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President Barack Obama released his proposed budget for 2017 days before America’s sappiest holiday. Similar to many expressions of love given each year around February 14, the budget packed much potential to please—and even more to disappoint.
Unlike most snubbed suitors, the lame-duck president faces no consequences for failing to satisfy. Obama thrusts his trillion-dollar gifts at the citizens of the United States, and these attempts to buy love, like so many boxes of chocolate and flowers purchased this time of year, were made using credit.
One of Obama’s naughtiest tokens of affection is the expansion of Medicaid—a jointly funded federal-state government program that uses taxes to provide health insurance to the poor. For states that expand their program’s rolls under Obama’s plan, the federal government proposes to pay 100 percent of the cost of newly eligible enrollees from 2014 through 2016. Thereafter, the federal share would decline until it reaches 90 percent in 2020. Under non-expanded Medicaid programs, the federal government pays for just 51 percent, and the state picks up the rest of the tab.
Rather than motivating states to help individuals rise above Medicaid, Obama’s budget encourages states to add citizens to their welfare rolls and tempts states to depend on federal assistance.
Similar to budgets his administration has proposed in previous years, Obama’s latest proposal creates perverse incentives, but some states just won’t swing that way.
At present, 19 states have declined to expand Medicaid, despite the prominent role the program plays in Obama’s signature health care law and the goodies states supposedly receive as a result of expansion. The Affordable Care Act (ACA) called on states to expand their Medicaid rolls to include people up to 138 percent of the federal poverty level. Only 26 states complied outright. Six expanded Medicaid through unconventional means, such as through waiver programs. The remaining 19 know a bad date when they see one.
Some states, such as Alabama and Wyoming, have already doubled down in 2016 on their previous rejections of Medicaid expansion. Gov. Robert Bentley (R) is leading Alabama away from traditional Medicaid altogether. Bentley announced on February 9 a pilot program that uses Section 1115 federal waivers to shift Medicaid patients and dollars to a new system that will tie fees to health care outcomes. His goal is to realign incentives, increase efficiency, and improve care.
State legislators in Wyoming continue to resist Medicaid expansion, despite mounting pressure. Gov. Matt Mead (R) once sued the federal government over ACA’s overreach, but now, in his second term, Mead is pushing for expansion, which the state’s Senate killed (again) earlier in February. Similar to the Obama administration, proponents of Medicaid expansion in Wyoming and other states are learning the hard way that “no” means “no”—or at least that it should.
States that didn’t learn this lesson in time have inadvertently taught it to wiser neighbors. A new study by Nebraska’s Platte Institute for Economic Research tells a cautionary tale. Arkansas expanded Medicaid in 2014 by steering newly eligible enrollees toward qualified health plans (QHPs) sold on the insurance exchange, but as Jonathan Ingram and Nicholas Horton explain in Arkansas’ Failed Medicaid Experiment: Not a Model for Nebraska, “The cost of expanding Medicaid through QHPs,” which is about $800 million over three years, “is far higher than the cost of traditional Medicaid expansion.”
Adding to Arkansas’ costs, the program attracted 85,000 more enrollees than predicted. “As a result, more than 41 percent of all Arkansans are on Medicaid, making Arkansas one of the most Medicaid-dependent states in the nation,” write Ingram and Horton.
Nebraska Gov. Pete Ricketts (R), determined to learn from his neighboring state’s fateful night with the king, has made Arkansas’ troubles a pillar of his argument against expanding Medicaid. Nebraska lawmakers, who have already rejected Medicaid expansion three times, will decide the issue again between now and April.
States that have held the line against expanding Medicaid should stand firm through Obama’s last year in office. Those enticed by the federal government’s offer to pay 90–100 percent of new Medicaid expansion costs should recognize this as Obama’s last-gasp attempt to rescue the Affordable Care Act from the fire, by marrying it to state budgets.
Obama’s budget sends a dangerous Valentine message to states that have thus far resisted Medicaid expansion: “Be mine.” Using the same perverse incentives by which entitlements trap millions of Americans in poverty and government dependence, the latest Medicaid lure coaxes financially strapped states into federal assistance that is temporary and illusory.