Pelosi Health Bill Would Expand Fraud, Undermine Federalism

Anyone who thought the defeat of Sen. Bernie Sanders in the Democrat presidential primaries ended the left’s quest for government control of health care should think again. Legislation introduced last week by House Democratic leaders, to be voted on by the House this week, would substantially expand Washington’s role in the welfare state, encouraging wasteful and fraudulent Medicaid spending and undermine the constitutional principles of federalism.

It seems bad enough that House Democrats decided to raid Medicare to the tune of nearly half a trillion dollars to fund their legislation. That these raided funds would go towards more than $200 billion in new Medicaid spending on individuals potentially ineligible for the program seems especially irresponsible.

Increased Fraud Risk

While expanding federal subsidies for exchange plans, the legislation would accelerate Obamacare’s movement to federalize Medicaid by placing additional requirements and mandates on states. For instance, the bill requires all Medicaid plans — even in states with approved Medicaid waivers — to cover individuals determined eligible for a minimum of 12 months.

Government audits have demonstrated that this policy of continuous eligibility leaves Medicaid programs ripe for waste, fraud, and abuse. In November 2018, Louisiana’s legislative auditor published a study showing individuals initially deemed eligible for Medicaid remained on the rolls despite having incomes as high as $145,146. Following the audit, Louisiana began more frequent eligibility checks and removed more than 30,000 ineligible individuals from the rolls — including at least 1,672 with incomes of over $100,000 — saving taxpayers approximately $400 million.

Broader economic studies confirm the experience of Louisiana. One report released last summer found that most of Obamacare’s coverage gains came from Medicaid and not insurance exchanges — even at income levels well above the threshold for Medicaid expansion. At a time a growing amount of evidence suggests millions of ineligible individuals are enrolling in Medicaid, the new House bill would sharply restrict states’ ability to remove ineligible individuals from the rolls.

On Friday, the Congressional Budget Office released its fiscal analysis of the Democrat legislation. The CBO concluded the continuous eligibility provision alone would result in $216.8 billion in new federal spending plus additional unfunded costs on states. A descriptive analysis of this provision was not provided by the CBO, but it is likely much of the $216.8 billion would fund Medicaid spending on individuals who beforehand would have lost eligibility for the program.

Unconstitutional Orders on States

Importantly, the bill undermines the flexibility of states in other ways, punishing any that have not accepted Obamacare’s Medicaid expansion to able-bodied adults. It would phase in a 10-percentage point reduction in non-expansion states’ federal match rate for administrative expenses — even as it imposes more administrative costs in the form of new reporting requirements. The move directly violates the Supreme Court’s 2012 opinion in NFIB v. Sebelius, which said Congress cannot “penalize states that choose not to participate in that new program [i.e., Medicaid expansion] by taking away their existing Medicaid funding.”

In permanently extending the State Children’s Health Insurance Program, the bill would eliminate the caps on federal funding that have defined the program since its creation nearly a quarter-century ago. It would also perpetually expand provisions first included in Obamacare that prohibit states from restricting eligibility. Together, these changes would essentially convert a program originally designed as a block grant into a permanent entitlement for states and individuals.

Wasteful Spending Is Obamacare on Steroids

Despite all these new restrictions on Medicaid and children’s health insurance programs, the bill does expand state flexibility in one important way: by eliminating all income eligibility thresholds for children. If states want to provide government-funded health care to the children of millionaires, the legislation would give them federal funds to do so, demonstrating that House Speaker Nancy Pelosi and her fellow Democrats only support Medicaid flexibility when states expand the number of people receiving government health care.

As Pelosi argues for a trillion-dollar bailout of state and local budgets, she has offered an excellent reason for Congress to reject both the bailout and the Obamacare “enhancement” act. Rather than giving states additional flexibility to remove ineligible individuals and narrow their budget gaps, the bill’s additional — and in at least one case, unconstitutional — mandates would cause Medicaid spending to balloon, leading to more state bailouts in subsequent years. Both taxpayers and the Constitution deserve better than this latest plan to put Obamacare on steroids.

This post was originally published at The Federalist.