare, citizens in states that opt out of the Medicaid expansion will have easier access to more generous private health insurance plans. Obamacare still provides insurance subsidies to everyone above 100 percent of poverty.
Five states (Florida, Iowa, Louisiana, Mississippi, and South Carolina) have already announced they are opting out of Obamacare’s Medicaid deal. And Texas has hinted they will do the same. It’s easy to see why.
Even before Obamacare became law, Texas’ Medicaid program was set to grow from 28.7 percent of the budget in 2008 to 32 percent in 2020. With Obamacare, that percentage would jump to 45.9 percent, far surpassing other state priorities like education, infrastructure and public safety.
For states that want to maintain any control over their future spending priorities, Obama’s Medicaid expansion is a nonstarter.
