The Four Most Dangerous Words in Washington

More than three decades ago, Ronald Reagan rightly characterized the nine most terrifying words in the English language: “I’m from the government, and I’m here to help.” In Washington, a quartet of four words rank close behind Reagan’s nine in their ability to terrify: What are you for?

Countless people in official Washington, from leadership staff to reporters to liberals to lobbyists, use these four words, or some variation thereof, to try to get conservatives to endorse bad policy. Their words carry with them an implicit argument: You have to be for something, rather than just opposing bad policy.

Reagan would find that reasoning nonsensical. Why do you have to be for something when all the available options undermine conservative principles—because you’re from the government and you’re here to help? It’s a lazy straw-man argument, which might explain why so many people in Washington use it, but it’s a premise that conservatives should reject.

Example 1: Drug Price Legislation

On Monday, House Republican leaders released their alternative to House Speaker Nancy Pelosi’s prescription drug legislation. Their very first bullet in the summary of the legislation said that the bill includes “350 pages” of provisions. (Technically, the bill has 352 pages of content, while by contrast, the Rules Committee print of Democrats’ prescription drug legislation weighs in at 275 pages.)

Republicans quite rightly criticized Pelosi almost a decade ago for the awful process she used to enact Obamacare. Remember the speaker’s infamous quote about the legislation in March 2010, which House Republicans still have on their YouTube page:

Yet including the bill’s size as the first bullet point in their summary suggests Republican leadership considers it a feature, not a bug: “Look at how substantive we are—our bill is 350 pages long!” Granted, the House Republican package consists of a grab-bag of provisions related to drug pricing, most of which existed well before this week. Some of them doubtless contain good ideas, and ideas I have previously endorsed.

But think about what went into creating this “new,” 350-page bill. A bunch of leadership staffers sat around a big desk in the Capitol, decided what bills and provisions to include in the package—and, by extension, which bills to exclude from it. I know, because I’ve sat in those types of meetings. They released the legislation on Monday, and Congress likely will vote on it late Wednesday night (early Thursday at the latest).

Republican Members of Congress won’t have time to read all 352 pages of the House Republican bill. Some of them may not have time to read even the four-page summary of the bill. And their staff, who are currently overwhelmed by the litany of issues on Congress’ December agenda, from impeachment to a massive defense policy bill to another massive spending bill to the prescription drug debate, have neither the time nor the bandwidth to provide thoughtful advice and counsel.

But most if not all Republican members of Congress will vote for this drug price alternative they have not read and many do not fully understand. Why? Because most think they need to “be for something.” Because they believe that (false) premise, they will have effectively handed their voting card to unelected leadership staffers—who may or may not actually know what they are doing—to define what Republicans are “for.” It’s no way to run a railroad, let alone the country.

Example 2: Entitlements

My article last week about Democratic presidential candidate Pete Buttigieg’s proposed long-term care entitlement prompted an e-mail from a colleague. The e-mail asked a polite variation of the question noted above: If you don’t like Buttigieg’s approach to long-term care, what would you do instead?

My response in a nutshell: Nope. As I pointed out in the original post, our country faces $23 trillion—that’s $23,000,000,000,000—in debt—and rising. We can’t afford the entitlements and government programs we have now. To even talk about creating new programs (which would face their own solvency and sustainability concerns) only gives lawmakers and the American public a permission structure to avoid the hard decisions Congress should have made years ago to right-size our entitlements.

Example 3: ‘Surprise Billing’ Legislation

On Sunday, several members of key committees announced an agreement in principle on federal legislation regarding “surprise billing,” which arises when physicians and medical providers seek to recover charges when patients obtain care out-of-network during emergencies, or when patients inadvertently see an out-of-network physician (e.g., an anesthesiologist) at an in-network hospital.

(Disclosure: I have consulted with various firms about the potential outcomes and implications of this legislation. However, these firms have not asked me for my personal policy positions on the legislation, nor have they asked me to advocate for a position on it—as my positions, as always, are mine alone.)

I wrote back in July that this issue largely represented a solution in search of a problem, for multiple reasons. First, a relatively small number of hospitals and providers impose most of the “surprise” bills. Second, states have the power to fix this issue on their own by regulating providers, even if federal law makes it difficult for states to regulate all the insurers in their state.

So why do Republicans feel the need to sign off on federal legislation addressing a problem that states can decide to fix (or not to fix) themselves? Again, because lawmakers feel the need to “be for something.” That again brings to mind Reagan’s axiom about the nine most terrifying words, and the proposition that “I’m from the government and I’m here to help” often leads to unintended consequences.

No, Don’t Just ‘Do Something’

Perhaps by this point, some observers might have come up with an obvious question: How can you win elections if you don’t try to “do something?” The question has two simple answers.

First, citizens quite obviously do not vote solely based on a candidate’s ability to “do something,” such as expand the regulatory state, the welfare state, and government in general. If conservatives want to run campaigns based on giving voters “free stuff,” but just slightly less “free stuff” than Democrats, guess how many elections the conservative would win?

Second, as noted above, the “What are you for?” question has an obvious four-word response: “We can’t afford it.” That retort sadly has the feature of truth about it, as our country cannot sustain its current levels of government spending.

Any responsible parent knows that, no matter how often his child asks, letting that child eat ice cream three times a day does not represent good parenting. Congress long since should have imposed some of that sense of discipline on itself, and the American people.

Given our current fiscal situation, many policy proposals, no matter how popular, are not fiscally sustainable. The “What are you for?” question cleverly tries to elide that debate, in ways that will only undermine conservative principles, and our country’s solvency.

I’ll end by noting my strong support for the First Amendment: “Congress shall make no law.” (What, you thought it contains some other words too?) If Congress spent the majority of its time stopping bad laws and policies—particularly policies considered only slightly less bad than the original proposals—maybe our country wouldn’t face the prospect of paying off a growing mountain of debt.

This post was originally published at The Federalist.

Pete Buttigieg’s Plan to Tax the Middle Class

Democratic presidential candidate Pete Buttigieg claimed last month that “everything that we have proposed has been paid for, and we have proposed no tax increase on the middle class.” The South Bend, Indiana mayor is incorrect on both counts: He hasn’t said how he’d pay for all his proposed spending. He has endorsed one explicit tax increase on the middle class, and his recent retirement plan provides an outline for another. Add it up, and middle-class workers could face a trillion dollars in new taxes.

To support family caregivers, Mr. Buttigieg’s retirement plan restated his prior commitment to enact “an enhanced version of the Family Act,” which would provide 12 weeks of subsidized family leave. The candidate has yet to specify how exactly he would “enhance” the Family Act. But that legislation, introduced by Rep. Rosa DeLauro (D., Conn.) and Sen. Kirsten Gillibrand (D., N.Y.), pays for its new benefit by raising payroll taxes by 0.2% of income.

Mr. Buttigieg’s retirement plan also contains several new spending proposals, including a long-term care entitlement. He says the program would make benefits available to people over 65 and would “kick in after an income-related waiting period.” His plan cites two white papers as examples of “similar programs” proposed by scholars.

Mr. Buttigieg fails to note how both white papers propose to pay for the new benefits. In the first paper, the Long-Term Care Financing Collaborative envisions a program “fully financed by a dedicated revenue source,” including a payroll tax, “an explicit income tax surcharge, or other dedicated tax.”

The second paper, written by researchers affiliated with the Urban Institute, contains several policy details Mr. Buttigieg adopted, including waiting periods for wealthier people to qualify. That paper also proposes a specific funding source: “an additional tax of about 1.0 percent of earned Medicare-covered income.” In other words, an increase in the payroll tax—a tax increase on the middle class.

The Congressional Budget Office estimated last December that a one percentage point increase in the Medicare tax rate would raise $898.3 billion over a decade. If Mr. Buttigieg intends to fund his new long-term care program via the payroll tax, that tax increase, coupled with the 0.2% payroll tax hike in the Family Act he has already endorsed, would bring total payroll-tax increases to more than $1 trillion.

If Mr. Buttigieg doesn’t want to fund his long-term-care entitlement with the payroll-tax increase proposed in a paper his campaign cited, he should explain where that money will come from. His own claims notwithstanding, Mr. Buttigieg’s candidacy has lacked fiscal candor. His campaign told the Indianapolis Star last month that it had proposed $5.7 trillion in spending to that point, but cited a total of only $5.1 trillion in tax increases and savings.

Mr. Buttigieg’s retirement-security plan has since added other spending proposals with no mention of a funding source. There’s his plan to make those receiving Social Security disability benefits immediately eligible for Medicare, which will likely cost more than $100 billion. There’s his new requirement for state Medicaid programs to cover community-based services as a mandatory benefit, along with mandates on nursing homes—including a $15 minimum wage and higher staffing ratios—which will raise Medicaid spending.

Mr. Buttigieg called Elizabeth Warren “extremely evasive” for her answers on single-payer health care, saying, “I think that if you are proud of your plan and it’s the right plan, you should defend it in straightforward terms. And I think it’s puzzling that when everybody knows the answer to that question of whether her plan . . . will raise middle class taxes is ‘Yes.’ Why wouldn’t you just say so, and then explain why you think that’s the better way forward?” He should follow his own advice.

This post was originally published at The Wall Street Journal.

“Ponzi Pete” Buttigieg Proposes More Unsustainable Entitlements

On the campaign trail for the Democratic presidential nomination, South Bend Mayor Pete Buttigieg tries to portray himself as a moderate politician. By running ads against implementing a single-payer health system, Buttigieg would have voters believe he rejects the radical leftism of socialist Sen. Bernie Sanders.

Don’t you believe it. Buttigieg recently released an aging and retirement plan that proposed massive amounts of new entitlement spending, with very little in the way of specifics to pay for all his ideas. It’s but the latest example of Democrats’ government giveaway train run amok.

CLASS Act ‘Ponzi Scheme’

The first part of Buttigieg’s paper talks about an “historic” new program, Long-Term Care America. The mayor claims this plan would provide aid to seniors “who require assistance with two or more activities of daily living….Benefits would be worth $90 per day for as long as [seniors] need care, and kick in after an income-related waiting period.”

But Title VIII of Obamacare contained language establishing the Community Living Assistance Services and Supports (CLASS) program. Moderate Democrats attacked the proposal as unsustainable. Prior to Obamacare’s enactment, Sen. Kent Conrad (D-N.D.), then the chairman of the Senate Budget Committee, called CLASS a “Ponzi scheme of the first order, the kind of thing Bernie Madoff would have been proud of.” Those concerns ultimately proved correct, as the Obama administration had to shelve the program as unworkable before it ever collected a dime in premiums.

As a Senate staffer conducting oversight on CLASS, and later as a member of the Commission on Long-Term Care tasked with examining possible replacements, I examined the program’s failure in minute detail. But at bottom, the program suffered from the same problem facing the Obamacare exchanges: Too many sick people signing up for benefits, driving up premiums, and therefore driving away healthy individuals.

Obamacare required individuals to pay into the CLASS program for only five years to qualify for benefits. Actuaries believed that people would sign up, pay a few thousand dollars in premiums over five years, and then collect benefits totaling tens of thousands of dollars or more. Just as Obamacare’s pre-existing condition provisions have priced millions of people out of coverage—because individuals can sign up for “insurance” after they develop a pre-existing condition—so too would CLASS have attracted people already suffering from disabilities, who by definition don’t need insurance so much as they need care.

The exchanges have remained somewhat sustainable only because of massive amounts of federal spending on subsidies and bailouts. However, Obamacare forced CLASS to become self-sustaining, without relying on federally subsidized premiums or a bailout. The Obama administration in October 2011 conceded that it could not meet these statutory requirements, and therefore shelved the program. (Congress later repealed CLASS outright in the “fiscal cliff” deal in January 2013.)

Buttigieg’s plan acknowledges none of this history, and makes no mention of solvency or sustainability when talking about his proposed new program. Perhaps limiting it to only those over age 65, and imposing a waiting period for people to receive benefits, as his proposal outlines, will make it more financially sustainable (or less unsustainable). But Buttigieg also proposes a $90 daily benefit, 80 percent richer than the CLASS Act’s $50 per day benefit, exacerbating solvency concerns.

Costly Promises

Buttigieg’s promise of a long-term care benefit says nothing about whether this new federal spending would increase the deficit, your taxes, or both. In that respect, it represents but one of the many costly promises in his retirement plan, including:

  • An end to the two-year waiting period currently required for individuals receiving Social Security disability benefits to qualify for Medicare coverage;
  • An increase in the minimum wage to $15 an hour, and new staffing requirements for nursing homes, all of which will raise costs to the Medicaid program; and
  • An expansion of Social Security benefits—including a new minimum benefit and credit for caregivers—funded entirely by higher taxes on “the rich.”

At present, our federal government faces $23 trillion in debt, and trillion-dollar deficits as far as the eye can see. To put it bluntly, we can’t pay for the government we have now, let alone the new programs Buttigieg and his fellow presidential candidates have proposed.

Buttigieg can try to hide himself in the cloak of the “moderate” mantra all he likes. But his laundry lists of new and unsustainable entitlements represent nothing more than big-government liberalism.

UPDATE: This post was edited after publication, to clarify the nature of Buttigieg’s proposal as compared to Obamacare’s CLASS Act.

This post was originally published at The Federalist.

Junk “Study” Demonstrates Liberal Think-Tank’s Bias

Why would an organization billed as a “respected source of health care data” publish an analysis with mutually contradictory conclusions? In the case of the Kaiser Family Foundation, the answer is simple: To defend Obamacare—even if the facts don’t align with one’s conclusions.

As conservatives have noted for years, Obamacare encourages states to discriminate against individuals with disabilities—a prime example of how government intervention in the health care system ultimately hurts those the left claims they want to help. Liberals, understanding the political power of such charges, feel compelled to push back on this narrative. While they don’t have many actual facts with which to do so, that hasn’t stood in the Kaiser Family Foundation’s way.

Obamacare’s Discrimination, Explained

If you could gain 50-76 cents for doing one thing, and 90 cents for doing another, which would you choose? I know which I would.

When I served on the Commission on Long-Term Care in 2013, it explored an area of health policy unknown to much of the public: Hundreds of thousands of individuals with disabilities remain on Medicaid waiting lists for home and community-based care. While federal law requires state taxpayers to pay nursing home benefits for all eligible Medicaid patients, coverage of community-based services remains optional, so states can—and do—establish waiting lists to control their Medicaid spending.

These waiting lists preceded Obamacare, so Obamacare didn’t cause the waiting lists per se. And individuals with disabilities on the waiting lists do have their health care needs paid for by Medicaid, even as they wait to become eligible for home-based care (e.g., help with bathing, dressing, etc.). But sheer common sense indicates that states will prioritize coverage of able-bodied adults—for which they get paid a higher match from the federal government—than eliminating their waiting list for individuals with disabilities.

The Flawed Premise

For the past several years, Kaiser has attempted to rebut charges that Medicaid expansion has affected waiting lists for individuals with disabilities. Their studies, including one released in April, claim that there is no relationship between whether a state has expanded Medicaid and increases or decreases in its waiting lists.

However, as I first noted two years ago, Kaiser’s over-simplistic analysis does not begin to consider the many other factors that affect decisions about their Medicaid programs and waiting lists. To use the most obvious example, the average state that has not expanded Medicaid is poorer than the average state that has. Connecticut, with a median income of $73,781 in 2017, has more resources to expand Medicaid to able-bodied adults and reduce its waiting lists than a state like Alabama, which had a median income of $46,472.

If Kaiser wanted to do a thorough analysis, it would control for this variable, and others. For instance, a good econometric analysis would factor in states’ morbidity rates—because states with sicker populations may have more individuals with disabilities needing care—along with the underlying cost of care, because states would have to spend more to reduce their waiting lists in areas with higher prices.

Contradictory Claims

How superficial are Kaiser’s conclusions? The section of its April paper right after the passage claiming no relationship between Obamacare and waiting lists includes this doozy:

Waiting lists are a function of the populations a state chooses to serve and how the state defines those populations; both of these factors vary among states, making waiting lists an incomplete measure of state capacity and demand for [home and community-based services] and not directly comparable among states. [Emphasis original.]

If waiting lists for individuals with disabilities are “not directly comparable among states,” then why did Kaiser in the preceding section claim Obamacare’s Medicaid expansion has nothing to do with waiting lists—a conclusion that by definition involves comparing waiting lists among states?

The question practically answers itself. Kaiser just hopes you won’t notice.

Talking Point versus Research

After more than two months, the researcher, Mary Beth Musumeci, would not deign to defend her “research” with a direct reply. Instead a Kaiser spokesman sent me what amounted to a polite brush-off, replicated in full below:

Thank you for your interest in our work. We appreciate people taking the time to consider our work and provide constructive feedback on it, and our team discussed your comments and ideas.

The data in the brief are presented as a simple, descriptive comparison of trends in wait lists stratified by expansion status, and we also tried to be clear about major limitations of the data, including caveats in state comparisons of wait lists. While we agree that further econometric analysis to assess causality could build on this work and contribute to policy understanding, the posted brief was not an attempt to undertake such analysis.

We appreciate your feedback and will consider it as we continue to develop our work in this area, and we hope our work serves as a useful basis for your own analysis and econometric research to undertake the type of work you suggest in your comments.

I responded with one simple question: Does the Kaiser Family Foundation have any plans to conduct an econometric study on Medicaid expansion and waiting lists? As I noted in my response:

You’ve admitted the limitations of your own analysis to date, but you’ve repeated these types of assertions for several years—without doing the type of in-depth research that you concede would be both warranted and more accurate. Why not?

Kaiser’s communications department responded that they don’t have that type of study planned. I won’t hold my breath for them to conduct this type of econometric study, either. As with the issue of pre-existing conditions, Kaiser won’t ask a question to which it doesn’t want to know the answer. Far better to use a crude and highly flawed “study” to claim that Obamacare hasn’t affected Medicaid waiting lists—the political conclusion the Kaiser analysts want to support.

A supposed “fact check” on the disability waiting list issue two years ago called the Kaiser Family Foundation a “respected source of health care data.” But by issuing mutually contradictory conclusions to maintain a political talking point, and not conducting the in-depth research that they admit the issue of Medicaid waiting lists warrants, Kaiser again reveals itself not so much as a respected source of health care data as a highly liberal one.

This post was originally published at The Federalist.

How the Obama Administration Hid Facts to Pass Obamacare

Over the weekend, Politico ran a report about how a “Trump policy shop filters facts to fit his message.” The article cited several unnamed sources complaining about the office of the Assistant Secretary for Planning and Evaluation (ASPE) within the Department of Health and Human Services (HHS), and its allegedly politicized role within the current administration.

One of the article’s anonymous sources called ASPE’s conduct over the past 18 months “another example of how we’re moving to a post-fact era.” Richard Frank, a former Obama appointee and one of the few sources to speak on the record, said that he found the current administration’s “attack on the integrity and the culture of the office…disturbing.”

As a congressional staffer conducting oversight of the CLASS Act in 2011-12, I reviewed thousands of pages of e-mails and documents from the months leading up to Obamacare’s passage. Those records strongly suggest that ASPE officials, including Frank, withheld material facts from Congress and the public about CLASS’s unsustainability, because full and prompt disclosure could have jeopardized Obamacare’s chances of passage.

About the CLASS Act ‘Ponzi scheme’

The Community Living Assistance Services and Supports program, or CLASS for short, intended to provide a voluntary insurance benefit for long-term care. Included as part of Obamacare, the program never got off the ground. In October 2011, HHS concluded it could not implement the program in an actuarially sound manner; Congress repealed the program entirely as part of the “fiscal cliff” deal enacted into law in the early days of 2013.

CLASS’s prime structural problem closely resembled that of the Obamacare exchanges—too many sick people, and not enough healthy ones. Disability lobbyists strongly supported the CLASS Act, hoping that it would provide financial support to individuals with disabilities. However, its voluntary nature meant that the more people already with disabilities enrolled and qualified for benefits, the higher premiums would rise, thereby discouraging healthy people from signing up.

Moreover, although actuarially questionable in the long-term, CLASS’s structure provided short-term fiscal benefits that aided Obamacare’s passage. Because CLASS required a five-year waiting period to collect benefits, the program would generate revenue early in its lifespan—and thus in the ten-year window budget analysts would use to score Obamacare—even if it could not maintain balance over a longer, 75-year timeframe.

This dynamic led the Senate Budget Committee Chairman Kent Conrad (D-ND), to dub CLASS “a Ponzi scheme of the first order, the kind of thing Bernie Madoff would have been proud of.”

Internal Concerns Minimized in Public

A report I helped draft, which several congressional offices released in September 2011—weeks before HHS concluded that program implementation would not go forward—highlighted concerns raised within the department during the debate on Obamacare about CLASS’ unsustainable nature. For instance, in September 2009, one set of talking points prepared by ASPE indicated that, even after changes made by Congress, CLASS “is still likely to create severe adverse selection problems”—i.e., too many sick people would enroll to make the program sustainable.

Frank told me that, during one public speech in October 2009, “I spent about half my time setting out the problems with CLASS that needed to be fixed.” He did indeed highlight some of the actuarial challenges the CLASS program faced. But Frank’s remarks, at a Kaiser Family Foundation event, closed thusly:

We’ve, in the department, have modeled this extensively, perhaps more extensively than anybody would want to hear about [laughter] and we’re entirely persuaded that reasonable premiums, solid participation rates, and financial solvency over the 75-year period can be maintained. So it is, on this basis, that the Administration supports it that the bill continues to sort of meet the standards of being able to stand on its own financial feet. Thanks.

Frank told me over the weekend that his comments “came at the end of my explaining that we were in the process of addressing those issues” (emphasis mine). But Frank actually said that the Obama administration was “entirely persuaded” of CLASS’ solvency, which gives the impression not that the department had begun a process of addressing those issues, but had already resolved them.

Frank’s public comments notwithstanding, ASPE had far from resolved the actuarial problems plaguing CLASS. Two days after his speech, one of Frank’s employees sent around an internal e-mail suggesting that the CLASS Act “seems like a recipe for disaster.”

But the ‘Fixes’ Fall Short

In response to these new analyses, HHS and ASPE came up with a package of technical fixes designed to make the CLASS program actuarially sound. One section of those fixes noted that “it is possible the authority in the bill to modify premiums will not be sufficient to ensure the program is sustainable.”

However, the proposed changes came too late:

  • No changes to the CLASS Act made it into the final version of Obamacare, which then-Majority Leader Harry Reid (D-NV) filed in the Senate on December 19, 2009.
  • The election of Scott Brown (R-MA) to replace the late Kennedy in January 2010 prevented Democrats from fixing the CLASS Act through a House-Senate conference committee, as Brown had pledged to be the “41st Republican” in the Senate who would prevent a conference report from receiving a final vote.
  • While the House and Senate could (and did) pass some changes to Obamacare on a party-line vote through the budget reconciliation process, the Senate’s “Byrd rule” on inclusion of incidental matters in a budget reconciliation bill prevented them from addressing CLASS.

The White House’s own health care proposal, released in February 2010, discussed “a series of changes to the Senate bill to improve the CLASS program’s financial stability and ensure its long-run solvency.” But as HHS Secretary Kathleen Sebelius later testified before the Senate Finance Committee, the “Byrd rule” procedures for budget reconciliation meant that those changes never saw the light of day—and could not make it into law.

Kinda Looks Like a Conspiracy of Silence

By the early months of 2010, officials at ASPE knew they had a program that they could not fix legislatively, and could fail as a result. Yet at no point between January 2010, when ASPE proposed its package of technical changes, through Obamacare’s enactment, did anyone within the administration admit that the program could prove impossible to implement.

Over the weekend, I asked Frank about this silence. He responded that “when the reconciliation package was shelved”—which I take to mean that the CLASS changes did not make it into the reconciliation bill, which did pass—“we began working on regulatory remedies that might address the flaws in CLASS.” However, from the outset some of Frank’s own employees believed those changes might prove insufficient to make the program actuarially sound, as it later proved.

To put it another way: In February 2011, Sebelius testified before the Senate Finance Committee that “the snapshot [of CLASS] in the bill, I would absolutely agree, is totally unsustainable.” She, Frank, and others within the administration had known this fact one year previously: They just hoped they could arrive at a package of regulatory changes that would overcome the law’s structural flaws.

But did anyone within the administration disclose that CLASS was “totally unsustainable” as written back in February 2010? No, because doing so could have jeopardized Obamacare’s chances of passage. The law passed the House on a narrow 219-212 margin.

If HHS had publicly conceded that CLASS could become a “zombie” program—one that they could not fix, but could not remove—it would have caused a political firestorm, and raised broader questions about the bill’s fiscal integrity that could have prevented its enactment.

Was Obamacare Sold on a Lie?

Conservatives have pilloried Obamacare for the many false statements used to sell the law, from the infamous “Lie of the Year” that “If you like your plan, you can keep it” to the repeated promises about premium reductions, Barack Obama’s “firm pledge” to avoid middle-class tax increases, and on and on.

But there are sins of both commission and omission, and the CLASS Act falls into the latter category. Regardless of whether one uses the loaded term “lie” to characterize the sequence of events described above, the public statements by HHS officials surrounding the program prior to Obamacare’s enactment fell short of the full and unvarnished truth, both as they knew it at the time, and as events later proved.

Politico can write all it wants about ASPE under Trump “filter[ing] facts to fit his message.” But ASPE’s prior failure to disclose the full scope of problems the CLASS Act faced represents a textbook example of a bureaucracy hiding inconvenient truths to enact its agenda. If anonymous HHS bureaucrats now wish to attack a “post-fact era” under Trump, they should start by taking a hard look in the mirror at what they did under President Obama to enact Obamacare.

This post was originally published at The Federalist.

Reforming Medicaid in Louisiana

A PDF of this document is available at the Pelican Institute website.

Two years ago, the incoming administration of Gov. John Bel Edwards (D-LA) pledged that expanding Medicaid to able-bodied adults, as permitted under Obamacare, would help solve Louisiana’s ongoing structural budget shortfalls. Unfortunately, the Governor’s promises have not come to fruition. Enrollment in the Medicaid expansion has exceeded projections—as have the costs associated with that expansion. As a result, Louisiana faces a scenario plaguing many states that expanded Medicaid: Rising spending on expansion crowding out other important budgetary priorities like education, transportation, and law enforcement.

Democrats have already proposed a series of tax increases to “solve” the state’s fiscal crisis.[1] But that “solution” misses the point—and won’t actually solve the problem. Rather than raising taxes yet again, to pay for more unaffordable health care spending, Louisiana should both right-size and reform its Medicaid program. Right-sizing the program would involve unwinding the massive expansion to the able-bodied—working-age adults without dependent children—to return Medicaid to serving the populations for which it was originally designed—pregnant women, children, senior citizens, and individuals with disabilities.

After right-sizing the Medicaid program, state leaders should then work to reform and modernize Medicaid for the 21st century. Specifically, Louisiana should work with the Trump Administration to enact a comprehensive Medicaid reform waiver. This waiver could include components to improve coordination of beneficiary care, introduce consumer choice elements into Medicaid, provide a smoother transition to work and employer-based coverage for those who are able to work, and improve program integrity to use scarce taxpayer dollars most effectively.

Individually and collectively, the policy solutions outlined in this paper—unwinding Medicaid expansion and embracing a comprehensive waiver to enact additional reforms—would help put Louisiana on a more sustainable fiscal trajectory, eliminating the need for the tax-and-spend battles of the past several years. By so doing, the state could focus more on enacting reforms necessary for the economy to thrive, bringing jobs back to Louisiana.

 

Massive Expansion

Fewer than two years since Louisiana first expanded Medicaid under Obamacare to able-bodied adults, enrollment in the expansion has already shattered expectations. While officials first projected about 306,000 previously uninsured individuals would gain coverage through expansion, within days of Gov. Edwards signing the executive order authorizing Medicaid expansion, state officials revised their estimates dramatically upward. At that time, officials claimed that as many as 450,000 Louisianans could be added to the Medicaid rolls by expansion.[2] However, even this projection turned out to be an under-estimate, as by December 2017 enrollment reached 456,004, exceeding the higher projection.[3] Louisiana officials admit that, as enrollment exceeds the original 306,000 projection, costs to the state will increase, reducing the state’s supposed fiscal savings.[4]

The fact that Louisiana’s Medicaid expansion has exceeded enrollment projections should come as no surprise. In fact, virtually every state that expanded Medicaid to the able-bodied under Obamacare has seen vastly more enrollees than they had originally planned for. A November 2016 study by the Foundation for Government Accountability (FGA) showed that 24 states’ Medicaid expansion had within two years exceeded projections for the maximum number of individuals that would ever enroll in the Obamacare expansion by an average of 110%.[5]

An earlier report by FGA, issued in April 2015, found that enrollment had exceeded estimates in 17 states. Collectively, those 17 states exceeded their maximum enrollment projections by an average of “only” 61%.[6] By comparison, just eighteen months later, a total of 24 states had exceeded their maximum enrollment projections by more than 110%—amounting to over 6 million enrollees more than projected.[7] More states continue to enroll many more individuals than projected in Medicaid expansion, even after many states already exceeded projections in the expansion’s first year.

The enrollment explosion in “free” Medicaid contrasts with more limited enrollment in Obamacare’s other venue for coverage expansion—health insurance Exchanges. While Medicaid enrollment vastly exceeded projections, as of the 2017 open enrollment period, effectuated Exchange enrollment stood at only 10.3 million individuals.[8] This enrollment figure represents less than half the 23 million individuals the Congressional Budget Office estimated at the time of Obamacare’s enactment would sign up for Exchange coverage in 2017.[9]

Moreover, studies suggest that only individuals who qualify for the most generous subsidies have joined insurance Exchanges in significant numbers. The consulting firm Avalere Health concluded that more than four in five (81%) eligible individuals with incomes of under 150% of the federal poverty level—who qualify for both the richest premiums subsidies and reduced deductibles and co-payments—have signed up for Exchange coverage.[10] By comparison, only about one-sixth (16%) of those with incomes between three and four times the poverty level—who qualify for much smaller premium subsidies, and receive no help with cost-sharing—purchased Exchange coverage.[11] Put simply, while individuals quickly sign up for “free,” or nearly free, health insurance coverage, including through Medicaid, they have signed up much more slowly for health plans for which they must make a financial contribution.

 

Massive—and Rising—Costs

Even prior to Obamacare, Medicaid had grown exponentially over the past several decades to become a larger and larger share of Louisiana’s state budget. In fiscal year 1985, Medicaid represented 8.9% of Louisiana’s total budgetary expenditures.[12] Thirty years later, in fiscal year 2015, Medicaid had more than tripled as a share of the state budget, rising to 27.6% of total expenditures.[13]

The rising tide of Medicaid spending in Louisiana echoes national trends. In fiscal year 1985, Medicaid consumed an average of 9.7% of total state expenditures across all 50 states.[14] By comparison, in fiscal year 2013, the last year before Obamacare’s expansion took effect, Medicaid represented an average of 24.4% of state spending.[15] Over a quarter-century, then, Medicaid spending more than doubled as a share of state spending—before most of Obamacare’s effects kicked in.

However, even when compared to other states, Louisiana suffered from skyrocketing Medicaid spending prior to Obamacare expansion taking effect. The Pew Charitable Trusts noted that, during the years 2000-2015, Medicaid grew the fastest in Louisiana when measured as a share of the state’s own spending. During that time, Medicaid grew by 12.8 percentage points—from 10.5% of the state’s spending to 23.3% of state dollars.[16] As a result of that growth in Medicaid spending, Louisiana was the state most dependent on federal funds in fiscal year 2015, using money from Washington to comprise 42.2% of its budget—again, before Obamacare’s Medicaid expansion ever took effect in Louisiana.[17]

States like Louisiana that chose to expand Medicaid to the able-bodied face additional rising costs, due to both higher than expected enrollment in Medicaid expansion and higher than expected per-beneficiary spending for those expansion enrollees. In late 2016, the Centers for Medicare and Medicaid Services’ (CMS) Office of the Actuary released its annual report on the state of the Medicaid program. The report found that, contrary to projections that expansion enrollees would have per-beneficiary costs lower than previously eligible Medicaid beneficiaries, states actually faced higher per-beneficiary costs for the expansion population than their prior enrollees.[18] In 2016, expansion enrollees cost the Medicaid program an average of $5,926, compared to average spending of $5,215 for non-expansion adults.[19]

The higher spending on Medicaid expansion enrollees has now persisted for several years, contrary to predictions before the coverage expansion took effect. At first, the CMS actuary thought that the higher spending came from pent-up demand for health care—previously uninsured enrollees using their newfound Medicaid coverage to cover heretofore-neglected health conditions.[20] However, the 2014, 2015, and 2016 annual reports on Medicaid all demonstrated higher per-beneficiary spending for expansion populations than those eligible prior to Obamacare.[21]

Echoing the national trends, Medicaid per-beneficiary spending in Louisiana remains higher for expansion enrollees than previously eligible beneficiaries. State officials admit that in fiscal year 2017, spending for expansion enrollees totaled $6,712 per adult—more than 20% higher than the $5,575 spent on non-expansion enrollees.[22] Liberal supporters of the expansion claim that the disparity arises from pent-up demand by new enrollees—the same assumption federal actuaries made.[23] However, the higher spending by expansion enrollees over several years at the federal level suggests that higher spending by expansion enrollees may persist in Louisiana as well.

With enrollment higher than initial projections, and spending on those new enrollees averaging more than anticipated, many states now face fiscal crises brought on by their Medicaid expansions. Under the Obamacare statute, states began to pay a share of the costs for the Medicaid expansion in calendar year 2017. Moreover, states’ 5% share of expansion enrollees’ health costs in 2017 will double over the next few years, rising to 6% in calendar year 2018, 7% in calendar year 2019, and 10% in calendar year 2020.[24] Given the vast sums that states already devote to their Medicaid programs, paying five percent—let alone ten percent—of expansion costs will add significant new stresses to state budgets.

Even as Louisiana expanded Medicaid to the able-bodied, other states began facing expansion’s negative effects, with budget shortfalls looming because the expansion exceeded projected costs. Kentucky’s estimated costs of expansion in fiscal years 2017 and 2018 rose from $107 million to $257 million—a more than doubling of costs that will take money away from other state priorities like education, transportation, or law enforcement.[25] Likewise, Ohio’s budget for Medicaid expansion more than doubled compared to the state’s prior projections, leaving legislators scrambling to cut money from other programs to stem the shortfall.[26]

With Medicaid expansion squeezing state budgets, even Democratic state legislators across the country have contemplated what some liberals might consider apostasy—scaling back and right-sizing the Medicaid program to reflect competing fiscal priorities. Consider comments from New Mexico state senator Howie Morales, a Democrat:

When you’re looking at a state budget and there are only so many dollars to go around, obviously it’s a concern. The most vulnerable of our citizens—the children, our senior citizens, our veterans, individuals with disabilities—I get concerned that those could be areas that get hit.[27]

Other legislators agree, with an Oregon Democratic State Senator reflecting on his state’s $500 million budget shortfall by stating that “the only way to keep this [budget situation] manageable is to keep those costs under control, get people off Medicaid.”[28]

The growth in Medicaid spending has resulted in cascading effects across states—including in Louisiana. As the state’s budget history demonstrates, a dollar of spending on Medicaid results in fewer dollars for other programs. For instance, as the share of Louisiana’s budget devoted to Medicaid more than tripled from 1985 through 2015, the share of the budget dedicated to primary and secondary education fell from 23.5% to 18.8%, the share dedicated to higher education fell from 10.9% to 9.9%, and the share dedicated to transportation fell by half, from 11.2% to 5.6%.[29] If Louisiana continues down its current path, schools, universities, and roads will face a continued squeeze as Medicaid consumes more and more state resources.

Moreover, the current Medicaid-imposed woes that states face assume that the enhanced federal match remains static—a far from safe assumption. With the federal debt recently topping $20 trillion, the belief that Washington will continue to pay 90 percent of states’ expansion costs in 2020 and every year thereafter may strike some as an overly rosy scenario.[30] Indeed, President Obama himself once proposed reducing the federal Medicaid match by $100 billion over ten years through a so-called “blended rate” policy.[31] Only an outcry from liberals, combined with the 2012 Supreme Court ruling that made Medicaid expansion optional for states, eventually persuaded President Obama to abandon the proposal.[32] However,  given Washington’s own dire fiscal situation, the concept could well return in future years.

More recently, Congress has begun taking action to rein in another enhanced match provided to states as part of Obamacare. Specifically, Section 2101 of the law provided a 23 percent increase in the federal match to State Children’s Health Insurance Programs (SCHIP) across the country.[33] As a result of the increase, Louisiana’s SCHIP match rate in the current fiscal year ending September 30 stands at 97.58%, instead of the usual 74.58%.[34] A total of 12 states, plus the District of Columbia, currently receive a 100% match for their SCHIP programs, meaning the federal government effectively funds all of the health costs of these states’ SCHIP enrollees.[35]

However, the costs of the enhanced federal SCHIP match on Washington’s budget have led Congress to eliminate that enhanced match within the next few years.  SCHIP legislation signed into law earlier this month will phase out the enhanced match—lowering the 23 percent match to 11.5 percent in fiscal year 2020, while eliminating it altogether in fiscal 2021.[36] With bipartisan agreement within Congress on eliminating Obamacare’s enhanced SCHIP match rate, state lawmakers would do well to consider whether and when Congress will likewise eliminate the enhanced match for Obamacare’s Medicaid expansion to the able-bodied.

 

Difficulties for the Most Vulnerable

In addition to skyrocketing enrollment and costs, the Medicaid expansion has hurt some of the most vulnerable Americans in society, because Obamacare effectively gives state programs financial incentives to discriminate against individuals with disabilities.[37] Traditionally, the federal government provides states with a Medicaid match through a statutory formula comparing a state’s average income to the national average. For their traditional beneficiaries—that is, pregnant women, children, the aged, medically frail, and individuals with disabilities—states receive a federal Medicaid match ranging from 50% to 83%. For the current fiscal year, Louisiana will receive a 63.69% match rate for these populations.[38]

However, as noted above, Obamacare gives states a much greater federal match to cover its expansion population—individuals with incomes of under 138 percent of the poverty level ($34,638 for a family of four in 2017). For calendar year 2017, states received a 95% federal match, which will fall slightly to 94% in 2018, 93% in 2019, and 90% in 2020.[39] Put another way, Louisiana will receive over 30 cents more on the dollar from the federal government to cover the expansion population this year than it will to cover traditional beneficiaries eligible for Medicaid prior to Obamacare.

This yawning disparity in the federal match favoring expansion enrollees over traditional beneficiaries comes despite noteworthy characteristics of the individuals who qualify for Obamacare’s Medicaid expansion. Specifically, the liberal Urban Institute found that nationwide, 82.4% of the expansion population consisted of able-bodied adults of working age.[40] In Louisiana, nearly three-quarters (74.9%) of projected expansion enrollees represented adults without dependent children.[41]

In other words, the federal government offers—and under the current governor, Louisiana accepted—an arrangement whereby states receive a significantly greater federal match to provide services to able-bodied adults of working age than to provide services to the individuals for whom Medicaid was traditionally designed: The medically frail, aged, and individuals with disabilities. Moreover, this disparity comes as many of the latter need critically important services, which they cannot currently obtain from Louisiana’s Medicaid program.

While the federal Medicaid statute requires state programs to provide medical coverage to individuals with disabilities, it does not require them to provide personal care services outside a nursing home setting. Because the law makes such home and community-based services (HCBS) optional, states can utilize waiting lists to control access to such services—and many, including Louisiana, do just that. Overall, more than 640,000 individuals with disabilities remain on lists waiting to access HCBS nationwide—including 62,828 in Louisiana.[42]

Prior to Louisiana accepting Obamacare’s Medicaid expansion to the able-bodied, the state prioritized coverage for individuals with disabilities. Instead of pushing to expand Medicaid under Obamacare, efforts instead focused on providing funds necessary to reduce the state’s HCBS waiting list for individuals with disabilities.[43] However, the current administration has taken the exact opposite tack—prioritizing an expansion of coverage for the able-bodied over the personal care needs of the most vulnerable Louisianans. As a result, able-bodied adults with low incomes can qualify for Medicaid immediately, while individuals with developmental disabilities must wait an average of seven years just to be evaluated for home-based care for their personal needs.[44]

Several states that expanded Medicaid under Obamacare before Louisiana provide evidence of the damage that expansion has caused for society’s most vulnerable. In Arkansas, while Gov. Asa Hutchinson pledged to reduce his state’s HCBS waiting lists in half under his administration, the rolls have risen 25 percent—even as the state continues its Medicaid expansion to the able-bodied.[45] Since the state expanded Medicaid to the able-bodied, at least 79 individuals with disabilities have died while on waiting lists seeking access to home-based care.[46]

Vulnerable residents in other states have likewise suffered as a result of Obamacare’s Medicaid expansion. In Ohio, the administration of Gov. John Kasich reduced eligibility for 34,000 individuals with disabilities, even while expanding Medicaid to the able-bodied.[47] In Illinois, lawmakers voted to allow Cook County to expand Medicaid early on the same day in which they also voted to reduce medication access for individuals with disabilities.[48] In that state, at least 752 residents with disabilities have died awaiting access to home-based care since the state embraced Obamacare’s Medicaid expansion.[49]

The claims of its proponents to the contrary, any policy that prioritizes able-bodied adults over the most vulnerable in society represents the antithesis of compassion. As more and more individuals crowd on to the Medicaid rolls, literally hundreds of thousands of individuals with disabilities wait for access to care—and in some cases, die well before they receive it. Any compassionate society should focus its greatest efforts on protecting the most vulnerable, meaning no state should expand Medicaid to the able-bodied without first having eliminated entirely its waiting list of individuals with disabilities seeking home-based care.

While disadvantaging the most vulnerable in society, who literally wait for years for access to personal care paid for by Medicaid, expansion of the Medicaid entitlement also disadvantages the expansion’s purported beneficiaries—able-bodied adults within working age—in several respects. Medicaid generally provides poorer health outcomes than most other forms of coverage, such that some analysts have questioned whether its patients fare worse than the uninsured.[50]

In general, states provide low reimbursement levels to doctors and hospitals treating Medicaid patients, in large part due to the fiscal pressures discussed above. However, these low reimbursement rates mean many medical providers do not accept Medicaid patients. One study found that specialty physicians denied appointments for two-thirds of Medicaid patients, compared to only an 11% denial rate for patients with private insurance. Moreover, “the average wait time for Medicaid” enrollees who did obtain an appointment “was 22 days longer than that for privately insured children.”[51] Through their “secret shopper” survey, the authors “found a disparity in access to outpatient specialty care between children with public insurance and those with private insurance.”

Louisiana does not deviate from the general pattern of state Medicaid programs providing poor reimbursements to physicians, as the state’s reimbursement levels stand slightly below the already low national average. Overall, the state pays physicians 70% of Medicare reimbursement levels, below the national Medicaid average of 72% of Medicare levels.[52] In primary care, Louisiana reimburses doctors at 67% of Medicare rates, one percentage point above the national average of 66%.[53] And in obstetrics, Louisiana reimburses doctors 70% of Medicare rates, eleven points below the national Medicaid average of 81%.[54] The comparatively paltry rates that Louisiana pays obstetricians come despite the fact that nearly two-thirds (65%) of babies born in the state in 2015 (i.e., before Medicaid expansion took effect) were paid for by Medicaid—the third highest rate of births paid for by Medicaid nationwide.[55]

The lack of access to physician care helps explain Medicaid’s middling performance in improving health outcomes. Most notably, the Oregon Health Insurance Experiment—which compared the health of individuals randomly selected to enroll in Medicaid with those who remained uninsured—found no measurable improvement in physical outcomes for the former group when compared to the latter.[56] The Oregon study also found that Medicaid beneficiaries utilized the emergency room 40 percent more than uninsured patients, a difference which persisted over time. These data suggest that patients lack a usual access to primary care that could alleviate medical conditions before necessitating emergency treatment—a further indication that Medicaid leaves much to be desired as a form of health coverage.[57]

Both Medicaid administrators and beneficiaries acknowledge the program’s shortcomings in providing access to care. One former program head called a Medicaid card a “hunting license”—a government-granted permission slip allowing beneficiaries to try to find a physician who will treat them.[58] With beneficiaries not even considering Medicaid “real insurance,” some would question the wisdom of consigning such a large—and growing—number of individuals to a program that provides such an uneven quality of care.[59]

 

Discouraging Work

In addition to providing beneficiaries with poor quality care, Medicaid expansion includes an in-built “poverty trap” that discourages entrepreneurship and social advancement. Specifically, the law includes numerous effects that will discourage work, and ultimately keep low-income individuals trapped in poverty for longer periods, while also stunting economic growth. According to the Congressional Budget Office (CBO), the Medicaid expansion represents one part of a larger Obamacare scheme that will reduce the labor supply nationally by the equivalent of 2.5 million full-time jobs by 2024.[60]

CBO believes that Medicaid expansion will reduce overall incentives to work. Most notably, Medicaid expansion creates an “income cliff,” whereby one additional dollar of income will cause a family to lose Medicaid eligibility entirely—subjecting them to hundreds, if not thousands, of dollars in health insurance premiums, deductibles, and co-payments as a result. As a result, CBO believes that the expansion will reduce beneficiaries’ labor force participation by about 4 percent by “creat[ing] a tax on additional earnings for those considering job changes.”[61] In other words, individuals will specifically avoid seeking a promotion, additional hours, or a bonus, because it will cause them to lose eligibility for Medicaid—the definition of a “poverty trap” that discourages low-income individuals from advancing their social strata.

Data from the liberal Urban Institute released prior to Obamacare taking effect suggest that most beneficiaries who qualify for Medicaid expansion represent individuals who could be in work, or preparing for work. In Louisiana, more than seven in eight adults who qualify for the expansion are of prime working age—either ages 19-24 (24.5%), 25-34 (25.7%), or 35-54 (37.4%).[62] With nearly three-quarters of Louisianans who qualify for expansion adults without dependent children, as noted above, many of these individuals should be able to work, or prepare for work.

Unfortunately, national data suggest that most beneficiaries enrolled in Medicaid are not working. Specifically, 2015 Census Bureau data indicate that more than half (52%) of non-disabled, working-age Medicaid beneficiaries are not working.[63] Only about one in six (16%) non-disabled Medicaid beneficiaries work full-time year-round, while about one in three (32%) work part-time, or for part of the year.[64]

If able-bodied individuals who currently qualify for Obamacare’s Medicaid expansion pursued full-time employment, many of them would no longer qualify for the expansion. The expansion applies to individuals with household income below 138 percent of the federal poverty level—which in 2018 equals $16,753 for a single individual, $22,715 for a couple, and $34,638 for a family of four.[65] At these levels, a couple each working 35 hours per week, 50 weeks per year, making the federal minimum wage of $7.25 per hour, or an individual working 40 hours per week, 50 weeks per year, making $8.50 per hour, would earn enough income to exceed the Medicaid eligibility thresholds.

While CBO believes Medicaid expansion will discourage work, evidence suggests that unwinding the expansion would increase employment, and employment-related search activity. A study of the Medicaid program in Tennessee, where the state scaled back the program in 2005 due to significant cost overruns, found that the reduction in Medicaid eligibility encouraged beneficiaries to look for work, and ultimately increased employment, as individuals looked for employment-based coverage.[66] Whereas Obamacare’s skewed incentives discourage work, scaling back Medicaid expansion could have salutary economic effects, by expanding the labor force in ways that could grow the economy.

 

What Lawmakers Should Do

The evidence shows the damage caused by Medicaid expansion, both in Louisiana and across the country. Soaring enrollment and higher-than-expected costs have led to fiscal crises in many states—crises that will only grow as states’ share of expansion costs increase in the coming years. Meanwhile, the urgent needs of many vulnerable citizens have taken a back seat, as Obamacare gives states more incentives to cover able-bodied adults than individuals with disabilities.

As the legislature considers its policy options, it should focus on both short-term and long-term solutions. In the short term, Louisiana should begin the process of winding down the Medicaid expansion to able-bodied adults, as one way of alleviating immediate budgetary pressures. In the longer term, the state should take advantage of the flexibility promised by the Trump Administration to consider more innovative reforms to the Medicaid program.

Enrollment Freeze:              The best way to end the high costs associated with the Medicaid expansion would involve freezing enrollment to new entrants.[67] Such a policy would allow individuals who already qualified for the expansion to remain as long as they maintain eligibility for the program. This proposal, passed by legislators in places like Ohio and Arkansas, would provide an orderly wind-down of the expansion, reducing costs to the state over time, while allowing people to transition into employer-sponsored insurance or other coverage as they lose Medicaid eligibility. [68]

One study released in early 2017 calculated the savings from a nationwide Medicaid freeze beginning in fiscal year 2018. Over a decade, this Medicaid freeze would generate approximately $56-64 billion in savings to state Medicaid programs, along with more than half a trillion dollars in savings to the federal government.[69] These savings would come without terminating Medicaid participation for a single beneficiary currently eligible for the program. The sizable savings provided to both the states and the federal government under a potential Medicaid freeze illustrates the need to wind down Medicaid’s expansion to the able-bodied in an orderly way, to restore the program’s focus to the populations for which it was originally intended.

Comprehensive Waiver:     Last March, then-Health and Human Services Secretary Tom Price and CMS Administrator Seema Verma sent a letter to the nation’s governors indicating their desire to expand state flexibility within the Medicaid program.[70] Since then, several organizations have published reports highlighting elements and policies that states could use to reform their Medicaid programs.[71] A bold waiver incorporating many of these policies could transform Medicaid programs across the country.

Louisiana should consider submitting a comprehensive waiver request to CMS. Such a waiver could include:

Consumer-Oriented Options:              Using Health Savings Account-like mechanisms would encourage beneficiaries to serve as smart shoppers of health care—generating savings that they could use once they leave the Medicaid program. Whether through Health Opportunity Accounts—an innovation passed by Congress in 2005, but effectively repealed under the Obama Administration—“right-to-shop” programs that give beneficiaries a chance to share in the savings from obtaining lower costs for non-emergency medical procedures, or other programs, giving beneficiaries financial incentives to act as smart health care consumers could benefit them as well as the Medicaid program.[72]

Wellness Incentives:                As with the consumer options above, providing incentives for healthy behaviors would encourage beneficiaries to improve their health, while giving them a potential source of financial savings. During the debate on Obamacare in 2009-10, wellness incentives proved one of the few sources of bipartisan agreement, thanks to the way in which Safeway and other firms reduced health costs through such reforms.[73] Particularly given the state’s high rates of obesity, Louisiana should consider bringing the “Safeway model” to the state’s Medicaid program.[74]

Premium Assistance:               Providing more flexible benefits to individuals with an offer of employer-sponsored coverage would allow Medicaid to supplement that coverage, thereby reducing costs and giving individuals access to higher-quality private insurance. Other policies in this vein might include a beneficiary waiting period designed to prevent “crowd-out”—individuals dropping private coverage to enroll in government programs—and Health Savings Account coverage, currently prohibited under two separate premium assistance programs.[75] These changes would help beneficiaries make a smoother transition off of the Medicaid rolls and into a life of work.

Home and Community-Based Services:             Focusing on ways to deliver care to beneficiaries outside of nursing homes could reduce costly Medicaid spending in institutional settings. Most importantly, it would enable patients to stay in their homes—most beneficiaries’ desired outcome. For instance, a state waiver could cap the number of nursing home slots available, or require beneficiaries to try receiving care at home prior to entering a nursing facility.[76] Collectively, these policies should create an affirmative bias in favor of care at home, rather than care at a nursing institution.

Work Requirements:               Unlike the Obama Administration, the Trump Administration has indicated a willingness to accept work requirements as part of a Medicaid waiver request.[77] Earlier this month, CMS issued a letter to state Medicaid directors indicating parameters to guide states as they prepare community engagement requirements—a document that reiterated the positive effects that work can have on beneficiaries’ economic success, self-sufficiency, and overall health.[78] Requiring that appropriate adult populations either work, look for work, or prepare for work, while exempting individuals with disabilities and other medically frail individuals, would further promote a transition from welfare into work.

Program Integrity:     Verifying eligibility on a regular basis would ensure that state and federal resources remain targeted to those most in need—an important priority given the way in which scam artists in Louisiana have sought to abuse the Medicaid program.[79] Increasing penalties for fraud would halt scam artists, and could lower Medicaid’s rate of improper payments.[80] More robust asset recovery measures—ensuring Medicaid remains the payer of last resort, not that of first instance—would help preserve scarce state and federal resources for those who need them most.[81]

The state of Rhode Island demonstrates the power of a comprehensive waiver to transform a Medicaid program. Its global compact waiver, approved in the waning days of President George W. Bush’s Administration in January 2009, allowed that state to improve Medicaid by providing more, better, and more timely care to beneficiaries. Thanks to the global compact waiver, Rhode Island actually reduced its per beneficiary Medicaid costs in absolute (i.e., before-inflation) terms over a four-year period[82]—and did so not by cutting access to care, but by improving it.[83] The success of the Rhode Island experiment illustrates the way in which Medicaid reform, done right, can simultaneously save money and improve health—a lesson the legislature should look to bring to Louisiana.

 

Conclusion

Given the state’s structural budget shortfall, and the significant costs associated with Medicaid expansion, Louisiana stands at a turning point. The legislature could continue down their current path, and hope that yet another series of tax increases will sate the growing health care costs that threaten to consume the state’s entire budget.

Thankfully, legislators have another option. Unwinding the Medicaid expansion gradually, while laying the groundwork to submit a comprehensive Medicaid waiver request to CMS, would in combination help turn the fiscal tide. Freezing Medicaid enrollment for able-bodied adults would re-direct the program towards the most vulnerable in society—those for whom Medicaid was originally designed. Likewise, a comprehensive waiver would re-orient and update Medicaid for a 21st century health care system, saving money by providing better care.

Given the two options, the choice for Louisiana seems clear. The state should use the flexibility promised by Washington to unwind Medicaid expansion for the able-bodied, and modernize and re-orient the program toward the program’s original intended beneficiaries. By so doing, the state can go a long way towards resolving its structural fiscal shortfalls, while also improving the care provided to some of Louisiana’s most vulnerable residents.

 

[1] Melinda Deslatte, “Louisiana Governor Offers Tax Ideas to Close $1 Billion Budget Gap,” Associated Press December 18, 2017, https://apnews.com/58833e0c265f4de6b26e465004c01c25/Louisiana-governor-offer.

[2] Kevin Litten, “Louisiana’s Medicaid Expansion Enrollment Could Grow to 450,000,” Times-Picayune January 20, 2016, http://www.nola.com/politics/index.ssf/2016/01/medicaid_expansion_500000.html.

[3] Louisiana Department of Health, “Louisiana Medicaid Expansion Dashboard,” http://www.ldh.la.gov/HealthyLaDashboard.

[4] Litten, “Louisiana’s Medicaid Expansion Enrollment Could Grow.”

[5] Jonathan Ingram and Nicholas Horton, “Obamacare Expansion Enrollment Is Shattering Projections,” Foundation for Government Accountability, November 16, 2016, https://thefga.org/download/ObamaCare-Expansion-is-Shattering-Projections.PDF, p. 5.

[6] Jonathan Ingram and Nicholas Horton, “The Obamacare Expansion Enrollment Explosion,” Foundation for Government Accountability,” April 20, 2015, https://thefga.org/wp-content/uploads/2015/04/ExpansionEnrollmentExplosion-Final3.pdf.

[7] Ingram and Horton, “Obamacare Expansion Enrollment Is Shattering Projections.”

[8] Centers for Medicare and Medicaid Services, “2017 Effectuated Enrollment Snapshot,” June 12, 2017, https://downloads.cms.gov/files/effectuated-enrollment-snapshot-report-06-12-17.pdf. Effectuated enrollment represents coverage for which individuals have both selected an insurance plan and paid at least one month’s premium.

[9] Congressional Budget Office, estimate of H.R. 4872, Health Care and Education Reconciliation Act, in concert with H.R. 3590, Patient Protection and Affordable Care Act, March 20, 2010, https://www.cbo.gov/sites/default/files/111th-congress-2009-2010/costestimate/amendreconprop.pdf, Table 4, p. 21.

[10] Avalere Health, “The State of Exchanges: A Review of Trends and Opportunities to Grow and Stabilize the Market,” report for Aetna, October 2016, http://go.avalere.com/acton/attachment/12909/f-0352/1/-/-/-/-/20161005_Avalere_State%20of%20Exchanges_Final_.pdf, Figure 3, p. 6.

[11] Ibid.

[12] National Association of State Budget Officers, “The State Expenditure Report,” July 1987, https://higherlogicdownload.s3.amazonaws.com/NASBO/9d2d2db1-c943-4f1b-b750-0fca152d64c2/UploadedImages/SER%20Archive/ER_1987.PDF, Medicaid Expenditures as a Percentage of Total Expenditures, p. 30.

[13] National Association of State Budget Officers, “State Expenditure Report,” November 2016, https://higherlogicdownload.s3.amazonaws.com/NASBO/9d2d2db1-c943-4f1b-b750-0fca152d64c2/UploadedImages/SER%20Archive/State%20Expenditure%20Report%20(Fiscal%202014-2016)%20-%20S.pdf, Table 5: State Spending by Function as a Percentage of Total State Expenditures, p. 13.

[14] National Association of State Budget Officers, “The State Expenditure Report.”

[15] National Association of State Budget Officers, “Fiscal Survey of States: Spring 2014,” https://higherlogicdownload.s3.amazonaws.com/NASBO/9d2d2db1-c943-4f1b-b750-0fca152d64c2/UploadedImages/Fiscal%20Survey/NASBO%20Spring%202014%20Fiscal%20Survey%20(security).pdf, p. xi.

[16] Pew Charitable Trusts, “Fiscal 50: State Trends and Analysis,” http://www.pewtrusts.org/en/multimedia/data-visualizations/2014/fiscal-50#ind7, Change in State Medicaid Spending as a Share of Own-Source Revenue, 2000 and 2015.

[17] Ibid., http://www.pewtrusts.org/en/multimedia/data-visualizations/2014/fiscal-50#ind1, Percentage of State Revenue from Federal Funds, Fiscal Year 2015.

[18] For an analysis of the ways that the CMS actuary and the Congressional Budget Office have changed their baseline projections of Medicaid spending over time, see Brian Blase, “Evidence Is Mounting: The Affordable Care Act Has Worsened Medicaid’s Structural Problems,” Mercatus Center, September 2016, https://www.mercatus.org/system/files/mercatus-blase-medicaid-structural-problems-v1.pdf, pp. 15-20.

[19] Centers for Medicare and Medicaid Services Office of the Actuary, “2016 Actuarial Report on the Financial Outlook for Medicaid,” report to Congress, 2016, https://www.medicaid.gov/medicaid/financing-and-reimbursement/downloads/medicaid-actuarial-report-2016.pdf, p. 22.

[20] Centers for Medicare and Medicaid Services Office of the Actuary, “2014 Actuarial Report on the Financial Outlook for Medicaid,” report to Congress, 2014, https://www.medicaid.gov/medicaid/financing-and-reimbursement/downloads/medicaid-actuarial-report-2014.pdf, pp. 36-38.

[21] Centers for Medicare and Medicaid Services Office of the Actuary, “2015 Actuarial Report on the Financial Outlook for Medicaid,” report to Congress, 2015, https://www.medicaid.gov/medicaid/financing-and-reimbursement/downloads/medicaid-actuarial-report-2015.pdf, p. 27.

[22] Cited in Jeanie Donovan, “Setting the Record Straight on Medicaid,” Louisiana Budget Project, August 4, 2017, http://www.labudget.org/lbp/2017/08/setting-the-record-straight-on-medicaid/.

[23] Ibid.

[24] 42 U.S.C. 1396d(y)(1), as codified by Section 2001(a) of the Patient Protection and Affordable Care Act, P.L. 111-148.

[25] Christina Cassidy, “Rising Cost of Medicaid Expansion is Unnerving Some States,” Associated Press October 5, 2016, http://bigstory.ap.org/article/4219bc875f114b938d38766c5321331a/rising-cost-medicaid-expansion-unnerving-some-states.

[26] Ibid.

[27] Christina Cassidy, “Medicaid Enrollment Surges, Stirs Worry about State Budgets,” Associated Press July 19, 2015, http://www.bigstory.ap.org/article/c158e3b3ad50458b8d6f8f9228d02948/medicaid-enrollment-surges-stirs-worry-about-state-budgets.

[28] Ibid.

[29] “The State Expenditure Report,” Primary and Secondary Education Expenditures as a Percentage of Total Expenditures, Higher Education Expenditures as a Percentage of Total State Expenditures, and Transportation Expenditures as a Percentage of Total State Expenditures; “State Expenditure Report,” Table 5: State Spending by Function.

[30] United States Treasury, “The Debt to the Penny and Who Holds It,” total public debt outstanding as of October 26, 2017, https://www.treasurydirect.gov/NP/debt/current.

[31] White House Office of the Press Secretary, “Fact Sheet: The President’s Framework for Shared Prosperity and Shared Fiscal Responsibility,” April 13, 2011, https://obamawhitehouse.archives.gov/the-press-office/2011/04/13/fact-sheet-presidents-framework-shared-prosperity-and-shared-fiscal-resp.

[32] NFIB v. Sebelius, 567 U.S. 519 (2012), https://www.supremecourt.gov/opinions/11pdf/11-393c3a2.pdf; Sam Baker, “White House Drops Support for Major Medicaid Cut,” The Hill December 10, 2012, http://thehill.com/policy/healthcare/272041-white-house-drops-support-for-major-medicaid-cut; Centers for Medicare and Medicaid Services, “Frequently Asked Questions on Exchanges, Market Reforms, and Medicaid,” December 10, 2012, https://www.cms.gov/CCIIO/Resources/Files/Downloads/exchanges-faqs-12-10-2012.pdf.

[33] 42 U.S.C. 1397ee(b), as amended by Section 2101(a) of PPACA.

[34] Department of Health and Human Services, “Federal Financial Participation in State Assistance Expenditures,” Federal Register November 15, 2016, pp. 80078-80080, Table 1, https://www.gpo.gov/fdsys/pkg/FR-2016-11-15/pdf/2016-27424.pdf.

[35] Ibid.

[36] Section 3005 of the HEALTHY KIDS Act, P.L. 115-120.

[37] See also Chris Jacobs, “How Obamacare Undermines American Values: Penalizing Work, Citizenship, Marriage, and the Disabled,” Heritage Foundation Backgrounder No. 2862, November 21, 2013, http://www.heritage.org/research/reports/2013/11/how-obamacare-undermines-american-values-penalizing-work-marriage-citizenship-and-the-disabled.

[38] “Federal Financial Participation in State Assistance Expenditures.”

[39] 42 U.S.C. 1396d(y)(1), as codified by Section 2001(a) of PPACA.

[40] Genevieve M. Kenney et al., “Opting in to the Medicaid Expansion Under the ACA: Who Are the Uninsured Adults Who Could Gain Health Insurance Coverage?” Urban Institute, August 2012, http://www.urban.org/sites/default/files/alfresco/publication-pdfs/412630-Opting-in-to-the-Medicaid-Expansion-under-the-ACA.PDF, p. 9, Appendix Table 2.

[41] Ibid.

[42] Kaiser Family Foundation, “Waiting List Enrollment for Medicaid Section 1915(c) Home- and Community-Based Services Waivers,” Kaiser Commission on Medicaid and the Uninsured 2015 survey, http://kff.org/health-reform/state-indicator/waiting-lists-for-hcbs-waivers/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D.

[43] Bobby Jindal, “Obamacare Is Anything But Compassionate,” Politico February 9, 2014, http://www.politico.com/magazine/story/2014/02/obamacare-costs-jobs-hurts-most-vulnerable-103299?paginate=false.

[44] Louisiana Department of Health and Hospitals, “Medicaid Waiver Services,” http://www.dhh.la.gov/index.cfm/page/1555.

[45] Jason Pederson, “Waiver Commitment Wavering,” KATV June 15, 2016, http://katv.com/community/7-on-your-side/waiver-commitment-wavering.

[46] Chris Jacobs, “Obamacare Takes Care from Disabled People to Subsidize Able-Bodied, Working-Age Men,” The Federalist November 18, 2016, http://thefederalist.com/2016/11/18/obamacare-takes-care-disabled-people-subsidize-able-bodied-working-age-men/.

[47] Ibid.

[48] Nicholas Horton, “Illinois’ Medicaid Expansion Enrollment Continues to Climb, Putting Vulnerable at Risk,” Illinois Policy Institute, November 1, 2016, https://www.illinoispolicy.org/illinois-medicaid-expansion-enrollment-continues-to-climb-putting-vulnerable-at-risk/.

[49] Nicholas Horton, “Hundreds on Medicaid Waiting List in Illinois Die While Waiting for Care,” Illinois Policy Institute, November 23, 2016, https://www.illinoispolicy.org/hundreds-on-medicaid-waiting-list-in-illinois-die-while-waiting-for-care-2/.

[50] Scott Gottlieb, “Medicaid Is Worse than No Coverage at All,” Wall Street Journal March 10, 2011, http://www.wsj.com/articles/SB10001424052748704758904576188280858303612.

[51] Joanna Bisgaier and Karin Rhodes, “Auditing Access to Specialty Care for Children with Public Insurance,” New England Journal of Medicine June 16, 2011, http://www.nejm.org/doi/full/10.1056/NEJMsa1013285.

[52] Stephen Zuckerman, et al., “Medicaid Physician Fees after the ACA Primary Care Fee Bump,” Urban Institute March 2017, https://www.urban.org/sites/default/files/publication/88836/2001180-medicaid-physician-fees-after-the-aca-primary-care-fee-bump_0.pdf, Table 1, p. 5.

[53] Ibid.

[54] Ibid.

[55] Kaiser Family Foundation, “Births Financed by Medicaid,” State Health Facts, https://www.kff.org/medicaid/state-indicator/births-financed-by-medicaid/?currentTimeframe=0&sortModel=%7B%22colId%22:%22%25%20Births%20Financed%20by%20Medicaid%22,%22sort%22:%22desc%22%7D.

[56] Katherine Baicker, et al., “The Oregon Experiment—Effects of Medicaid on Clinical Outcomes,” New England Journal of Medicine May 2, 2013, http://www.nejm.org/doi/full/10.1056/NEJMsa1212321.

[57] Amy Finklestein et al., “Effect of Medicaid Coverage on ED Use—Further Evidence from Oregon’s Experiment,” New England Journal of Medicine October 20, 2016, http://www.nejm.org/doi/full/10.1056/NEJMp1609533.

[58] Statement by DeAnn Friedholm, Consumers Union, at Alliance for Health Reform Briefing on “Affordability and Health Reform: If We Mandate, Will They (and Can They) Pay?” November 20, 2009, http://www.allhealthpolicy.org/wp-content/uploads/2016/12/TranscriptFINAL-1685.pdf, p. 40.

[59] Vanessa Fuhrmans, “Note to Medicaid Patients: The Doctor Won’t See You,” Wall Street Journal July 19, 2007, https://www.wsj.com/articles/SB118480165648770935.

[60] Congressional Budget Office, “The Budget and Economic Outlook: 2014 to 2024,” February 2014, http://cbo.gov/sites/default/files/cbofiles/attachments/45010-Outlook2014_Feb.pdf, Appendix C: Labor Market Effects of the Affordable Care Act: Updated Estimates, pp. 117-27.

[61] Edward Harris and Shannon Mok, “How CBO Estimates Effects of the Affordable Care Act on the Labor Market,” Congressional Budget Office Working Paper 2015-09, December 2015, https://www.cbo.gov/sites/default/files/114th-congress-2015-2016/workingpaper/51065-ACA_Labor_Market_Effects_WP.pdf, p. 12.

[62] Kenney, “Opting in to the Medicaid Expansion,” Appendix Table 1, p. 8.

[63] Cited in Nic Horton and Jonathan Ingram, “The Future of Medicaid Reform: Empowering Individuals Through Work,” Foundation for Government Accountability, November 14, 2017, https://thefga.org/wp-content/uploads/2017/11/The-Future-of-Medicaid-Reform-Empowering-Individuals-Through-Work.pdf, p. 4.

[64] Ibid.

[65] Department of Health and Human Services, notice regarding “Annual Update of the HHS Poverty Guidelines,” Federal Register January 18, 2018, https://www.gpo.gov/fdsys/pkg/FR-2018-01-18/pdf/2018-00814.pdf, , pp. 2642-44.

[66] Craig Garthwaite, Tal Gross, and Matthew Notowidigdo, “Public Health Insurance, Labor Supply, and Employment Lock,” National Bureau of Economic Research, NBER Working Paper 19220, July 2013, http://www.nber.org/papers/w19220.

[67] Chris Jacobs, “Putting Obamacare in a Deep Freeze,” National Review December 7, 2016, http://www.nationalreview.com/article/442820/obamacare-repeal-replace-enrollment-freeze-first-step.

[68] Kim Palmer, “Ohio Lawmakers Vote to Freeze Medicaid Expansion,” Reuters June 28, 2017, https://www.reuters.com/article/us-ohio-budget/ohio-lawmakers-vote-to-freeze-medicaid-expansion-idUSKBN19K0B8; Caleb Taylor, “House Passes Medicaid Expansion Freeze,” The Arkansas Project March 1, 2017, http://www.thearkansasproject.com/house-passes-medicaid-expansion-freeze/.

[69] Foundation for Government Accountability, “Freezing Medicaid Expansion Enrollment Will Save Taxpayers More Than Half a Trillion,” February 2017, https://thefga.org/wp-content/uploads/2017/02/MedEx-Freeze-Savings-Table.pdf.

[70] Letter by Health and Human Services Secretary Tom Price and Centers for Medicare and Medicaid Services Administrator Seema Verma to state governors regarding Medicaid reform, March 14, 2017, https://www.hhs.gov/sites/default/files/sec-price-admin-verma-ltr.pdf.

[71] See for instance Chris Jacobs, “Reforming Medicaid to Serve Wyoming Better,” Wyoming Liberty Group Wyoming Policy Review Issue 101, June 2017, https://wyliberty.org/images/PDFs/Wyoming_Policy_Review-Jacobs-Reforming_Medicaid-101.pdf, and Naomi Lopez Bauman and Lindsay Boyd, “Medicaid Waiver Toolkit,” State Policy Network, August 2017.

[72] 42 U.S.C. 1396u-8, as codified by Section 6082 of the Deficit Reduction Act of 2005, P.L. 109-171; Section 613 of the Children’s Health Insurance Program Reauthorization Act of 2009, P.L. 111-3; Josh Archambault and Nic Horton, “Right to Shop: The Next Big Thing in Health Care,” Forbes August 5, 2016, http://www.forbes.com/sites/theapothecary/2016/08/05/right-to-shop-the-next-big-thing-in-health-care/#6f0ebcd91f75.

[73] Steven Burd, “How Safeway is Cutting Health Care Costs,” Wall Street Journal June 12, 2009, http://www.wsj.com/articles/SB124476804026308603.

[74] Louisiana currently ranks fifth in the nation for adult obesity, with an obesity rate of 35.5%. See Trust for America’s Health, “The State of Obesity,” https://stateofobesity.org/states/la/.

[75] 42 U.S.C. 1397ee(c)(10)(B)(ii)(II) and 42 U.S.C. 1396e-1(b)(2)(B), as codified by Section 301 of CHIPRA.

[76] See for instance testimony of Patti Killingsworth, TennCare Chief of Long-Term Supports and Services, before the Commission on Long-Term Care on “What Would Strengthen Medicaid LTSS?” August 1, 2013, http://ltccommission.org/ltccommission/wp-content/uploads/2013/12/Patti-Killingsworth-Testimony.pdf. The author served as a member of the Commission.

[77] Mattie Quinn, “On Medicaid, States Won’t Take Feds’ No for an Answer,” Governing October 11, 2016, http://www.governing.com/topics/health-human-services/gov-medicaid-waivers-arizona-ohio-cms.html.

[78] Centers for Medicare and Medicaid Services, “Opportunities to Promote Work and Community Engagement Among Medicaid Beneficiaries,” State Medicaid Director letter SMD-18-002, January 11, 2018, https://www.medicaid.gov/federal-policy-guidance/downloads/smd18002.pdf

[79] Louisiana Office of the Attorney General, “Over $2 Million in Medicaid Fraud Uncovered in New Orleans,” October 16, 2017, https://www.ag.state.la.us/Article/3470/5.

[80] Jonathan Ingram, “Stop the Scam: How to Prevent Welfare Fraud in Your State,” Foundation for Government Accountability, April 2, 2015, https://thefga.org/wp-content/uploads/2015/04/Stop-The-Scam-research-paper.pdf.

[81] See for instance Government Accountability Office, “Medicaid: Additional Federal Action Needed to Further Improve Third Party Liability Efforts,” GAO Report GAO-15-208, January 2015, http://gao.gov/assets/670/668134.pdf.

[82] Testimony of Gary Alexander, former Rhode Island Secretary of Health and Human Services, on “Strengthening Medicaid Long-Term Supports and Services” before the Commission on Long Term Care, August 1, 2013, http://ltccommission.org/ltccommission/wp-content/uploads/2013/12/Garo-Alexander.pdf.

[83] Lewin Group, “An Independent Evaluation of Rhode Island’s Global Waiver,” December 6, 2011, http://www.ohhs.ri.gov/documents/documents11/Lewin_report_12_6_11.pdf.

Yes, Obamacare Really Does Disadvantage Individuals with Disabilities

My article last week regarding disability groups’ political and policy views prompted some comments and criticisms on Twitter. Rather than trying to explain detailed subjects in bursts of 140-character tweets, I considered it best to compile them into a longer-form article.

To summarize my prior work: Obamacare provides states with a greater incentive to expand Medicaid to able-bodied adults than to cover services for individuals with disabilities. States receive a 95 percent match this year (declining to 90 percent in 2020 and all future years) to cover the able-bodied, but a match ranging from 50-75 percent to cover individuals with disabilities, while more than half a million are on waiting lists to receive home or attendant care.

Many of the responses I discuss in greater detail below attempt to obscure two separate and distinct issues: The question of the amount of funding for programs versus the priorities within those programs.

As a conservative, I’m likely to disagree with liberals on the ideal size of many government programs, but I thought I would at least agree with them that individuals with disabilities should receive precedence within those programs. However, Obamacare actually tilted Medicaid’s preference away from individuals with disabilities, which makes disability groups’ silence on that front surprising.

There Is No Correlation Between Waiting Lists and Medicaid Expansion

The timeliest rebuttal comes from a story on a long-term care report none other than AARP released yesterday. Susan Reinhard with that organization—no right-wing conservative group, by any stretch—said that

Many states have struggled to expand home- and community-based options for Medicaid enrollees needing long-term care because that is an optional benefit. Nursing homes are mandatory under federal law. While states focus on Medicaid coverage for children and families — as well as non-disabled adults covered by the Medicaid expansion under the Affordable Care Act — adults with disabilities have received less attention. ‘Long-term care is a stepchild of the program and not a top focus for states,’ she said. (emphasis mine.)

That statement notwithstanding, several people cited two different analyses that compare states’ decisions on expansion to the able-bodied and their waiting lists for home-based care for individuals with disabilities. But each of those “studies” (based on only one year of data available) take an overly simplistic approach, and therefore don’t get at the core issue of the extent to which the skewed incentives Obamacare created have encouraged states to prioritize the able-bodied over those with disabilities.

A state’s decision to expand Medicaid to the able-bodied, or reduce its waiting lists for individuals with disabilities, depends on myriad factors. For instance:

  • A wealthy state with a greater tax base would have more resources both to expand Medicaid to the able-bodied and to reduce its waiting list of individuals with disabilities, while a poorer state with a smaller tax base might not have resources to do either;
  • A state with “bad” demographics (e.g., an older and sicker population), or higher costs for health and personal care services, might have more difficulty reducing their Medicaid waiting lists;
  • A state may face other fiscal pressures—controversy over school funding, a natural disaster, a pension crisis—that could affect overall Medicaid spending.

Numerous variables affect states’ budget choices, and therefore their Medicaid waiting lists. The “studies” controlled for exactly none of them. They examined whether a state expanded Medicaid and the total number of people on a state’s waiting list, and that’s it.

Moreover, under Obamacare, all states receive the same (higher) federal match to cover able-bodied adults—another change in policy (prior to Obamacare, all Medicaid match rates were based on states’ relative income) skewing the balance in favor of wealthier expansion states. Yet, as noted above, the analyses claiming no correlation between expansion and Medicaid waiting lists didn’t even attempt to control for these variables—or any other.

Therefore, in the absence of a quality study examining the issue, I’ll go with something far simpler: Common sense. If you’re a state that wants to spend more money on Medicaid, and you can do something (i.e., cover the able-bodied) that gives you 95 cents on the dollar, or something (i.e., reduce waiting lists for individuals with disabilities) that gives you 50 cents on the dollar, which are you going to do first?

I thought so. The incentives in Obamacare strongly favor coverage of the able-bodied over coverage for individuals with disabilities. And no number of crude analyses attempting to provide retroactive justification for this bad policy can hide that fact.

Waiting Lists Are Worst In Two Non-Expansion States

This comment reinforces the crudeness of the analysis being cited. All else being equal, as the second- and third-largest states in the Union, Texas and Florida would be expected to have a larger number of people on its waiting lists for home- and community-based services than a smaller expansion state like Connecticut. All else isn’t equal, of course, but did the analysts attempt to control for these kinds of factors? Nope. They examined raw waiting list numbers, rather than waiting lists as a percentage of the population.

But just suppose for a second that the commenters above are correct, and there is no correlation between expansion to the able-bodied and waiting lists for home-based care. That means that the greater incentives Obamacare gives to states to cover the able-bodied—and while the advocacy community might not want to admit it, Obamacare clearly does give states greater incentives to cover the able-bodied—didn’t affect state behavior, or decisions about whether to reduce disability waiting lists at all.

In that case, why has the disability community expressed such outrage about the impact of per capita caps or block grants on Medicaid beneficiaries with disabilities? If states make decisions without considering federal incentives—the point of the claims that there is no correlation between expanding Medicaid to the able-bodied and longer waiting lists for individuals with disabilities—then why also claim that “cost-shifting to states will force massive cuts in Medicaid services?” Why wouldn’t states shift around resources to protect individuals with disabilities—what the disability community claims that states did to reduce waiting lists even while expanding Medicaid under Obamacare?

There are really only two credible possibilities:

  • States are affected by incentives, therefore Obamacare—by giving states a higher match to cover the able-bodied—encouraged discrimination against individuals with disabilities; or
  • States are not affected by incentives, and therefore the per capita caps—which generate a comparatively small amount of savings in the House repeal bill—will have little impact, because states will re-prioritize their budgets to protect the most vulnerable.

It’s therefore worth asking why some appear to be trying to argue both sides of this question, and doing so in a way that neatly lines up with partisan lines—trying to ignore Obamacare’s skewed incentives, while roundly castigating the House Republican bill for incentives that will “force massive cuts in Medicaid.”

Republicans’ Bill Would Cut Program Helping People Live at Home

This is a true statement: Section 111(2) of the American Health Care Act, House Republicans’ “repeal-and-replace” bill, would sunset the enhanced match for the Community First Choice program on January 1, 2020. That option provides states with a 6 percent increase in their federal match for home- and community-based services, including to individuals with disabilities. But here again, raising this issue demonstrates the inherent disconnect between the incentives being offered to states, and the disability community’s responses to those incentives.

  • Obamacare provides states with a match ranging from 20-45 percentage points higher to cover the able-bodied than individuals with disabilities: “No correlation between expansion and waiting lists for individuals with disabilities!”
  • Obamacare provides states with a 6 percentage point increase for home-based services: A “huge change to improve HCBS [home and community-based services] care.”
  • The Republican alternative to Obamacare would reduce Medicaid spending for traditional (i.e., non-expansion) populations by a comparatively small amount: “Massive cuts to Medicaid services.”

Isn’t there a slight contradiction in these responses—both in their tone and in their logic? And isn’t it worth noting that these contradictions all happen to align perfectly with the natural partisan response to each of these issues?

This Is A Political Problem, Not a Policy Problem

Claiming that the greater federal match to cover able-bodied adults than individuals with disabilities stems from a “political history problem” deliberately obscures its roots. This “history” did not take place half a century ago, at Medicaid’s creation, it took place in the past few years, as part of Obamacare.

When crafting that legislation, Democrats could have come up with other policy solutions that expanded Medicaid to the able-bodied without discriminating against individuals with disabilities in the process. They could have proposed increasing the federal match for coverage of individuals with disabilities, in exchange for states covering the able-bodied at the existing federal match rates. Congress enacted a similar type of “swap” in the Medicare Modernization Act. The federal government took over the prescription drug cost of Medicare-Medicaid “dual eligibles” in exchange for a series of “clawback” payments from states.

Democrats in Congress could have considered other ways to expand Medicaid without giving states a greater match to cover the able-bodied than individuals with disabilities. To the best of my knowledge, they chose not to do so. President Obama could have insisted on a more equitable Medicaid formula, but he chose not to do so. And the disability community could have pointed out this disparity to the president and leaders in Congress, but chose not to do so.

Agree or disagree with them, these were deliberate policy choices, not a mere historical accident.

How Can You Support Lower Funding While Complaining About Access?

The argument about lower funding levels misses several points. First, while the Congressional Budget Office has not released estimates of how much the per capita caps (as opposed to changes associated with scaling back Obamacare’s Medicaid expansion) will reduce federal spending, multiple estimates suggest a comparatively small amount of savings from this particular change—at most 1 or 2 percent of spending on traditional Medicaid populations over the coming decade.

Second, if given sufficient flexibility from Washington, states can reduce their Medicaid spending, rendering the discussion of “cuts” under the caps moot. Rhode Island’s Global Compact Waiver, approved in January 2009, actually resulted in a year-on-year decline of Medicaid spending per beneficiary. Moreover, the non-partisan Lewin Group concluded that Rhode Island’s waiver reduced that spending by improving beneficiary access and care, not by denying medical services.

Third, if caps on Medicaid are so harmful and damaging, then why did Obamacare cap spending on Medicare—and why did disability groups remain silent about it? Current law imposes a per capita cap on Medicare spending, one enforced by Obamacare’s Independent Payment Advisory Board (IPAB) of unelected bureaucrats.

What’s more, Obamacare imposes an annual inflation adjustment (gross domestic product growth plus 1 percent) likely to be lower than the inflation adjustment for disabled populations included in the House-passed bill (medical inflation plus 1 percent). Yet a critique of the Medicare payment caps or IPAB appears nowhere in the disability community’s 14 pages of comments regarding the bill that became Obamacare.

So the question to the disability community is obvious: Why does a Democratic proposal to impose per capita caps on Medicare raise no objections, but a Republican proposal to impose (potentially higher) per capita caps on Medicaid guaranteed to prompt “massive cuts in Medicaid services?”

Let’s Just Pay More for Everyone

This comment attempts to obscure the distinction between the amount of funding and the priorities for that funding. I might disagree with liberals about the overall level of funding for the program—not least because efforts like that in Rhode Island demonstrate the potential for Medicaid to become more efficient—but I should agree with them about the need to prioritize care for the most vulnerable. Unfortunately, Obamacare’s Medicaid expansion goes in the opposite direction.

In thinking about the important distinction between overall program funding and priorities within a program, I’m often reminded of a speech that former House Majority Leader Steny Hoyer (D-MD) gave on the House floor in September 2009: “At some point in time, my friends, we have to buck up our courage and our judgment and say, if we take care of everybody, we won’t be able to take care of those who need us most. That’s my concern. If we take care of everybody…then we will not be able to take care of those most in need in America.”

Yes, Hoyer’s speech discussed Medicare, not Medicaid, and he voted for Obamacare (and its Medicaid expansion) six months after giving it. But the speech raises an important point about the need to prioritize entitlements, one that the notion of giving higher reimbursement rates to all populations ignores.

That’s what’s wrong with focusing solely on the question on the amount of funding for a program. Reasonable people can (and will) disagree about where to draw the funding line, but it has to be drawn somewhere. “Solving” the question of funding priorities by increasing reimbursements for all populations—the equivalent of promising everyone a pony—will, by failing to choose wisely now, cause even tougher fiscal choices for generations to come.

Disability Groups Have More Important Priorities

Yes, I have worked with disability groups. For one, in 2013, I served on the Commission on Long-Term Care Congress created in the wake of the CLASS Act’s failure and repeal. We took many hours of public testimony from disability groups and others, and received dozens of other written comments—many from dedicated and passionate parents or caregivers of individuals with disabilities, and all of which I made a point to read. I won’t claim to have made disability policy my life’s work, but my jobs over the years have intersected with the disability community on several occasions.

By claiming that disability groups have “way more priorities than comparing their FMAP [i.e., their federal match rate],” this comment actually makes my point for me. The January 2010 letter by the Consortium of Citizens with Disabilities (CCD) setting out priorities for what became Obamacare was 14 pages in length, amounted to over 5,500 words, and included (by my count) 73 separate bulleted recommendations regarding the legislation. All that, and yet not one word on the bill prioritizing coverage of the able-bodied over individuals with disabilities? Frankly, the issue seems quite conspicuous by its absence.

Just Interview Someone From This Consortium

I received a series of tweetsculminating in a dramatic “Shame on you”—attacking me for not having contacted any members of the Consortium for Citizens with Disabilities (CCD) prior to writing my piece. It is correct that I didn’t reach out to any CCD member groups before printing the article. I didn’t need to because I had already spent years working with them.

The charge that I never spoke to “ONE SINGLE CCD MEMBER” is false—and demonstrably so. For nearly four years, from the spring of 2004 until the end of 2007, I worked as a lobbyist for the National Association of Disability Representatives (NADR). During that time, I spent many hours in CCD task force meetings, interacting both directly and indirectly with CCD members. The commenter’s accusation that if I had reached out to CCD members, I would know about the lengthy adjudication process for many Social Security disability claims holds no small amount of irony—I handled those issues over a decade ago.

In reality, my time working with CCD members while representing the disability representatives prompted me to write my article last week. While attending CCD meetings, I saw firsthand how some meeting participants—several of which remain in their current positions and active in CCD activities—made offhand comments of a rather partisan nature. Not everyone joined in the political commentary, but several felt comfortable enough to make clear their partisan affiliations in open discussions, even if I and others did not.

Similarly, I recall how the disability community fought against George W. Bush’s idea for personal accounts within Social Security almost uniformly, and even before Congress and the administration had an opportunity to fully develop their proposals. At the time, my client, the National Association of Disability Representatives, took an agnostic view towards the personal account concept, focusing more on the specifics of whether and how it could work for the disability community.

For instance, NADR wanted to ensure that any personal account proposal would hold the Social Security Disability Trust Fund (separate from the Old Age and Survivors Trust Fund) harmless, and that people who spent time receiving disability benefits would not be financially harmed (e.g., lack the opportunity to save wage earnings in a personal account, yet have their retirement benefits reduced) for having done so.

By contrast, most CCD members opposed the proposal from the get-go, often coordinating with Nancy Pelosi, Sander Levin, and other Democrats for events and strategy meetings. Archives on the disability coalition’s website from that era appear incomplete, but a 2005 August recess “Action Alert: Efforts to Privatize Social Security Continue!” gives a sense of the message coming from most CCD members, and the organization as a whole.

At this point any liberals still reading might applaud the disability community for having come out so strongly against the Bush proposal. But that idea focused on the Social Security retirement system, not the disability program, and the Bush administration and Republicans in Congress wanted to engage with disability groups to ensure any reforms held the disability community harmless. So how did failing to engage them—choosing instead to oppose from the outset—help the disability community?

In truth, early and vocal opposition to personal accounts may have put the disability community at greater risk had the personal account proposal been enacted without disability groups’ technical expertise on how best to structure it. And given both the partisan comments I heard from at least some CCD members at CCD meetings, it’s worth asking whether partisan or ideological concerns—separate and distinct from the interests of the disability community—unduly or improperly influenced the organization’s collective judgment back then.

Their inherent contradictions in the current debate—remaining silent about Obamacare’s unfair Medicaid match rate disparity and Medicare payment caps, while strenuously objecting to Republican attempts to impose payment caps on Medicaid—reinforce those concerns about undue partisanship.

It isn’t always easy stating inconvenient truths—pointing out that laws one doesn’t like should be enforced along with every other law, or where policies proposed by lawmakers with whom one might ordinarily be aligned fall woefully short. But such truth-telling remains an essential ingredient to authenticity and credibility. As I argued last week, I don’t think the disability community has done that in this case. I wish they had.

This post was originally published at The Federalist.

Reforming Medicaid to Serve Wyoming Better

A PDF of this document is available on the Wyoming Liberty Group website.

In the past several years, Wyoming has accomplished several key changes to its Medicaid program. A series of reforms regarding long-term care, and other methods to improve care delivery and coordination, have stabilized the overall spending on Medicaid—and reduced expenditures on a per-beneficiary basis.

However, the commitment by both the new Administration and Congressional leaders to examine Medicaid reform closely presents Wyoming with the possibility to accelerate its current reform efforts. Seema Verma, the new head of the Centers for Medicare and Medicaid Services (CMS) and a former Medicaid consultant, has publicly committed to provide states with greater flexibility and freedom to innovate.[1] Likewise, legislation advancing fundamental Medicaid reform has begun to advance in Congress.

Whether through a block grant, per capita allotments, or enhanced waiver authority from the federal government, states like Wyoming can and should receive greater freedom to manage their programs, in exchange for a series of fixed federal payments. Upon receiving this flexibility, Wyoming can put into place additional reforms that will improve care for beneficiaries, encourage transitions to employment and employer-based health coverage where appropriate, reduce health costs, and save taxpayer funds. These reforms would modernize Medicaid to incorporate the best of 21st century medicine, help Baby Boomers as that generation ages into retirement, and alleviate the fiscal challenges Wyoming faces in managing its Medicaid program.

 

The Problem

Enacted into law in 1965, the Medicaid program as originally designed provided federal matching funds to states to cover discrete populations, including the blind, needy seniors, and individuals with disabilities. Over time, expansions of the program to new populations, and changes in the delivery of health care, have made the Medicaid program large, costly, and unwieldy for states to manage. A significant body of evidence demonstrates that, after more than a half-century, Medicaid is long overdue for a modernization.

Cost:    According to government-provided data, Medicaid now approaches Medicare for the title of largest taxpayer-funded health care program. According to non-partisan government actuaries, state and federal taxpayers combined will spend an estimated $595.5 billion on Medicaid in the current fiscal year—$368.9 billion by the federal government, and $226.6billion by states.[2] By comparison, the Congressional Budget Office projects that this fiscal year, Medicare will spend a net of $598 billion, excluding premium payments by enrollees.[3] Even as the Baby Boomers retire in the coming decade, Medicaid will stay on pace with Medicare when it comes to total expenditures—Medicaid spending will total an estimated $57.5 billion in fiscal year 2025, compared to an estimated $1.005 trillion in net Medicare spending the same fiscal year.[4]

On the state level, rising spending on Medicaid has crowded out other key state priorities like education, transportation, and law enforcement. While states often cut back on those other programs during recessions, Medicaid spending continues to grow in both good economic times and bad. For instance, for fiscal year 2017, states adopted a total of $7.7 billion in spending increases on Medicaid when compared to fiscal 2016—less than the growth of K-12 education spending ($8.9 billion increase), but more than spending on higher education or corrections (both $1.1 billion increases).[5] But in fiscal year 2012—as states recovered from the last recession—states sharply cut K-12 education ($2.5 billion decrease) and higher education ($5 billion decrease) to finance a massive increase in Medicaid spending ($15 billion increase).[6]

With program spending growing at a near-constant pace, Medicaid has grown substantially over the past several decades to become the largest line-item in most state budgets. In fiscal year 2016, Medicaid consumed an average of 29.0 percent of state spending from all fund sources, and 20.3 percent of general fund expenditures.[7] By comparison, in fiscal year 1996, Medicaid consumed 20.3 percent of state spending, and 14.8 percent of general fund spending—and in fiscal year 1987, Medicaid consumed only 10.2 percent of state spending, and 8.1 percent of general fund spending.[8] With program spending nearly tripling as a size of their overall budgets from 1987 through 2016, Medicaid growth has limited states’ ability to provide for other critical state priorities—or return some of taxpayers’ hard-earned cash back into their pockets.

Quality:            Unfortunately, many Medicaid programs suffer from poor access to physicians, high rates of emergency room usage, and poor quality outcomes. A New England Journal of Medicine survey using “secret shopper” methods found that two-thirds of Medicaid children were denied appointments with specialty physicians, compared to only 11% of patients with private insurance coverage. Moreover, those Medicaid patients that did receive appointments had to wait an average of more than three weeks longer than privately insured children.[9] Perhaps unsurprisingly, beneficiaries themselves think much less of Medicaid coverage due to their lack of access:

You feel so helpless thinking, something’s wrong with this child and I can’t even get her into a doctor….When we had real insurance, we could call and come in at the drop of a hat.[10]

Even supporters of Medicaid call an enrollment card nothing more than a “hunting license”—a card that grants beneficiaries the ability to go try to find a physician that will actually treat them.[11]

Because of the difficulties beneficiaries face in obtaining timely access to physicians, Medicaid patients often end up with worse outcomes than the general population as a whole. The Oregon Health Insurance Experiment—which compared outcomes for identically situated groups of uninsured individuals, some of whom enrolled in Medicaid and some of whom did not—concluded that patients who enrolled in Medicaid received no measurable improvements in their physical health than those that remained uninsured.[12] Moreover, the newly enrolled Medicaid patients increased their emergency room usage by 40 percent when compared to those who did not obtain coverage—and those disparities persisted over time.[13] Such results tend to bolster previous findings that patients with Medicaid coverage may end up with worse outcomes than uninsured patients.[14]

Impact in Wyoming:  A January 2015 brief by the Kaiser Family Foundation, and a 2014 Government Accountability Office (GAO) report on Medicaid variations by state, provide helpful metrics comparing Wyoming’s Medicaid program to its peers. The Kaiser brief analyzed per-beneficiary spending in Medicaid for “full-benefit” patients—that is, excluding any partial benefit enrollees.[15] As the table below shows, as of 2011, Wyoming’s spending on aged beneficiaries led the nation—nearly double the national average—and its spending on individuals with disabilities ranked high as well.

Moreover, per-beneficiary spending in Wyoming grew at a rapid, above-average pace for the aged and disabled populations. During the years 2000 to 2011, costs per beneficiary nationally grew by an average of 3.7% for aged beneficiaries and 4.5% for individuals with disabilities. By comparison, in Wyoming spending rose an average of 6.8%—again, nearly twice the national average—for aged beneficiaries, and an above-average 5.45% for individuals with disabilities during the same 2000-2011 period.[16]

 

 

Aged

Individuals with Disabilities  

Adults

 

Children

United States $17,522 $18,518 $4,141 $2,492
Wyoming $32,199 $25,346 $3,986 $1,967
Difference $14,677 $6,828 -$155 -$525
Wyoming Rank Highest 7th Highest 31st Highest 46th Highest

The 2014 GAO report provides additional context as to why Wyoming has relatively high levels of spending on aged and disabled populations.[17] Whereas the Kaiser report studied spending for the years 2000 through 2011, GAO analyzed spending for federal fiscal year 2008 only. However, like Kaiser, GAO also found that Wyoming’s per-enrollee spending on aged ($21,662) and disabled ($24,644) beneficiaries significantly exceeded national averages ($17,609 and $19,135, respectively).[18]

In addition to analyzing per-beneficiary spending by state, the GAO study also examined factors known to influence spending—and on these, Wyoming and its rural neighbors also ranked high. Wyoming ranked more than ten percentage points above the national average for the percentage of aged beneficiaries receiving long-term care services (48.7% in Wyoming vs. 37.7% nationally), and for the percentage of aged Medicaid enrollees ever institutionalized during the year (35.7% in Wyoming vs. 24.5% nationally).[19] Crucially, most of Wyoming’s neighbors—North Dakota, South Dakota, Montana, and Colorado—also have percentages of aged seniors receiving long-term care services, and receiving institutional care, well above national averages, and in some cases higher than Wyoming. These data suggest that the difficulties of life in rural and frontier communities may result in above-average rates of institutionalization, as aged or disabled individuals cannot live far from care support structures.

The prior reports indicating high levels of spending on Wyoming’s Medicaid program do not consider the significant reforms the state has implemented to date. Efforts to increase the percentage of beneficiaries receiving home and community-based services, rather than institutional care, have driven the percentage of members receiving long-term care in the home above 50%.[20] As a result, spending on Medicaid has remained relatively flat from fiscal years 2010 through 2015. Per enrollee costs have actually declined over that period, particularly for the aged population.[21]

However, the Kaiser and GAO studies illustrate the challenges and the opportunities the Medicaid program faces in Wyoming. Despite the reforms put in place to date, spending on the aged and disabled population remains at comparatively high levels. While spending on aged beneficiaries has declined from $32,199 per enrollee in 2011 to $26,222 in fiscal 2015, even that lower level remains higher than the national per-beneficiary average in 2011 ($17,522).

But if Wyoming can build upon its existing Medicaid reforms to improve care for the aged and vulnerable population—coordinating care better, and ensuring that individuals who can be treated at home are not inappropriately diverted into institutional settings—then beneficiaries will benefit, as will taxpayers. If Medicaid enrollees receive better care, their lives will improve in both measurable and immeasurable ways. Likewise, simply bringing spending on aged and disabled beneficiaries down to national averages will drive millions of dollars in savings to the Medicaid program.

 

The Vision

Ultimately, the Medicaid program would work best if transformed into a block grant or per capita allotment to states. Under either of these proposals, states would receive additional flexibility from the federal government to manage their health care programs, in exchange for a series of fixed payments from Washington. The American Health Care Act, passed by the House of Representatives on May 4, contains both options, creating a new system of per capita spending caps for Medicaid, while allowing states to choose a block grant for some of their Medicaid populations.[22]

While fundamental changes to Medicaid’s funding formulae must pass through Congress, the incoming Administration can work from its first days to give states more freedom and flexibility to manage their Medicaid programs. Specifically, Section 1115 of the Social Security Act gives the Secretary of Health and Human Services the power to waive certain requirements under Medicaid and the State Children’s Health Insurance Program (SCHIP) for “any experimental, pilot, or demonstration project which, in the judgment of the Secretary, is likely to assist in promoting the objectives” of the programs.[23]

Unfortunately, the Obama Administration often refused or watered down Section 1115 waiver requests from Republican governors. For instance, the last Administration repeatedly refused requests from governors to impose work requirements for able-bodied adults as a condition of participation in the Medicaid program.[24] Ironically, Obamacare actually made the process of obtaining waivers more difficult; one section of the law imposed new requirements, including a series of hearings, that states must undertake when applying for a waiver.[25] In the years since, federal legislative changes have sought to streamline the process for states requesting extensions of waivers already granted.[26]

In the hands of the right Administration, waiver authority could provide states with a significant amount of flexibility to reform their Medicaid programs. Among the finest examples of such reform is the Rhode Island Global Compact Waiver, approved in the waning days of the George W. Bush Administration on January 16, 2009. The waiver combined and consolidated myriad Medicaid waivers into one comprehensive waiver, with a capped allotment on overall spending. Rather than considering the silos of various program requirements, or specific waivers on discrete issues, Rhode Island was able to examine Medicaid reform holistically—focusing on the big picture, rather than specific bureaucratic dictates from Washington.[27]

Given flexibility from Washington, Rhode Island succeeded in controlling Medicaid expenditures—indeed, in reducing them on a per beneficiary basis. Overall spending remained roughly constant from 2010 through 2013, while enrollment grew by 6.6%.[28] Per beneficiary costs declined by 5.2% over that four-year period—a decline in absolute terms, even before factoring in inflation.[29] Perhaps most importantly, an independent report from the Lewin Group found that the Global Compact was “highly effective in controlling Medicaid costs,” while “improving members’ access to more appropriate services.”[30] In other words, Rhode Island reduced its Medicaid costs not by providing less care to beneficiaries—but providing more, and more appropriate, care to them.

The Rhode Island example has particular applicability to Wyoming’s Medicaid program. Just as Wyoming spends above national averages on Medicaid care for the aged and individuals with disabilities, so too did Rhode Island have a highly institutionalized population prior to implementing its Global Compact. Moreover, Wyoming’s current system of discrete waivers—two (including one pending with CMS) under Section 1115, and seven separate long-term care waivers under Section 1915 of the Social Security Act—lends itself towards potential care silos and unnecessary duplication. Consolidating these myriad waivers into one global waiver would allow Wyoming to “see the forest for the trees”—focusing on overall changes that will improve the quality of care. Implementing a global waiver will also give Wyoming the flexibility to accelerate reforms regarding delivery of long-term supports and services to the aged and disabled population, while introducing new consumer-oriented options for non-disabled beneficiaries.

 

Specific Solutions

A block grant, per capita allotment, or waiver along the lines of Rhode Island’s Global Compact provides the vision that will give states the tools needed to reform Medicaid for the 21st century. Fortunately, states have experimented with several specific reforms that can provide more granular details regarding how a reformed Medicaid program might look. Proposals in documents such as House Republicans’ “Better Way” plan, released last year, and a report issued by Republican governors in 2011, provide good sources of ideas.[31] Both individually and collectively, these solutions can 1) improve the quality of care beneficiaries receive; 2) better engage beneficiaries with the health care system, and where appropriate, provide a transition to employment and employer-sponsored coverage; 3) reduce health costs overall; and 4) provide sound stewardship of the taxpayer dollars funding the Medicaid program.

 

Delivery System Reform

With a Medicaid program based around fee-for-service medicine—which pays doctors and hospitals for every service they perform—Wyoming in particular would benefit from reforms that encourage greater value and coordination in health care delivery. As explained above, the state’s above-average spending on aged and disabled beneficiaries speaks to the way in which uncoordinated care can result in health problems for patients—and ultimately, greater expenses for taxpayers.

Promote Home and Community-Based Services (HCBS):         The Lewin Group’s analysis of Rhode Island’s Global Compact Waiver delineated many of the ways in which that state reformed its Medicaid program to de-institutionalize aged and disabled beneficiaries. Between the January 2009 approval of the waiver and the December 2011 report, Rhode Island achieved impressive savings from providing more coordinated, and “right-sized,” care to patients:

  • Shifting nursing home services into the community saved $35.7 million during the period examined by the study;
  • More accurate rate setting in nursing homes saved an additional $15 million in 2010 alone;
  • Better care management for adults with disabilities and special needs children saved between $4.5 and $11.9 million; and
  • Enrollment in managed care significantly increased the access of adults with disabilities to physician services.[32]

The results from the Rhode Island waiver demonstrate the possible savings to Wyoming associated with reform of long-term services and supports (LTSS)—savings that the Lewin report confirms came not from denying care to beneficiaries, but by improving it.

Other states have also taken actions to promote HCBS. Testifying before the Congressionally-chartered Commission on Long-Term Care in 2013, Tennessee’s head of Long-Term Supports and Services proposed several solutions, focused largely on turning the bias in favor of nursing home care toward a bias in favor of HCBS—to use nursing homes as a last resort, rather than a first resort.[33] Her proposals included a possible limit on nursing home capacity; converting nursing home “slots” into HCBS care “slots;” and requiring patients to try HCBS as the default option before moving to a more intense (i.e., institutional) setting.[34] Integrating these proposals into a comprehensive waiver would not only provide Wyoming residents with more appropriate care, it could also save taxpayers money.

Managed Care:            Wyoming could benefit by exploring the use of managed care plans to deliver Medicaid services to beneficiaries. Providing plans with a capitated payment—that is, a flat payment per beneficiary per month—would give them an incentive to streamline care. Moreover, a transition to managed care would provide more fiscal certainty to the state, as payment levels would not change during a fiscal or contract year.

In June 2014, a report commissioned by the Wyoming Legislature and prepared for the Wyoming Department of Health recommended against pursuing full-risk managed care, despite an admitted high level of vendor interest in doing so.[35] Three years later, Wyoming should explore the issue again, as both the Department of Health and medical providers in Wyoming have additional experience implementing other forms of coordinated care. The 2014 report notes that managed care plans have numerous tools available that could help reduce costs, particularly for high-cost patients, including data analytics, case managers, and quality metric incentives. Given the unique capacities that managed care plans bring to the table, it is worth exploring again the issue of whether full-risk plans could improve care to Wyoming beneficiaries while providing fiscal stability to the state.

While managed care could provide significant benefits to Wyoming, the state may be hamstrung by Medicaid’s current requirement that beneficiaries have the choice of at least two managed care plans. Given that Wyoming has only one insurer participating on its insurance Exchange this year, and a heavily rural population, this requirement may not be realistic or feasible. If approved by CMS, a waiver application could enable only one managed care plan to deliver care to rural Wyomingites.

Provider-Led Groups:              In addition to managed care products organized and sold by insurance companies, Wyoming could also explore the possibility of creating groups led by teams of providers to manage care delivery. Similar to the accountable care organization (ACO) model promoted through the Medicare program, these provider-led groups could provide coordinated care to patients, either on a fully- or partially-capitated payment model.

In recent years, at least 18 state Medicaid programs have either adopted or studied the creation of various provider-led organizations.[36] Adopters include neighboring states like Utah and Colorado, as well as southern states like Louisiana and Alabama. Whether a hospital-led ACO, or a group of doctors providing direct primary care to patients, these provider-led organizations would have greater incentives to coordinate care for patients, hopefully resulting in better health outcomes, and reduced spending for the Medicaid program.

Payment Bundling:     One other option for reforming delivery systems lies in bundled payments, which would see Medicaid providing a lump-sum payment for all the costs of a procedure (e.g., a hip replacement and associated post-operative therapy). Such concepts date back more than a quarter-century; a Medicare demonstration that began in the summer of 1991 reduced spending on heart bypass patients by $42.3 million—a savings of nearly 10 percent.[37] More recently, Pennsylvania’s Geisinger Health System helped bring the payment bundle model into the national lexicon, implementing a 90-day “warranty” on heart bypass patients beginning in February 2006.[38]

In recent years, government payers have increasingly adopted the payment bundle as a means to improve care quality and limit spending increases. Beginning in 2011, Arkansas’ Medicaid program worked with its local Blue Cross affiliate to improve health care delivery through payment improvement, and has implemented an episode-of-care payment model (i.e., a payment bundle) as one of its efforts.[39] Likewise, Medicare has moved ahead with efforts to embrace bundled payments—offering providers the option of a retrospective or prospective lump-sum payment for an inpatient stay, post-acute care provided after the stay, or both.[40]

A reformed Medicaid program in Wyoming could offer providers the opportunity to utilize bundled payment models as one vehicle to deliver better care. Ideally, Medicaid need not mandate participation from providers, as Medicare has done for some payment bundles, but instead help to encourage broader trends in the industry.[41] While not as dramatic a change as a move toward managed care, the bundled payment option may appeal to some providers as a “middle ground” for those not yet ready to embrace a fully capitated payment model.

De-Identified Patient Data:   In a bid to harness the power of “big data,” the federal government has made de-identified Medicare patient claims information available to companies that can analyze the information for patterns of care usage. Those initiatives have recently expanded to Medicaid, with one start-up compiling a database of 74 million Medicaid patients.[42] Wyoming could ask outside vendors or consultants to analyze its claims data for relevant patterns and trends—yielding valuable insights into the delivery of care, and potentially improving outcomes for beneficiaries. By releasing its own Medicaid data and encouraging companies to analyze it, Wyoming will encourage the development of Wyoming-specific solutions to the state’s unique health care needs.

 

Consumer-Directed Options

As part of a move towards modernizing Medicaid, Wyoming should adopt several different consumer-directed elements for its health coverage. These provisions would give beneficiaries incentives to act as smart shoppers, using ideas proven to lower the growth of health care costs. Providing appropriate incentives to beneficiaries will also make Medicaid coverage more closely resemble private health insurance plans—providing an easy transition for beneficiaries who move into employer-based coverage as their income rises.

Health Opportunity Accounts:            In 2005, provisions in the Deficit Reduction Act created Health Opportunity Accounts.[43] The language in the statute called for several demonstration projects by states, who could offer non-elderly and non-disabled beneficiaries the choice to enroll in Health Opportunity Accounts on a voluntary basis. The Opportunity Accounts would be used to pay for medical expenses up to a deductible, at which point traditional insurance coverage would take over. While the Opportunity Accounts under the demonstration would function in many respects like a Health Savings Account (HSA)—the state and/or charities would fund the accounts, and beneficiaries could build up savings within them—they included a twist. Upon becoming ineligible for Medicaid, beneficiaries could access most of their remaining Opportunity Account balance for a period of up to three years, to purchase either health insurance coverage or “job training and tuition expenses.”[44]

By creating an HSA-like account mechanism, and giving beneficiaries the flexibility to use their Opportunity Account funds on job training or health insurance expenses upon becoming ineligible for Medicaid, the Opportunity Account demonstration promoted both smart health care shopping and employment opportunities for Medicaid beneficiaries. Unfortunately, in 2009 a Democratic Congress and President Obama passed legislation prohibiting the approval of any new Health Opportunity Account demonstrations— effectively killing this innovative program before it had a chance to take root.[45]

Thankfully, some states have continued to incorporate HSA-like incentives into their Medicaid programs. In the non-Medicaid space, HSAs and consumer-directed options have demonstrated their ability to reduce health care costs. A 2012 study in the prestigious journal Health Affairs found that broader adoption of the HSA model could reduce health care costs by more than $57 billion annually.[46] If extended into the Medicaid realm, slower growth of health costs would save taxpayers—in Wyoming and elsewhere.

The upcoming reauthorization of the State Children’s Health Insurance Program (SCHIP)—currently due to expire on September 30, 2017—gives Congress an opportunity to re-examine Health Opportunity Accounts. Regardless of whether lawmakers in Washington reinstate this particular model, however, account-based health coverage in Medicaid deserves a close look in Wyoming as part of a comprehensive reform waiver. Although the Opportunity Account mechanism was somewhat prescriptive in its approach, allowing beneficiaries to keep some portion of remaining account balances upon becoming ineligible for Medicaid represents an innovative and sound concept. Such a program could represent a true win-win: Both the state and beneficiaries receive a portion of the benefits from lower health spending—cash which the beneficiary can use to help adjust to life after Medicaid.

Right to Shop:              Thanks to several states’ reform of transparency laws, patients can now engage in a “right to shop” in many locations across the country.[47] The movement centers around the basic principle that consumers should share in the benefits of savings from choosing less expensive locations for medical and health procedures. Particularly for non-urgent care—for instance, medical tests or radiological procedures—variations among medical facilities provide patients with the opportunity to achieve significant savings by choosing a less costly provider.

Results from large employers illustrate how price transparency and competition have yielded savings for payers and consumers alike. A California Public Employees’ Retirement System (CalPERS) program of reference pricing—in which CalPERS set a maximum price of $30,000 for hip and knee replacements—led to savings of $2.8 million ($7,000 per patient) to CalPERS, and $300,000 (nearly $700 per patient) in lower cost-sharing, in its first year alone. The program led hospitals to renegotiate their rates with CalPERS, which expanded its reference pricing program to other procedures the very next year.[48]

Other estimates suggest that the potential savings from transparency and competition could range into the tens of billions of dollars. One study concluded that reference pricing for a handful of specific procedures could reduce health spending by 1.6 percent—or nearly $10 billion, if applied to all individuals with employer-sponsored health coverage.[49] A separate estimate found that eliminating variation in “shoppable” (i.e., high-cost and known in advance) health services could reduce spending on individuals with employer health coverage by $36 billion.[50]

A reformed Medicaid program should look to bring these positive effects of “patient power” to Medicaid—by allowing consumers to share in the savings from choosing wisely among providers. The right to shop could work particularly well in conjunction with an account-based model for Medicaid reform, which provides a ready vehicle for the state to deposit a portion of savings to beneficiaries. Citizens have literally saved millions of dollars using the right to shop; tapping into those savings for the Medicaid program would benefit taxpayers significantly.[51] Moreover, by incentivizing all providers to price their services more competitively, right to shop will exert downward pressure on health costs—an important goal for our nation’s health care system.

Wellness Incentives:   Over the past several years, successful employers have used incentives for healthy behaviors to help control the skyrocketing growth in health care costs. For instance, Safeway used such incentives to keep overall health costs flat over four years—at a time when costs for the average employer plan grew by 38 percent.[52]

Many large employers have increasingly embraced the results of the “Safeway model,” offering employees incentives for participating in healthy behaviors. According to the most recent annual survey of employer-provided health plans, approximately one-third of large employers (those with over 200 workers) offer employees incentives to complete a health risk assessment (32%), undergo biometric screening (31%), or participate or complete a wellness program (35%).[53] Among the largest employers—those with over 5,000 workers—nearly half offer incentives for risk assessments (50%), biometric screening (44%), and wellness programs (48%).[54] The trend of employer wellness incentives suggests Wyoming should bring this innovation to its Medicaid program.

Even though Obamacare passed on a straight party-line vote, expanding employer wellness incentives represented one of the few areas of bipartisan agreement. Language in the law permitted employers to increase the permitted variation for participation in wellness programs from 20 percent of premiums to 30 percent.[55] Medicaid programs should have the flexibility to implement such changes to their programs without requesting permission from Washington—and Wyoming should incorporate incentives for healthy behaviors into its revised Medicaid program as part of a comprehensive waiver.

Premiums and Co-Payments:              In addition to more innovative models discussed above, a revised Medicaid program in Wyoming could look to impose modest cost-sharing on beneficiaries through a combination of premiums and co-payments. Applying cost-sharing to specific services—for instance, unnecessary use of the emergency room for non-urgent care—should encourage beneficiaries to find the most appropriate source of care. Reasonable, enforceable cost-sharing would encourage beneficiaries to take responsibility for their care, making them partners in the road to better health.

 

Transition to Employment and Employer-Based Health Insurance

In many cases, individuals on Medicaid can, and ultimately should, make the transition to employment, and to the employer-based health insurance that comes with many quality jobs. However, the benefits currently provided by Medicaid bear little resemblance to most forms of employer-based coverage. In conjunction with the consumer-directed options discussed above, Wyoming should implement other steps to encourage beneficiaries to make the transition into work, and encourage the adoption of employer-based health insurance.

Work Requirements:               Fortunately, the Trump Administration has indicated a willingness to embrace state flexibility in Medicaid—which with respect to work requirements in particular would represent a welcome change from the Obama Administration.[56] A requirement that able-bodied Medicaid beneficiaries either work, look for work, or prepare for work through enrollment in job-training programs would help transform state economies, as even voluntary job-referral programs have led to some impressive success stories. In the neighboring state of Montana, one participant obtained skills that helped her find not just a job, but a new career:

“I think it’s a success story,” [Ruth] McCafferty says about the [Medicaid] jobs program. “I love this. I’m the poster child!”

McCafferty is a 53-year-old single mom with three kids living at home. Seven months ago, she lost her job in banking, and interviews for new jobs weren’t panning out.…

The jobs component of [her Medicaid coverage] means she also got a phone call from her local Job Service office, saying they might be able to hook her up with a grant to pay for training to help her get a better job than the one she lost. She was pretty skeptical, but came in anyway…

Job Service ended up paying not just for online training, but a trip to Helena to take a certification exam. Now, they’re funding an apprenticeship at a local business until she can start bringing in her own clients and get paid on commission.

“I’m able to support my family,” [McCafferty] says. “I’ve got a career opportunity that’s more than just a job.”[57]

Ruth McCafferty is not the only success story associated with Montana’s Medicaid Job Service program. Five in six individuals who participated in the program are now employed, and with an average 50 percent increase in pay, to about $40,000 per year—enough in some cases to transition off of Medicaid.[58] Unfortunately, however, because the program is not mandatory for beneficiaries, only a few thousand out of 53,000 Medicaid enrollees have embraced this life-changing opportunity.[59]

In December 2015, the Congressional Budget Office noted that Obamacare’s Medicaid expansion will reduce beneficiaries’ labor force participation by about 4 percent, “creat[ing] a tax on additional earnings for those considering job changes” that would raise their income above the threshold for eligibility.[60] Rather than discouraging work, as under Obamacare, Medicaid should encourage work, and a transition into working life. Imposing a work requirement for Medicaid recipients, coupled with appropriate resources for job training and education, would help beneficiaries, taxpayers—and ultimately, Wyoming’s economy.

Flexible Benefits:         Particularly for non-disabled adults and optional coverage populations, Wyoming should consider offering a more flexible and limited set of insurance benefits than the standard Medicaid package. Congress moved down this route in 2005, using a section of the Deficit Reduction Act to create a set of “benchmark” benefits that certain populations could receive.[61] However, the “benchmark” plan section limits eligibility to certain populations, and excludes provisions permitting states to impose modest cost-sharing for beneficiaries.

As part of a comprehensive waiver, Wyoming should request the ability to shift non-disabled beneficiaries into “benchmark” plans. Moreover, the waiver application should include provisions for modest cost-sharing for beneficiaries, and make those cost-sharing payments enforceable. Receiving authority from Washington to customize health coverage options for non-traditional beneficiaries would give the state the ability to innovate, and tailor benefit packages to beneficiary needs and fiscal realities.

Premium Assistance:               Premium assistance—in which Medicaid helps subsidize premiums for employer-sponsored health coverage—could play an important role in encouraging the use of private insurance where available, while also keeping all members of a family on the same health insurance policy. Unfortunately, however, current regulatory requirements for premium assistance have proven ineffective and unduly burdensome. All current premium assistance programs require Medicaid programs to provide wrap-around benefits to beneficiaries.[62] In addition, two premium assistance options created by Congress in 2009 explicitly prohibit states from using high-deductible health plans—regardless of whether or not the state funds an HSA to subsidize beneficiaries’ medical expenses in conjunction with the high-deductible plan.[63]

As part of its comprehensive waiver application, Wyoming should ask for more flexibility to use Medicaid dollars to subsidize employer coverage, without providing additional wrap-around benefits. In addition, the state’s application should require non-disabled adults to utilize premium assistance where available—another policy consistent with maximizing the use of private health coverage.

Preventing “Crowd-Out”:        Many government-run health programs face the problem of “crowd-out”—individuals purposefully dropping their private health coverage to enroll in taxpayer-funded insurance. Prior studies have estimated the “crowd-out” rate for certain coverage expansions at around 60 percent.[64] In these cases, coverage expansions enrolled more people who dropped their private coverage than previously uninsured individuals—a poor use of taxpayers’ hard-earned dollars.

States like Wyoming should have the ability to impose reasonable restrictions on enrollment as one way to prevent “crowd-out.” For instance, ensuring enrollees do not have an available offer of employer coverage, or only enrolling persistently uninsured individuals (e.g., those uninsured for at least 90-180 days prior to enrollment), would prevent individuals from attempting to “game the system” and ensure efficient use of taxpayer dollars.

 

Program Integrity

Estimates suggest that health care fraud represents an industry of massive proportions, with tens of billions in taxpayer dollars lost every year to fraudulent activities.[65] Medicaid has remained on the Government Accountability Office (GAO) list of “high-risk” programs since 2003 “due to its size, growth, diversity of programs, and concerns about the adequacy of fiscal oversight.”[66] In its most recent update, GAO noted that improper payments—whether erroneous or fraudulent in nature—increased from a total of $29.1 billion in fiscal year 2015 to $36.3 billion in fiscal 2016—an increase of nearly 25 percent.[67]

A reformed Medicaid program in Wyoming would use flexibility provided by the federal government to strengthen programs and methods ensuring proper use of taxpayer dollars. Because any dollar stolen by a fraudster represents one dollar not used to help the patients—many of them aged and vulnerable—that Medicaid treats, policy-makers should work diligently to ensure that scarce taxpayer funds are used solely by the populations for whom Medicaid was designed.

Verify Eligibility and Identity:            A 2015 report by the Foundation for Government Accountability provides numerous cases of ineligible—or in some cases deceased—beneficiaries remaining on state Medicaid rolls:

  • Arkansas identified thousands of individuals not qualified for Medicaid benefits in 2014, including 495 deceased beneficiaries;
  • Pennsylvania removed over 160,000 individuals from benefit rolls in 2011, including individuals in prison and million-dollar lottery winners; and
  • In Illinois, state officials removed over 400,000 ineligible beneficiaries in one year alone, saving taxpayers approximately $400 million annually.[68]

In the past two years, Wyoming has taken decisive action to crack down on fraud. The eligibility checks begun in mid-2015 removed several thousand ineligible individuals from the Medicaid rolls.[69] Moreover, Act 57, passed by the state legislature last year, introduced a new comprehensive program to stop fraud.[70] By verifying eligibility and identity upon enrollment, monitoring eligibility through quarterly database checks, and prosecuting offenders where found, Act 57 should save Wyoming taxpayers, while ensuring that eligible beneficiaries can continue to receive the health services they need.[71]

Asset Recovery:            A 2015 Government Accountability Office (GAO) report raised concerns about whether Wyoming’s Medicaid program is appropriately protecting taxpayer dollars. GAO concluded that Wyoming ranks second in the percentage of Medicaid beneficiaries (20.6%) with additional private health insurance coverage, and third in the percentage of Medicaid beneficiaries (26.02%) with additional public health insurance coverage.[72] By comparison, GAO concluded that only 13.4% of Medicaid beneficiaries nationwide had an additional source of private insurance coverage—meaning Wyoming has a rate of additional private coverage among Medicaid beneficiaries roughly 50 percent higher than the national average.[73]

As with the concept of crowd-out—individuals dropping private coverage entirely to enroll in Medicaid—discussed above, Medicaid should serve as the payer of last resort, not of first instance. If another payer has liability with respect to a Medicaid beneficiary’s claims, the state has the duty—both a statutory obligation under the federal Medicaid law, and a moral obligation to its taxpayers—to avoid incurring those claims, and seek to recover payments already made when it is cost-effective to do so.

Asset recovery can take several forms. Improving recovery for third-party liability claims could involve participation in electronic data matching between Medicaid enrollment files and private insurer files; empowering any managed care organizations contracted to the Medicaid program to adjudicate third-party liability claims; and prohibiting insurers from denying third-party liability claims for purely procedural reasons, such as failure to obtain prior authorization.[74] As part of these efforts, Wyoming should have the freedom to hire contingency fee-based contractors as one means to stem the flow of improper payments to health care providers.

Long-term services and supports represent another area where Wyoming can take steps to ensure taxpayer dollars are spent on the vulnerable populations for whom Medicaid was designed. The state can and should utilize existing authority to recover funds from estates, or impose sanctions on individuals who transferred assets at below-market rates in their efforts to qualify for Medicaid.[75]

 

Conclusion

In the past decade, Wyoming has made numerous reforms to its Medicaid program. The state has begun to re-balance care away from institutional settings where possible, and has implemented several programs to improve care coordination. These changes have helped stabilize Medicaid spending as a share of the budget, and reduce spending on a per-beneficiary basis.

However, given freedom and flexibility from Washington—flexibility which should be forthcoming under the new Administration—Wyoming can go further. This vision would see additional reforms designed to keep patients out of intensive and costly settings—whether the hospital or a nursing home—and an exploration of managed care options. Beyond the aged population, Wyoming would implement consumer-driven principles into Medicaid, giving beneficiaries greater incentives to take responsibility for their own care, and the tools to do so. And many recipients would ultimately transition out of Medicaid entirely, using skills they learned through Medicaid-sponsored job training programs to build a better life.

This vision stands within Wyoming’s reach—indeed, it stands within every state’s reach. All it takes is flexibility from Washington, and the desire on the part of policy-makers to embrace the vision for a modern Medicaid system. With a comprehensive waiver, Wyoming can transform and revitalize Medicaid. It’s time to embrace the opportunity and do just that.

 

[1] Letter by Health and Human Services Secretary Tom Price and Centers for Medicare and Medicaid Services Administrator Seema Verma to state governors regarding Medicaid reform, March 14, 2017, https://www.hhs.gov/sites/default/files/sec-price-admin-verma-ltr.pdf.

[2] Office of the Actuary, Centers for Medicare and Medicaid Services, “2016 Actuarial Report on the Financial Outlook for Medicaid,” https://www.medicaid.gov/medicaid/financing-and-reimbursement/downloads/medicaid-actuarial-report-2016.pdf, Table 3, p. 15.

[3] Congressional Budget Office, January 2017 Medicare baseline, https://www.cbo.gov/sites/default/files/recurringdata/51302-2017-01-medicare.pdf.

[4] 2016 Actuarial Report, Table 3, p. 15; CBO January 2017 Medicare baseline.

[5] National Association of State Budget Officers, Fiscal Survey of States: Spring 2016, https://higherlogicdownload.s3.amazonaws.com/NASBO/9d2d2db1-c943-4f1b-b750-0fca152d64c2/UploadedImages/Reports/Spring%202016%20Fiscal%20Survey%20of%20States-S.pdf, Table 11: Fiscal Year 2017 Recommended Program Area Adjustments by Value, p. 16.

[6] National Association of State Budget Officers, Fiscal Survey of States: Spring 2011, https://higherlogicdownload.s3.amazonaws.com/NASBO/9d2d2db1-c943-4f1b-b750-0fca152d64c2/UploadedImages/Fiscal%20Survey/Spring%202011%20Fiscal%20Survey.pdf, Table 11: Fiscal Year 2012 Recommended Program Area Adjustments by Value, p. 13.

[7] National Association of State Budget Officers, Fall 2016 Fiscal Survey of States, https://higherlogicdownload.s3.amazonaws.com/NASBO/9d2d2db1-c943-4f1b-b750-0fca152d64c2/UploadedImages/Fiscal%20Survey/Fall%202016%20Fiscal%20Survey%20of%20States%20-%20S.pdf, p. 1.

[8] National Association of State Budget Officers, 1996 State Expenditure Report, April 1997, https://higherlogicdownload.s3.amazonaws.com/NASBO/9d2d2db1-c943-4f1b-b750-0fca152d64c2/UploadedImages/SER%20Archive/ER_1996.PDF, Table 3, p. 11.

[9] Joanna Bisgaier and Karin Rhodes, “Auditing Access to Specialty Care for Children with Public Insurance,” New England Journal of Medicine June 16, 2011, http://www.nejm.org/doi/full/10.1056/NEJMsa1013285.

[10] Vanessa Fuhrmans, “Note to Patients: The Doctor Won’t See You,” Wall Street Journal July 19, 2007, http://www.wsj.com/articles/SB118480165648770935.

[11] Statement by DeAnn Friedholm, Consumers Union, at Alliance for Health Reform Briefing on “Affordability and Health Reform: If We Mandate, Will They (and Can They) Pay?” November 20, 2009, http://www.allhealth.org/briefingmaterials/TranscriptFINAL-1685.pdf, p. 40.

[12] Katherine Baicker, et al., “The Oregon Experiment—Effects of Medicaid on Clinical Outcomes,” New England Journal of Medicine May 2, 2013, http://www.nejm.org/doi/full/10.1056/NEJMsa1212321.

[13] Amy Finklestein et al., “Effect of Medicaid Coverage on ED Use—Further Evidence from Oregon’s Experiment,” New England Journal of Medicine October 20, 2016, http://www.nejm.org/doi/full/10.1056/NEJMp1609533.

[14] Scott Gottlieb, “Medicaid Is Worse than No Coverage at All,” Wall Street Journal March 10, 2011, http://www.wsj.com/articles/SB10001424052748704758904576188280858303612.

[15] Katherine Young et al., “Medicaid Per Enrollee Spending: Variation Across States,” http://files.kff.org/attachment/issue-brief-medicaid-per-enrollee-spending-variation-across-states-2, Appendix Table 1, p. 9.

[16] Ibid., Appendix Table 2, p. 11.

[17] Government Accountability Office, “Medicaid: Assessment of Variation among States in Per-Enrollee Spending,” Report GAO-14-456, June 16, 2014, http://www.gao.gov/assets/670/664115.pdf.

[18] Ibid., Appendix II, pp. 40-41.

[19] Ibid., Appendix VII, pp. 53-54.

[20] Wyoming Department of Health, “Introduction to Wyoming Medicaid,” p. 31.

[21] Ibid., pp. 11, 14.

[22] Section 121 of H.R. 1628, the American Health Care Act, as passed by the U.S. House of Representatives on May 4, 2017.

[23] Section 1115 of the Social Security Act, codified at 42 U.S.C. 1315.

[24] Mattie Quinn, “On Medicaid, States Won’t Take Feds’ No for an Answer,” Governing October 11, 2016, http://www.governing.com/topics/health-human-services/gov-medicaid-waivers-arizona-ohio-cms.html.

[25] Section 10201 of the Patient Protection and Affordable Care Act, P.L. 111-148, created a new Section 1115(d) of the Social Security Act (42 U.S.C. 1315(d)) imposing such requirements.

[26] Section 1115 (e) and (f) of the Social Security Act, codified at 42 U.S.C. 1315(e) and (f).

[27] Testimony of Gary Alexander, former Rhode Island Secretary of Health and Human Services, on “Strengthening Medicaid Long-Term Supports and Services” before the Commission on Long Term Care, August 1, 2013, http://ltccommission.org/ltccommission/wp-content/uploads/2013/12/Garo-Alexander.pdf.

[28] Ibid., p. 4.

[29] Ibid., p. 4.

[30] Lewin Group, “An Independent Evaluation of Rhode Island’s Global Waiver,” December 6, 2011, http://www.ohhs.ri.gov/documents/documents11/Lewin_report_12_6_11.pdf, p. 3.

[31] House of Representatives Republican Task Force, “A Better Way—Our Vision for a Confident America: Health Care,” June 22, 2016, http://abetterway.speaker.gov/_assets/pdf/ABetterWay-HealthCare-PolicyPaper.pdf, pp. 23-28; Republican Governors Public Policy Committee, “A New Medicaid: A Flexible, Innovative, and Accountable Future,” August 30, 2011, https://www.scribd.com/document/63596104/RGPPC-Medicaid-Report.

[32] Lewin Group, “An Independent Evaluation.”

[33] The author served as a member of the commission, whose work can be found at www.ltccommission.org.

[34] Testimony of Patti Killingsworth, TennCare Chief of Long-Term Supports and Services, before the Commission on Long-Term Care on “What Would Strengthen Medicaid LTSS?” August 1, 2013, http://ltccommission.org/ltccommission/wp-content/uploads/2013/12/Patti-Killingsworth-Testimony.pdf.

[35] Health Management Associates, “Wyoming Coordinated Care Study,” June 27, 2014, http://legisweb.state.wy.us/InterimCommittee/2014/WyoCoordinatedCareReportAppendices.pdf.

[36] National Academy for State Health Policy, “State ‘Accountable Care’ Activity Map,” http://nashp.org/state-accountable-care-activity-map/.

[37] Health Care Financing Administration, “Medicare Participating Heart Bypass Demonstration,” Extramural Research Report, September 1998, https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Reports/downloads/oregon2_1998_3.pdf.

[38] Reed Abelson, “In Bid for Better Care, Surgery with a Warranty,” New York Times May 17, 2007, http://www.nytimes.com/2007/05/17/business/17quality.html?pagewanted=all.

[39] State of Arkansas, “Health Care Payment Improvement Initiative—Episodes of Care,” http://www.paymentinitiative.org/episodesOfCare/Pages/default.aspx.

[40] Centers for Medicare and Medicaid Services, “Bundled Payments for Care Improvement Initiative: General Information,” https://innovation.cms.gov/initiatives/Bundled-Payments/.

[41] On December 20, 2016, the Centers for Medicare and Medicaid Services (CMS) announced that participation in new cardiac and orthopedic bundles would be mandatory for all hospitals in selected metropolitan statistical areas beginning July 1, 2017; see https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2016-Fact-sheets-items/2016-12-20.html. Both lawmakers and provider groups have suggested that CMS is imposing too many mandates on providers and exceeding its statutory and constitutional authority; see http://tomprice.house.gov/sites/tomprice.house.gov/files/assets/September%2029%2C%202016%20CMMI%20Letter.pdf.

[42] Steve Lohr, “Medicaid’s Data Gets an Internet-Era Makeover,” New York Times January 9, 2017, https://www.nytimes.com/2017/01/09/technology/medicaids-data-gets-an-internet-era-makeover.html.

[43] Section 6082 of the Deficit Reduction Act of 2005, P.L. 109-171, which created a new Section 1938 of the Social Security Act (42 U.S.C. 1396u-8).

[44] The statute provided that, upon a beneficiary becoming ineligible for Medicaid, 25 percent of state contributions to the Opportunity Account would be returned to the state, but the beneficiary would retain 100 percent of any other contributions to the account, along with 75 percent of state contributions.

[45] Section 613 of the Children’s Health Insurance Program Reauthorization Act of 2009, P.L. 111-3.

[46] Amelia Haviland et al., “Growth of Consumer-Directed Health Plans to One-Half of All Employer-Sponsored Insurance Could Save $57 Billion Annually,” Health Affairs May 2012, http://content.healthaffairs.org/content/31/5/1009.full.

[47] Josh Archambault and Nic Horton, “Right to Shop: The Next Big Thing in Health Care,” Forbes August 5, 2016, http://www.forbes.com/sites/theapothecary/2016/08/05/right-to-shop-the-next-big-thing-in-health-care/#6f0ebcd91f75.

[48] Amanda Lechner et al., “The Potential of Reference Pricing to Generate Savings: Lessons from a California Pioneer,” Center for Studying Health System Change Issue Brief No. 30, December 2013, http://hschange.org/CONTENT/1397/1397.pdf.

[49] Paul Fronstin and Christopher Roebuck, “Reference Pricing for Health Care Services: A New Twist on the Defined Contribution Concept in Employment-Based Health Benefits,” Employee Benefit Research Institute Issue Brief No. 398, April 2014, https://www.ebri.org/pdf/briefspdf/EBRI_IB_398_Apr14.RefPrcng.pdf.

[50] Bobbi Coluni, “Save $36 Billion in U.S. Health Care Spending through Price Transparency,” Thomson Reuters, February 2012, https://www.scribd.com/document/83286153/Health-Plan-Price-Transparency.

[51] Archambault and Horton, “Right to Shop.”

[52] Steven Burd, “How Safeway is Cutting Health Care Costs,” Wall Street Journal June 12, 2009, http://www.wsj.com/articles/SB124476804026308603.

[53] Kaiser Family Foundation and Health Research and Educational Trust, “Employer Health Benefits: 2016 Annual Survey,” September 14, 2016, http://files.kff.org/attachment/Report-Employer-Health-Benefits-2016-Annual-Survey, Exhibit 12.20, p. 227.

[54] Ibid.

[55] PPACA Section 1201, which re-wrote Section 2705 of the Public Health Service Act (42 U.S.C. 300gg-4).

[56] Quinn, “States Won’t Take Feds’ No.”

[57] Eric Whitney, “Montana’s Medicaid Expansion Jobs Program Facing Scrutiny,” Montana Public Radio November 21, 2016, http://mtpr.org/post/montanas-medicaid-expansion-jobs-program-facing-scrutiny.

[58] Ibid.

[59] Ibid.

[60] Edward Harris and Shannon Mok, “How CBO Estimates Effects of the Affordable Care Act on the Labor Market,” Congressional Budget Office Working Paper 2015-09, December 2015, https://www.cbo.gov/sites/default/files/114th-congress-2015-2016/workingpaper/51065-ACA_Labor_Market_Effects_WP.pdf, p. 12.

[61] Section 6044 of the Deficit Reduction Act, P.L. 109-171, codified at Section 1937 of the Social Security Act, 42 U.S.C. 1396u-7.

[62] Joan Aiker et al., “Medicaid Premium Assistance Programs: What Information Is Available about Benefit and Cost-Sharing Wrap-Around Coverage?” Kaiser Commission on Medicaid and the Uninsured Issue Brief, December 2015, http://files.kff.org/attachment/issue-brief-medicaid-premium-assistance-programs-what-information-is-available-about-benefit-and-cost-sharing-wrap-around-coverage; Joan Aiker, “Premium Assistance in Medicaid and CHIP: An Overview of Current Options and Implications of the Affordable Care Act,” Kaiser Commission on Medicaid and the Uninsured Issue Brief, March 2013, https://kaiserfamilyfoundation.files.wordpress.com/2013/03/8422.pdf.

[63] Section 301 of the Children’s Health Insurance Program Reauthorization Act of 2009, P.L. 111-3, codified at 42 U.S.C. 1397ee(c)(10)(B)(ii)(II) and 42 U.S.C. 1396e-1(b)(2)(B).

[64] Jonathan Gruber and Kosali Simon, “Crowd-Out 10 Years Later: Have Recent Public Insurance Expansions Crowded Out Private Health Insurance?” Journal of Health Economics February 21, 2008, http://economics.mit.edu/files/6422.

[65] “Medicare Fraud: A $60 Billion Crime,” 60 Minutes October 23, 2009, http://www.cbsnews.com/news/medicare-fraud-a-60-billion-crime-23-10-2009/.

[66] Government Accountability Office, “High-Risk Series: An Update,” Report GAO-15-290, February 2015, http://www.gao.gov/assets/670/668415.pdf, p. 366.

[67] Government Accountability Office, “High-Risk Series: Progress on Many High-Risk Areas, While Substantial Efforts Needed on Others,” Report GAO-17-317, February 2017,  http://www.gao.gov/assets/690/682765.pdf, p. 579.

[68] Jonathan Ingram, “Stop the Scam: How to Prevent Welfare Fraud in Your State,” Foundation for Government Accountability, April 2, 2015.

[69] Wyoming Department of Health, “Introduction to Wyoming Medicaid,” p. 13.

[70] Enrolled Act 57, Wyoming Legislature, 63rd Session.

[71] Ibid.

[72] Government Accountability Office, “Medicaid: Additional Federal Action Needed to Further Improve Third Party Liability Efforts,” GAO Report GAO-15-208, January 2015, http://gao.gov/assets/670/668134.pdf, Appendix II, Table 3, pp. 27-28.

[73] Ibid., Figure 1, p. 10.

[74] Ibid.

[75] Kirsten Colello, “Medicaid Financial Eligibility for Long-Term Services and Supports,” Congressional Research Service Report R43506, April 24, 2014, https://fas.org/sgp/crs/misc/R43506.pdf.

Unwinding the Worst of Obamacare: How to End Medicaid Expansion

A PDF of this document is available on the Palmetto Promise Institute website.

As Congress prepares to consider legislation repealing and replacing Obamacare in 2017, unwinding that law’s massive expansion of Medicaid should stand at the top of the Congressional agenda. The source of most of the law’s spending, Medicaid expansion has resulted in exploding enrollment, creating state budget shortfalls that legislatures will need to remedy in 2017.

Moreover, Obamacare’s expansion of Medicaid to the able-bodied has undermined Medicaid’s original mission to provide services to the most vulnerable in society—including seniors and individuals with disabilities. The law effectively discriminates against vulnerable populations, providing states with more federal funding to cover the able-bodied than individuals with disabilities. Sadly, even as able-bodied beneficiaries have flooded into Medicaid, hundreds of thousands of individuals with disabilities continue to suffer long waits for needed care.

Congressional Republicans have put forward proposals seeking to reform Medicaid, transforming the program into a system of block grants or per capita allotments that will provide greater flexibility to states in exchange for a fixed federal spending commitment. However, such reforms are necessary—but not sufficient—in reforming the Medicaid program. First and foremost, Congress should take immediate action to unwind Obamacare’s Medicaid expansion, re-orienting the program to serve the most vulnerable populations for which it was originally designed.

 

History of Medicaid and Obamacare

As originally enacted into law in 1965, the Medicaid program provided federal matching funds to states to cover certain discrete populations, including the blind, seniors, individuals with disabilities, and needy parents. Obamacare changed the program fundamentally by expanding the program to all low-income adults; under Section 2001 of the law, all those with incomes under 138 percent of the federal poverty level (FPL) qualified for Medicaid coverage.[1] The statute as written made expansion mandatory for all states participating in Medicaid. States could decline to expand Medicaid, but in so doing, they would have had to forfeit all federal Medicaid funds, including funds for their existing aged, blind, and disabled populations.

In June 2012, the Supreme Court struck down the mandatory nature of Medicaid expansion as unconstitutionally coercive. Speaking for a seven-member majority, Chief Justice John Roberts concluded that “the threatened loss of 10 percent of a state’s overall budget [i.e., the federal share of Medicaid spending]…is economic dragooning that leaves states with no real option but to acquiesce in the Medicaid expansion.”[2] The Court left the expansion, and the rest of the law, intact, but prohibited the federal government from withholding all Medicaid funds from any states that chose not to pursue the categorical expansion to all adults with incomes under 138 percent FPL.

Because the Supreme Court ruling gave them a free choice about whether or not to embrace Obamacare’s Medicaid expansion, states—the “laboratories of democracy”—have taken different approaches. Some states, fearing that the federal government will renege on its promised high levels of funding, declined to expand. Some states passed a traditional Medicaid expansion, ratifying Obamacare’s massive new entitlement as its authors intended. Other states have utilized a system of premium assistance—also called the “private option”—that uses Medicaid dollars to subsidize private Exchange insurance coverage for individuals qualified for Medicaid under the Obamacare expansion.

Whether through the “private option” or traditional Medicaid, outcomes for states embracing Obamacare’s massive expansion of Medicaid to the able-bodied have been little different. States that have embraced Obamacare’s expansion have faced spiking enrollment and skyrocketing costs, all while perpetuating a system that encourages discrimination against the most vulnerable. Policy-makers should closely examine these cautionary tales as they look to rescind and replace Obamacare.

 

Exploding Enrollment, Skyrocketing Spending

The evidence among those states that have expended Medicaid demonstrates the massive effects on state budgets—due in large part to skyrocketing enrollment. A recent report by the Foundation for Government Accountability showed how the Medicaid rolls exploded in states that chose to expand the program under Obamacare. In a whopping 24 states that decided to expand, state Medicaid programs exceeded the highest enrollment projections:

  • Arizona predicted a maximum enrollment of 297,000; by September 2016, 397,879 had enrolled in Medicaid;
  • Arkansas predicted a maximum enrollment of 215,000; by October 2016, enrollment had reached 324,318;
  • California predicted a maximum enrollment of 910,000; by May 2016, enrollment had more than quadrupled prior maximum projections, reaching 3,842,200;
  • Colorado predicted a maximum enrollment of 187,000; by October 2016, enrollment hit 446,135;
  • Connecticut predicted a maximum enrollment of 113,000; by December 2015, 186,967 had enrolled;
  • Hawaii predicted a maximum enrollment of 35,000; by June 2015, enrollment had exceeded that projection, reaching 35,622;
  • Illinois predicted a maximum enrollment of 342,000; by April 2016, nearly double that amount—650,653—were enrolled;
  • Iowa predicted a maximum enrollment of 122,900; by February 2016, enrollment had reached 139,119;
  • Kentucky predicted a maximum enrollment of 188,000; by December 2015, enrollment more than doubled the initial expectation, reaching 439,044;
  • Maryland predicted a maximum enrollment of 143,000; by December 2015, enrollment reached 231,484;
  • Michigan predicted a maximum enrollment of 477,000; by October 2016, enrollment exceeded that projection, reaching 630,609;
  • Minnesota predicted a maximum enrollment of 141,000; by December 2015, enrollment hit 207,683;
  • Nevada predicted a maximum enrollment of 78,000; enrollment more than doubled those maximum projections, reaching 187,110 by September 2015;
  • New Hampshire predicted a maximum of enrollment of 45,500; by August 2016, enrollment reached 50,150;
  • New Jersey predicted a maximum enrollment of 300,000; twelve months after expansion began, in January 2015, enrollment totaled 532,917;
  • New Mexico predicted a maximum enrollment of 140,095; by December 2015, enrollment had reached 235,425;
  • New York predicted a maximum enrollment of 76,000; by December 2015, nearly four times as many had enrolled—a grand total of 285,564;
  • North Dakota predicted a maximum enrollment of 13,591; by March 2016, a total of 19,389 had enrolled;
  • Ohio predicted a maximum enrollment of 447,000; by August 2016, enrollment hit 714,595;
  • Oregon predicted a maximum enrollment of 245,000; by December 2015, enrollment hit 452,269;
  • Pennsylvania predicted a maximum enrollment of 531,000; by April 2016, enrollment had hit 625,970;
  • Rhode Island predicted a maximum enrollment of 39,756; in December 2015, enrollment reached 59,280;
  • Washington state predicted a maximum enrollment of 262,000; by July 2016, enrollment had more than doubled the highest enrollment projections, reaching 596,873; and
  • West Virginia predicted a maximum enrollment of 95,000; enrollment in December 2015 hit 174,999.[3]

While Medicaid is considered a counter-cyclical program—one in which enrollment typically rises during recessions, as household incomes shrink and individuals lose access to employer-sponsored coverage—Obamacare’s Medicaid expansion went into effect at a time of steady, albeit slight, economic growth. In other words, Medicaid enrollment under the Obamacare expansion could eventually exceed these figures—even as the actual enrollment numbers themselves exceeded projections prior to implementation, in some cases by several multiples.

By contrast, enrollment in health insurance Exchanges remains far below expectations set at the time of the law’s passage. Just before Obamacare passed in March 2010, the Congressional Budget Office (CBO) concluded that in 2016, the Exchanges would enroll a total of 21 million Americans.[4] For the first half of 2016, the Exchanges averaged enrollment of only 10.4 million—less than half the original CBO projection.[5]

Moreover, an analysis of Exchange enrollees shows enrollment concentrated largely among the individuals who qualify for the largest subsidies. According to an analysis conducted by the consulting firm Avalere Health, 81% of eligible individuals with income below 150 percent FPL—who are eligible for both subsidized premiums and reduced cost-sharing—have selected an Exchange plan.[6] On the other hand, only 16% of those with incomes between 300 and 400 percent FPL—who qualify for modest premium subsidies, but not reduced cost-sharing—have enrolled in Exchange coverage, while only 2% of individuals with incomes above 400 percent FPL—who do not qualify for subsidies at all—have signed up.[7] When it comes to both Medicaid expansion and Exchange coverage, the evidence suggests that only those individuals who receive free, or heavily subsidized, insurance have signed up in great numbers.

Just as enrollment for subsidized Medicaid under Obamacare dramatically exceeded expectations, so too have per-enrollee health costs for Medicaid participants. In the official 2014 report on the state of Medicaid’s finances, government actuaries acknowledged for the first time that per-enrollee costs for Obamacare’s newly eligible Medicaid enrollees ($5,488) exceeded those of previously eligible Medicaid participants ($4,914).[8] Actuaries had previously assumed that per-enrollee costs for the newly eligible population would be 30 percent lower than spending on existing populations—but the actual data suggested otherwise.[9] At the time, the actuaries believed some of the higher Medicaid spending arose because of pent-up demand—newly insured individuals requesting care for long-ignored medical conditions—a phenomenon they suggested might fade over time.[10]

But contrary to the expectations of government actuaries, costs for newly eligible beneficiaries continued to increase for a second straight year in 2015. Whereas the gap between per-enrollee costs for newly eligible beneficiaries and existing beneficiaries stood at approximately $500 in 2014, in the following year the gap grew to over $1,000—an average cost of $6,366 for every newly enrolled adult, versus $5,159 for every adult previously eligible for Medicaid.[11] As a result, the Congressional Budget Office likewise increased their estimates of per-enrollee spending on Obamacare’s Medicaid expansion—at least in the short term.[12] CBO still believes that per-enrollee spending on Obamacare’s Medicaid expansion will stabilize at lower levels over time, despite the evidence that actual costs continue to exceed prior assumptions by sizable margins.

The combination of higher-than-expected enrollment and higher-than-expected enrollee costs has created a “double whammy” for state budgets. While the federal government paid 100 percent of the cost to cover Obamacare’s Medicaid expansion population for the law’s first three years, states must contribute 5 percent of costs for the newly eligible beginning in 2017, rising to 10 percent by 2020—a share proving larger than expected, and one placing fiscal strains on states.

With the new entitlement costing much more than expected, states may have to cut other critically important spending priorities to continue funding Obamacare’s expansion of Medicaid to able-bodied adults. In Kentucky, costs for fiscal years 2017 and 2018 are now estimated at $257 million—more than double the original estimate of $107 million.[13] As a result, education, transportation, corrections, and other priorities will receive $150 million less from the state budget. Ohio’s budget for Medicaid expansion more than doubled from the $55.5 million originally projected, likewise robbing other important state spending programs.[14]

Even Democrats serving in state legislatures have expressed alarm at the rising tide of spending associated with Obamacare’s Medicaid expansion, and the other programs being cannibalized to pay for this new entitlement. In Oregon, facing a $500 million Medicaid-imposed budgetary shortfall over the next three years, Democratic state Senator Richard Devlin noted that “the only way to keep this [budget situation] manageable is to keep those costs under control, get people off Medicaid.”[15] In New Mexico, also facing pressures due to higher-than-expected enrollment, Democratic state Senator Howie Morales expressed anguish over the fiscal choices:

When you’re looking at a state budget and there are only so many dollars to go around, obviously it’s a concern. The most vulnerable of our citizens—the children, our senior citizens, our veterans, individuals with disabilities—I get concerned that those could be areas that get hit.[16]

Sen. Morales’ comments eloquently describe the plight that legislators face. States that expand Medicaid may have to cut important programs for individuals with disabilities, seniors, and the most vulnerable—to provide additional taxpayer funds for an expansion of Medicaid to able-bodied adults.

 

Undermining the Most Vulnerable

Supporters’ claims to the contrary, Medicaid expansion actually undermines principles of social justice and fairness—in which our society focuses the safety net first and foremost on those unable to provide for themselves. Expanding Medicaid under Obamacare serves only to endorse a horrifically unfair system created by the law, which effectively discriminates against individuals with disabilities—prioritizing coverage of able-bodied adults over protecting the most vulnerable in society.[17]

How does this happen in practice?

In 2013, the congressionally-appointed Commission on Long-Term Care heard testimony about the significant numbers of individuals with disabilities on waiting lists for home- and community-based services (HCBS).[18] Because coverage of HCBS—as opposed to institutional care in a nursing home—remains an optional service for state Medicaid programs, Americans in 42 states remain on lists waiting for access to home-based care.[19] More than 582,000 individuals—including nearly 350,000 with intellectual and developmental disabilities, over 155,000 aged and/or disabled individuals, over 58,000 children, more than 14,000 individuals with physical disabilities, and more than 4,000 Americans with traumatic brain injuries—remain on Medicaid waiting lists.[20] All these individuals could benefit from home-based care that would improve their quality of life, and could keep them from requiring more costly nursing home care in the future—yet they must wait in the Medicaid queue, in many cases for years on end.

Yet even as more than half a million Americans with disabilities wait for service, Obamacare prioritizes coverage of able-bodied adults over treating the most vulnerable—providing states as much as 45 cents on the dollar more to cover the able-bodied than individuals with disabilities. In 2017, the law provides a federal match for expansion populations—that is, individuals with incomes under 138 percent of the federal poverty level—of 95 percent, dipping slightly to 94 percent in 2018, 93 percent in 2019, and 90 percent in 2020 and future years.[21] Conversely, states wishing to expand coverage to individuals with disabilities—to eliminate their Medicaid waiting lists—will receive only the normal Medicaid matching rate, which for the current fiscal year ranges from 50 percent to 75 percent, based on states’ relative income.[22] In other words, in 2017, states will receive at least 20 cents, and as much as 45 cents, more on the dollar for covering able-bodied adults than they will ending waiting lists for individuals with disabilities seeking care.

Sadly, some states have responded to Obamacare’s perverse incentives in predictable ways. In the few years since the law took effect, the most vulnerable in society have suffered, while able-bodied adults received a new, taxpayer-funded entitlement:

  • A recent report from Illinois found that 752 individuals with disabilities died while awaiting access to home- and community-based services since Obamacare’s expansion took effect. Ironically enough, on the very day that Illinois voted to expand Medicaid to the able-bodied early, it also cut funding for medication and services provided to special needs children.[23]
  • In Arkansas, while Gov. Asa Hutchinson pledged to cut his state’s waiting list for individuals with disabilities in half, instead it has grown by 25 percent—even as Hutchinson has embraced Medicaid expansion to the able-bodied. The individuals waiting for care include ten-year-old Skylar Overman, whose mother worries she will die before she ever receives access to the in-home care she needs.[24]
  • In Ohio, Gov. John Kasich’s administration cut Medicaid eligibility for 34,000 individuals with disabilities, even while expanding the program to the able-bodied.[25]

Any law that results in these types of inequities—the most vulnerable cast aside to hasten access to care for the able-bodied—cannot be considered compassionate or just.

The disparities and perverse incentives present in Obamacare apply to South Carolina just as much as they do in other states. The law provides massive incentives for South Carolina to expand Medicaid to these able-bodied adults—many of whom may be unemployed or under-employed—rather than ending waiting lists for individuals with disabilities. In fiscal year 2017, South Carolina will receive a 71.3 percent match from the federal government for the traditional Medicaid program—including coverage for individuals with disabilities.[26] Yet Obamacare will provide a 95 percent match should the state choose to expand Medicaid to able-bodied adults. Effectively, the law provides South Carolina with nearly 25 cents more on the dollar should the state discriminate against the most vulnerable in our society.

South Carolina has rightly rejected the effective discrimination perpetuated by Obamacare, for multiple reasons. The state has a list of 5,656 individuals with disabilities waiting to receive HCBS.[27] Providing enough funding to end the Medicaid waiting list should stand as the state’s pressing health care priority—not expanding health coverage to able-bodied adults, many of whom would exceed the income limits to qualify for Medicaid if they pursued full-time employment. The fact that Washington does not agree with South Carolina’s decision to prioritize the most vulnerable—because federal officials want the state to put the able-bodied, rather than individuals with disabilities, at the head of the Medicaid line—is a reason for Washington to change its priorities, not South Carolina.

 

Not a Panacea for Hospitals

In many states debating the future of Medicaid under Obamacare, hospital associations have served as the biggest supporters of expansion. Hospitals claim that expanding Medicaid will result in substantial improvements to their bottom line, making the difference between facilities remaining open or shutting their doors. Unfortunately, however, Medicaid expansion will not make a meaningful impact on hospitals’ bottom line.

In September 2016, staff at the non-partisan Congressional Budget Office (CBO) released a report illustrating the minimal impact of Medicaid expansion on hospitals’ profitability.[28] The paper analyzed the effects of several changes associated with Obamacare on two variables: hospitals’ aggregate profit margin nationwide, and the percentage of hospitals with negative margins. The analysis estimated these two factors in 2025, and compared hospital profitability with 2011, before most of Obamacare’s major provisions took effect.

The CBO analysis found that, under the best possible scenario, hospitals will fare no better in 2025 than they did prior to Obamacare’s major provisions taking effect—and they could fare much worse. A scenario that coupled the law’s Medicare payment reductions with its coverage expansions yielded a best-case scenario similar to the status quo ante: about one quarter of hospitals with negative profit margins (26% in 2025, versus 27% in 2011), and an aggregate margin of 6.0% in both cases.[29] However, should hospitals fail to achieve the productivity gains contemplated under Obamacare, margins will fall significantly—with as many as half of all hospitals having a negative profit margin by 2025, and the industry as a whole barely profitable.[30] Thanks to Obamacare, hospitals will struggle mightily just to tread water—and many may end up sinking financially.

The CBO paper also specifically examined whether all states expanding Medicaid would make a material impact on its analysis. Would a broader expansion of insurance coverage overcome the damaging fiscal effects of Obamacare’s Medicare payment reductions? CBO concluded that broader Medicaid expansion would have a minor impact:

Differing assumptions about the number of states that expand Medicaid coverage have a small effect on our projections of aggregate hospitals’ margins. That is in part because the hospitals that would receive the greatest benefit from the expansion of Medicaid coverage in additional states are more likely to have negative margins, and because in most cases the additional revenue from the Medicaid expansion is not sufficient to change those hospitals’ margins from negative to positive. Moreover, the total additional revenue that hospitals as a group would receive from the newly covered Medicaid beneficiaries…is not large enough relative to their revenues from other sources to substantially alter the projected aggregate margins.[31]

Despite claims from some hospital executives that Medicaid expansion represents a make-or-break financial decision for their industry, non-partisan experts disagree.

The real problem for hospitals lies elsewhere within Obamacare, in the Medicare productivity adjustments that will affect hospitals each and every year. The Medicare actuary, along with other non-partisan experts, has made annual warnings every year since the law’s passage concluding the productivity reductions are unsustainable, and will make most hospitals, skilled nursing facilities, and home health agencies unprofitable in the coming decades.[32] The September CBO report confirms, and further validates, the Medicare actuary’s work highlighting the unrealistic nature of the payment reductions used to fund Obamacare.

As has been explained elsewhere, hospitals made a terribly unwise bargain when negotiating behind closed doors with the Obama Administration: They agreed to annual reductions in their Medicare payments forever in exchange for a one-time increase in the number of insured Americans.[33] Hospital lobbyists themselves know full well that the agreement they negotiated will ultimately destroy the industry.

At a televised event in August 2010, months after the law passed, Chip Kahn—the CEO of the Federation of American Hospitals, which represents the for-profit hospital industry—admitted his knowledge of Obamacare’s long-term effects on the hospital sector.[34] Then-Medicare actuary Richard Foster asked Kahn why hospitals agreed to what appears on its face to be a bad deal: Perpetual Medicare payment reductions in exchange for a one-time increase in insured Americans. Mr. Kahn first claimed that “from the hospital industry standpoint, there never was any kind of illusion that this was some kind of standard that we could meet in terms of improving quality”—even though the law itself assumes that hospitals will become more productive year-over-year, and reduces their Medicare payments accordingly.[35] When pressed on this issue—what will happen to the hospital industry when these year-on-year reductions cascade over time—Mr. Kahn eventually threw up his hands: “Now, you could say, did you make a bad deal? And fortunately, I don’t think I’ll probably be working after 2020. [Laughter.]…I’m glad my contract only goes another six years. [Laughter.]”[36]

The candid comments by the head of the Federation of American Hospitals months after the law passed say it all. In endorsing Obamacare, hospital lobbyists knew they were agreeing to provisions that would decimate their industry in the long run—but didn’t care, because those devastating provisions would only take effect well after they had retired. These incredibly cynical comments provide two additional reasons for legislators not to embrace Medicaid expansion. As both the CBO analysis and Mr. Kahn’s comments indicate, expanding Medicaid will not solve hospitals’ financial difficulties, which arise from a self-inflicted blow—namely, agreeing to massive Medicare payment reductions that overwhelm the comparatively small revenue gain associated with Medicaid expansion. But while expanding Medicaid will not save hospitals in the long term, it will serve to sink state budgets, leaving them with the worst of both worlds on the fiscal front.

 

Work Disincentives

Supporters of Medicaid expansion claim that the additional federal funds generated by expansion have created jobs and economic growth. In reality, expanding Medicaid has only created additional disincentives for work, according to non-partisan economic experts.

Many studies claiming Medicaid expansion will create jobs represent one-sided—and therefore highly biased—analysis, examining the federal revenue flowing into states as a result of expansion without studying the impact of the tax increases necessary to generate said revenue. However, many studies—including a seminal analysis undertaken by President Obama’s former chief economic adviser, Christina Romer—find that the economic damage—in technical terms, the deadweight losses associated with Obamacare’s tax increases—will vastly outweigh any job gains associated with Medicaid expansion.[37]

Ironically, one of the architects of Obamacare disputes the economic theories put forward by Medicaid expansion proponents. In a New York Times op-ed, former Obama Administration advisor Zeke Emanuel stated that “Health care is about keeping people healthy or fixing them up when they get sick. It is not a jobs program.”[38] Likewise, two Harvard economists note that viewing the health system as a jobs program will ultimately increase spending and raise health costs, limiting access for the poor: “Treating the health care system like a (wildly inefficient) jobs program conflicts directly with the goal of ensuring that all Americans have access to care at an affordable price.”[39]

Rather than creating jobs, the Congressional Budget Office (CBO) believes that Medicaid expansion will discourage work. In part of its 2014 update on Obamacare’s effects on the labor supply—in which CBO asserted that the law as a whole will reduce the supply of labor provided by the equivalent of 2.5 million jobs by 2024—the budget office noted that “expanded Medicaid eligibility under [the law] will, on balance, reduce incentives to work.”[40] For instance, individuals who exceed Medicaid eligibility limits by even one dollar could face hundreds, or thousands, of dollars in premiums and co-payments to obtain subsidized Exchange coverage; such workers will likely work fewer hours to keep their income below eligibility caps.

Medicaid expansion will discourage work precisely because most of the participants in the expansion are able-bodied adults of working age. According to analysis conducted by the liberal-leaning Urban Institute, nearly nine in ten individuals (88.1%) who would benefit from Medicaid expansion in South Carolina represent adults without dependent children.[41] Moreover, the vast majority of South Carolinians to be covered under expansion would come within the ages of 19-55—prime working ages for most Americans. More than one-quarter (27.6%) of would-be beneficiaries of expansion are aged 19-24, with a further 21.9% aged 25-34, and more than one-third (35.5%) aged 35-54.[42]

The Urban Institute data strongly suggest that the vast majority of the potential beneficiaries from Medicaid expansion in South Carolina constitute individuals who could be in work, or preparing for work. Indeed, many South Carolinians working full-time would generate enough income not to qualify for benefits under Medicaid expansion. In 2016, 138 percent of the federal poverty level represents an income of just under $16,400 for an individual.[43] A South Carolinian working a full-time job (40 hours per week, 50 weeks per year) at a wage of $8.25 per hour would earn $16,500 annually, thereby exceeding the limit to qualify for Medicaid benefits.

However, CBO believes the Medicaid “benefit cliff” will discourage individuals from working, precisely because they wish to remain eligible for benefits. A December 2015 CBO paper quantified this impact: Analysts concluded that Obamacare’s Medicaid expansion will reduce beneficiaries’ labor force participation by about 4 percent, by “creat[ing] a tax on additional earnings for those considering job changes” that would raise their income above the threshold for eligibility.[44]

While Obamacare’s massive expansion of Medicaid to the able-bodied discourages work and will reduce the labor supply, unwinding the expansion will produce salutary economic effects. Tennessee’s decision to roll back a Medicaid coverage expansion in 2005 encouraged more individuals to join the labor force, in order to obtain employer-sponsored health coverage.[45] If states wish to grow their economies and encourage work, unwinding Obamacare provides a better approach to achieving those objectives.

“Private Option” Results in Greater Public Spending

While some supporters of Medicaid expansion believe that the so-called “private option”—using Medicaid dollars to purchase Exchange coverage for beneficiaries—represents an efficient use of taxpayer dollars, evidence suggests otherwise. In 2012, immediately following the Supreme Court ruling that made Medicaid expansion optional for states, the Congressional Budget Office (CBO) considered expansion through health insurance Exchanges significantly more costly than expansion through traditional Medicaid:

For the average person who does not enroll in Medicaid as a result of the [Supreme] Court’s decision and enrolls in an Exchange instead, estimated federal spending will rise by roughly $3,000 in 2022—the difference between estimated additional Exchange [premium and cost-sharing] subsidies of about $9,000 and estimated Medicaid savings of roughly $6,000.[46]

Providing Medicaid beneficiaries private coverage through the insurance Exchanges could cost approximately 50% more, according to CBO’s 2012 estimate—a concern other non-partisan experts have flagged.

Government auditors have raised significant concerns that the “private option” waiver method of providing coverage improperly wastes taxpayer funds. In an August 2014 report, the Government Accountability Office (GAO) noted that, when approving the first instance of this “private option” model in Arkansas, the federal Department of Health and Human Services (HHS) “did not ensure budget neutrality,” which is required under federal law, in three key areas:

  • “HHS approved a spending limit for the demonstration that was based, in part, on hypothetical costs—significantly higher payment amounts the state assumed it would have to make to providers if it expanded coverage under the traditional Medicaid program—without requesting any data to support the state’s assumptions.” GAO concluded that these higher payment assumptions increased the program’s budget caps by $778 million—or nearly 20% of the approximately $4.0 billion, three-year budget for the program.
  • “HHS gave Arkansas the flexibility to adjust the spending limit if actual costs under the demonstration proved higher than expected…one which HHS has not provided in the past.”
  • “HHS in effect waived its cost-effectiveness requirement that providing premium assistance to purchase individual coverage on the private market prove comparable to the cost of providing direct coverage under the state’s Medicaid plan—further increasing the risk that the demonstration will not be budget-neutral.”[47]

The GAO report illustrates how, in order to ensure that Arkansas endorsed Obamacare’s massive new entitlement, federal officials raised the budgetary caps required under law so high that they became nearly meaningless—and then gave Arkansas officials discretion to raise them even higher. Such actions represent a disservice to taxpayers in all states, including South Carolina. The GAO report demonstrates why unwinding the law’s Medicaid expansion—in all its forms, including the “private option”—represents the wisest way to protect taxpayer funds.

 

How to Unwind Obamacare’s Medicaid Expansion: Congress

As Congress considers legislation to repeal Obamacare in January 2017, it should embark on a three-step approach to unwind the law’s massive Medicaid expansion:

  • First, Congress should take action to freeze enrollment in the Medicaid expansion immediately after enactment of the repeal bill. Freezing enrollment will hold those currently on Medicaid harmless, while beginning a process to roll back the higher levels of spending associated with Medicaid expansion.
  • Second, Congress should roll back the enhanced federal match for expansion populations, consistent with budget reconciliation legislation that Congress passed, and President Obama vetoed, during the 114th Congress.[48] Ending the enhanced federal match by 2019 will eliminate the discrimination inherent in Obamacare—whereby states receive a higher match to cover able-bodied adults than individuals with disabilities.
  • Third, Congress and states should reorient Medicaid towards the vulnerable populations for which the program was originally designed. Added flexibility from Congress, and the incoming Trump Administration, will allow states to achieve additional savings in their Medicaid programs—savings that will permit states to achieve other important priorities, like reducing waiting lists for individuals with disabilities seeking access to home-based care.

While proposals to transform Medicaid into a block grant or per capita allotment would give states welcome flexibility from Washington’s dictates, lawmakers must focus first on unwinding Obamacare’s Medicaid expansion—and eliminating distortions to the program caused by same. Any block grant or Medicaid funding formula that uses the years 2014 through 2017 as a “base year” will perpetuate the inequities caused by the Obamacare expansion—the massive enrollment of able-bodied adults, and the increased spending by states that used the prospect of a 100% federal match to increase Medicaid reimbursements. States that made the policy choice to keep Medicaid focused on the most vulnerable in society should not be penalized by a block grant formula that rewards those states who embraced Obamacare’s expansion of Medicaid to the able-bodied.

 

How to Unwind Obamacare’s Medicaid Expansion: The States

The states also have a role, albeit a limited one, in the undoing of Obamacare’s massive Medicaid expansion. As state legislatures reconvene, they can:

  • Continue to resist calls for expanding Medicaid to able-bodied adults. No state is expected to expand or choose a “private option” scheme in their new legislative terms, but fiscally responsible legislators should nevertheless arm themselves with the facts of this paper and prepare for misguided calls for subjecting more states to the excessive costs of Medicaid expansion.
  • Pass resolutions memorializing Congress to resist attempts to retain any of the core principles of Obamacare, including Medicaid expansion, as having a negative impact on state budgets and state policies. Both with respect to the costs of Medicaid expansion, and with respect to skyrocketing premiums in health insurance Exchanges, states and consumers alike are begging for relief from Obamacare. If enough states call for a top to bottom repeal and replace of Obamacare, including Medicaid expansion, consumers will win.
  • Prepare for possible common sense solutions, formerly known as “Obamacare off-ramps,” that will insure freedom for the insured without bullying businesses or individuals into plans they don’t like and doctors they don’t want. Members of both the United States House and Senate previously introduced such plans in the last Congress.[49] The new Trump Department of Health & Human Services, and specifically the Centers for Medicare and Medicaid Services (CMS), should provide guidance on blanket waivers designed to maximize flexibility for state Medicaid programs immediately upon taking office.[50]

 

Need for Reform

Even prior to Obamacare, Medicaid stood as a program in need of significant reform. The program has nearly tripled as a share of state budgets since 1987, yet provides beneficiaries with care of questionable quality.[51] Results from Oregon suggest that newly enrolled individuals in Medicaid used the emergency room at rates 40 percent higher than the uninsured—a disparity that persisted over time—yet did not achieve measurable improvement in their physical health outcomes.[52] With high (and growing) levels of spending coupled with subpar outcomes, states should use the flexibility promised from the Trump Administration to rethink their approach to Medicaid.

However, such efforts should come only after Congress has first backed down Obamacare’s massive expansion of Medicaid to the able-bodied. Restoring Medicaid as a safety net program for the most vulnerable in society would unwind more than $1 trillion in projected spending over the coming decade providing coverage to the able-bodied.[53] Just as important, it would remove the inequities created by Obamacare, and put all states on a level playing field for the reformed Medicaid program that should follow.

 

[1] Patient Protection and Affordable Care Act, Public Law 111-148, as amended by the Health Care and Education Reconciliation Act, Public Law 111-152, http://housedocs.house.gov/energycommerce/ppacacon.pdf, Section 2001(a).

[2] NFIB v. Sebelius, 567 U.S. __ (2012).

[3] Jonathan Ingram and Nicholas Horton, “Obamacare Expansion Enrollment Is Shattering Projections,” Foundation for Government Accountability, November 16, 2016, https://thefga.org/download/ObamaCare-Expansion-is-Shattering-Projections.PDF, p. 5.

[4] Congressional Budget Office, estimate of H.R. 4872, Health Care and Education Reconciliation Act, in concert with H.R. 3590, Patient Protection and Affordable Care Act, March 20, 2010, https://www.cbo.gov/sites/default/files/111th-congress-2009-2010/costestimate/amendreconprop.pdf, Table 4, p. 21.

[5] Centers for Medicare and Medicaid Services, “First Half of 2016 Effectuated Enrollment Snapshot,” October 19, 2016, https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2016-Fact-sheets-items/2016-10-19.html.

[6] Avalere Health, “The State of Exchanges: A Review of Trends and Opportunities to Grow and Stabilize the Market,” report funded by Aetna, October 2016, http://go.avalere.com/acton/attachment/12909/f-0352/1/-/-/-/-/20161005_Avalere_State%20of%20Exchanges_Final_.pdf, Figure 3, p. 6.

[7] Ibid.

[8] The numbers in parentheses represent revised 2014 data cited in the 2015 actuarial report, based on actual spending patterns. The numbers initially cited in the 2014 actuarial report were $5,514 for newly eligible adults, and $4,650 for previously eligible adults.

[9] Centers for Medicare and Medicaid Services Office of the Actuary, “2014 Actuarial Report on the Financial Outlook for Medicaid,” report to Congress, 2014, https://www.medicaid.gov/medicaid/financing-and-reimbursement/downloads/medicaid-actuarial-report-2014.pdf, pp. 36-37.

[10] Ibid.

[11] Centers for Medicare and Medicaid Services Office of the Actuary, “2015 Actuarial Report on the Financial Outlook for Medicaid,” report to Congress, 2015, https://www.medicaid.gov/medicaid/financing-and-reimbursement/downloads/medicaid-actuarial-report-2015.pdf, p. 27.

[12] For an analysis of the ways that the Medicare actuary’s office and CBO have changed their baseline projections of Medicaid spending over time, see Brian Blase, “Evidence Is Mounting: The Affordable Care Act Has Worsened Medicaid’s Structural Problems,” Mercatus Center, September 2016, https://www.mercatus.org/system/files/mercatus-blase-medicaid-structural-problems-v1.pdf, pp. 15-20.

[13] Christina Cassidy, “Rising Cost of Medicaid Expansion is Unnerving Some States,” Associated Press October 5, 2016, http://bigstory.ap.org/article/4219bc875f114b938d38766c5321331a/rising-cost-medicaid-expansion-unnerving-some-states.

[14] Ibid.

[15] Christina Cassidy, “Medicaid Enrollment Surges, Stirs Worry about State Budgets,” Associated Press July 19, 2015, http://www.bigstory.ap.org/article/c158e3b3ad50458b8d6f8f9228d02948/medicaid-enrollment-surges-stirs-worry-about-state-budgets.

[16] Ibid.

[17] See also Chris Jacobs, “How Obamacare Undermines American Values: Penalizing Work, Citizenship, Marriage, and the Disabled,” Heritage Foundation Backgrounder No. 2862, November 21, 2013, http://www.heritage.org/research/reports/2013/11/how-obamacare-undermines-american-values-penalizing-work-marriage-citizenship-and-the-disabled.

[18] The author served as an appointee to the commission, whose work can be found at www.ltccommission.org.

[19] Kaiser Family Foundation, “Waiting List Enrollment for Medicaid Section 1915(c) Home- and Community-Based Services Waivers,” Kaiser Commission on Medicaid and the Uninsured 2015 survey, http://kff.org/health-reform/state-indicator/waiting-lists-for-hcbs-waivers/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D.

[20] Ibid.

[21] Section 2001(a) of PPACA.

[22] “Federal Financial Participation in State Assistance Expenditures,” Federal Register November 25, 2015, pp. 73781-82, Table 1, https://aspe.hhs.gov/sites/default/files/pdf/167966/FMAP17.pdf.

[23] Nicholas Horton, “Hundreds on Medicaid Waiting List in Illinois Die While Waiting for Care,” Illinois Policy November 23, 2016, https://www.illinoispolicy.org/hundreds-on-medicaid-waiting-list-in-illinois-die-while-waiting-for-care-2/.

[24] Jason Pederson, “Waiver Commitment Wavering,” KATV June 15, 2016, http://katv.com/community/7-on-your-side/waiver-commitment-wavering.

[25] Chris Jacobs, “Obamacare Takes Care from Disabled People to Subsidize Able-Bodied, Working-Age Men,” The Federalist November 18, 2016, http://thefederalist.com/2016/11/18/obamacare-takes-care-disabled-people-subsidize-able-bodied-working-age-men/.

[26] “Federal Financial Participation,” Table 1.

[27] Kaiser Family Foundation, “Waiting List Enrollment.”

[28] Tamara Hayford et al., “Projecting Hospitals’ Profit Margins Using Several Alternative Scenarios,” Congressional Budget Office Working Paper 2016-04, September 2016, https://www.cbo.gov/sites/default/files/114th-congress-2015-2016/workingpaper/51919-Hospital-Margins_WP.pdf.

[29] Ibid., Table 6, p. 29.

[30] Ibid.

[31] Ibid., p. 34.

[32] For the most recent version, see John Shatto and Kent Clemens, “Projected Medicare Expenditures under an Illustrative Alternative Scenario,” Office of the Actuary, Centers for Medicare and Medicaid Services, June 22, 2016, https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/Downloads/2016TRAlternativeScenario.pdf.

[33] Chris Jacobs, “The Report Every State Legislator Should Read,” National Review September 27, 2016, http://www.nationalreview.com/article/440411/obamacare-medicaid-expansion-hospitals-wont-benefit-says-cbo.

[34] American Enterprise Institute, “Medicare after Reform: the 2010 Medicare Trustees Report,” August 6, 2010, video available through C-SPAN at https://www.c-span.org/video/?c4402939/chip-kahn.

[35] Ibid.

[36] Ibid.

[37] Chris Conover, “Will Medicaid Expansion Create Jobs?” Forbes February 25, 2013, http://www.forbes.com/sites/chrisconover/2013/02/25/will-medicaid-expansion-create-jobs/#73893e3e3d25.

[38] Ezekiel Emanuel, “We Can Be Healthy and Rich,” New York Times February 2, 2013, http://opinionator.blogs.nytimes.com/2013/02/02/we-can-be-healthy-and-rich/.

[39] Kate Baicker and Amitabh Chandra, “The Health Care Jobs Fallacy,” New England Journal of Medicine June 28, 2012, http://www.nejm.org/doi/full/10.1056/NEJMp1204891.

[40] Congressional Budget Office, “The Budget and Economic Outlook: 2014 to 2024,” February 2014, http://cbo.gov/sites/default/files/cbofiles/attachments/45010-Outlook2014_Feb.pdf, Appendix C: Labor Market Effects of the Affordable Care Act: Updated Estimates, pp. 117-27.

[41] Genevieve M. Kenney et al., “Opting in to the Medicaid Expansion Under the ACA: Who Are the Uninsured Adults Who Could Gain Health Insurance Coverage?” Urban Institute, August 2012, p. 9, Appendix Table 2, http://www.urban.org/sites/default/files/alfresco/publication-pdfs/412630-Opting-in-to-the-Medicaid-Expansion-under-the-ACA.PDF.

[42] Ibid., p. 8, Appendix Table 1.

[43] “Annual Update of the HHS Poverty Guidelines,” Federal Register January 25, 2016, pp. 4036-37, https://www.gpo.gov/fdsys/pkg/FR-2016-01-25/pdf/2016-01450.pdf.

[44] Edward Harris and Shannon Mok, “How CBO Estimates Effects of the Affordable Care Act on the Labor Market,” Congressional Budget Office Working Paper 2015-09, December 2015, https://www.cbo.gov/sites/default/files/114th-congress-2015-2016/workingpaper/51065-ACA_Labor_Market_Effects_WP.pdf, p. 12.

[45] Craig Garthwaite, Tal Gross, and Matthew Notowidigdo, “Public Health Insurance, Labor Supply, and Employment Lock,” National Bureau of Economic Research, NBER Working Paper 19220, July 2013, http://www.nber.org/papers/w19220.

[46] Congressional Budget Office, “Estimates for the Insurance Coverage Provisions of the Affordable Care Act Updated for the Recent Supreme Court Decision,” July 2012, https://www.cbo.gov/sites/default/files/112th-congress-2011-2012/reports/43472-07-24-2012-CoverageEstimates.pdf, p. 4.

[47] Government Accountability Office, “Medicaid Demonstrations: HHS’ Approval Process for Arkansas’ Medicaid Waiver Raises Cost Concerns,” Report GAO-14-689R, August 8, 2014, http://www.gao.gov/assets/670/665265.pdf, p. 3.

[48] Section 207 of H.R. 3762, Restoring Americans’ Health Care Freedom Reconciliation Act of 2015.

[49] Palmetto Promise Institute, “King v. Burwell: The Obamacare Off-Ramp?” Health Care Fast Facts May 2015, http://www.kbcsandbox4.com/palmetto/wp-content/uploads/2015/05/King-v-Burwell-Fast-Facts.pdf.

[50] Chris Jacobs, “Reforming Medicaid, Beginning on Day One,” Chris Jacobs on Health Care December 12, 2016, http://www.chrisjacobshc.com/2016/12/12/reforming-medicaid-beginning-on-day-one/.

[51] National Association of State Budget Officers, Fiscal Survey of States: Spring 2016, https://higherlogicdownload.s3.amazonaws.com/NASBO/9d2d2db1-c943-4f1b-b750-0fca152d64c2/UploadedImages/Reports/Spring%202016%20Fiscal%20Survey%20of%20States-S.pdf, p. 63; National Association of State Budget Officers, 1996 State Expenditure Report, April 1997, https://higherlogicdownload.s3.amazonaws.com/NASBO/9d2d2db1-c943-4f1b-b750-0fca152d64c2/UploadedImages/SER%20Archive/ER_1996.PDF, Table 3, p. 11.

[52] Amy Finklestein et al., “Effect of Medicaid Coverage on ED Use—Further Evidence from Oregon’s Experiment,” New England Journal of Medicine October 20, 2016, http://www.nejm.org/doi/full/10.1056/NEJMp1609533; Katherine Baicker, et al., “The Oregon Experiment—Effects of Medicaid on Clinical Outcomes,” New England Journal of Medicine May 2, 2013, http://www.nejm.org/doi/full/10.1056/NEJMsa1212321.

[53] Congressional Budget Office, baseline estimates for federal subsidies for health insurance, March 2016, https://www.cbo.gov/sites/default/files/recurringdata/51298-2016-03-healthinsurance.pdf, Table 3, p. 5.

How Obamacare Discriminates Against the Most Vulnerable

As previously predicted, many in the press have tried to define the Obamacare debate through the prism of the individuals newly insured by the law. One article has highlighted the election “through the eyes of Obamacare enrollees.” Liberal groups are trotting out studies—studies debunked years ago by a member of the Obama Administration—that claim repealing Obamacare would hasten the deaths of tens of thousands of Americans annually, due to lack of insurance coverage.

But what about Obamacare’s forgotten faces? What about the people who, instead of obtaining coverage because of Obamacare, didn’t obtain coverage because of Obamacare? What about the people with disabilities who quite literally have died on waiting lists to receive care—not despite Obamacare, but because of it.

Instead of talking about how Obamacare “ended discrimination against people with pre-existing conditions,” what about how Obamacare encourages discrimination against the most vulnerable?

The People That Obamacare Doesn’t Help

I’m talking about the individuals with disabilities—more than half a million nationwide—still on waiting lists to receive services, because Obamacare encourages states to expand Medicaid coverage to able-bodied adults, instead of serving them. They include people like Lindsey Overman and her 10-year-old daughter Skylar:

“She [Skylar] was born with a rare medical neurological condition called schizencephaly,” Overman told us.

In the past three months Skylar’s condition has worsened. Last month she had surgery to relieve pressure on her brain and her family is paying $400 per month just for transportation to and from a summer program. A Medicaid waiver would help with the costs that go along with at-home care for children with disabilities.

Skylar remains #754 on the waiver waiting list.

Because Obamacare encourages states to expand Medicaid to able-bodied adults, rather than provide services to individuals with disabilities like Skylar, the 10-year-old continues to wait—and wait, and wait—for needed care, which her mother thinks she will never see during her daughter’s lifetime.

Obamacare Favors the Able-Bodied, Not the Disabled

It’s Obamacare’s dirty little secret, and perhaps its most shocking. For the past three years, the law has provided 100 percent federal funding for states that expand Medicaid to new populations. That funding will phase down slightly beginning in January—the federal match drops to 95 percent in 2017, 94 percent in 2018, 93 percent in 2019, and 90 percent in 2020 and future years. But for the populations that qualified for Medicaid prior to Obamacare, the federal government provides a match rate that this fiscal year ranges from 50 percent to 75 percent, based on states’ relative income.

Estimates from the Urban Institute suggest that most individuals eligible for Obamacare’s Medicaid expansion are childless adults in their prime working years. Nationally, more than four in five (82.4 percent) of the would-be eligible adults are those without dependent children. More than five in six (86.1 percent) of the would-be eligible adults are aged 19 to 54.

In other words, the overwhelming majority of the adults covered under Medicaid expansion are able-bodied adults of working age. Yet Obamacare provides states with anywhere from 20 to 40 cents more on the dollar to cover these able-bodied adults in the expansion population than the individuals who qualified for Medicaid prior to Obamacare—including seniors and individuals with disabilities.

There Are Waiting Lists for Individuals with Disabilities

When serving on the congressionally-appointed Commission on Long-Term Care in 2013, I heard much about the waiting lists for care that individuals with disabilities face. Because Medicaid requires coverage of nursing home care, but considers home and community-based services (HCBS) optional, states facing fiscal pressures can—and most do—put individuals with disabilities on waiting lists to receive HCBS care. These individuals may benefit from home-based care—which could help keep them out of nursing homes—but cannot receive it, due to budget restrictions imposed by states.

The latest national estimates provide a sense of the magnitude of the problem. A total of over 582,000 individuals, in 42 different states, remain on waiting lists for home and community-based services, including:

  • 349,511 individuals with intellectual or developmental disabilities;
  • 155,697 aged, or aged and disabled, individuals;
  • 14,128 individuals with physical disabilities;
  • 58,635 children with disabilities; and
  • 4,006 individuals with traumatic brain injury.

At a time when more than half a million individuals with disabilities continue to wait for access to critically important personal care, Obamacare has provided a greater federal match to states that expand Medicaid to able-bodied adults. By giving states a strong incentive to expand Medicaid to new populations—and ignore the hundreds of thousands of individuals with disabilities still on waiting lists—Obamacare discriminates against the most vulnerable in our society.

Obamacare Doesn’t Help The Most Vulnerable

A report issued on Wednesday by the Foundation for Government Accountability highlights how Medicaid rolls have exploded under Obamacare—and how individuals with disabilities have suffered as a result. In Illinois, on the same day state legislators implemented an early Medicaid expansion for Cook County, they also voted to cut traditional Medicaid, costing one patient his access to seizure medication. In Ohio, Gov. John Kasich’s administration, even while expanding Medicaid to the able-bodied under Obamacare, cut eligibility for more than 34,000 individuals with disabilities.

And then there’s Arkansas—home of Skylar and Lindsey Overman, the 10-year-old standing at #754 on a waiting list. While Gov. Asa Hutchinson pledged to cut his state’s Medicaid waiting list in half, in reality the list has grown by nearly 25 percent in the past three years—a time when Arkansas expanded Medicaid under Obamacare. According to state estimates reviewed by the Foundation for Government Accountability, 79 individuals with developmental disabilities have died on the Medicaid waiting list since the state expansion took effect. I’ll say that again: Since Arkansas expanded Medicaid to the able-bodied, 79 individuals with disabilities have died on lists waiting for access to Medicaid services.

Conservatives Shouldn’t Ignore the Plight of the Disabled

In responding to the threat of Obamacare repeal, the left seems eager to develop a “parade of horribles” revolving around individuals who fear losing coverage under an Obamacare alternative. Yet those same groups have singularly failed to notice the tragic stories already in front of them—the individuals with disabilities facing discrimination, and an inability to access needed care, because of Obamacare itself.

Conservatives who have seen the results of this law on individuals with disabilities have no reason—none—take a back seat on the compassion front to any Obamacare supporter. Any measure that encourages states to discriminate against the most vulnerable represents a twisted view of compassion indeed.

This post was originally published at The Federalist.