The General Assembly should oppose the Medicaid expansion
One of the upsides to the Supreme Court’s decision in NFIB v. Sebelius, the Obamacare decision, was that states were given the option over whether to expand Medicaid as part of their implementation of Obamacare. Prior to the law change, the Medicaid expansion was a fait accompli – states either had to expand Medicaid or lose their Federal matching funds for Medicaid (the Federal government covers 50%) all together. Ruling that extortion of the states an unconstitutional coercion, the Roberts Court set up a decision that is likely to dominate this year’s General Assembly session: should Virginia expand Medicaid?
As a believer in bipartisan problem solving, I have long advocated that Republicans and Democrats should work together to resolve differences and present solutions to the issues facing all Virginians. I have spent a long time advocating for compromise and cooperation, and I’ve taken a lot of criticism for it. But I have steadfastly said that there are always going to be issues where we can’t compromise with Democrats and we shouldn’t. Sometimes it’s okay for Republicans to just say no.
This is one of those times. This is one area where we can’t afford to compromise. Virginia should not expand Obamacare by a major expansion of Medicaid.
McAuliffe said in the State of the Commonwealth Address that the Medicaid expansion represents $2.1 billion annually in Federal funds over the next three years – more than $5 million per day. “This is simply a good deal for the states that choose to take it.”
No, Governor, it isn’t. The expansion of Obamacare in Virginia by expanding Medicaid eligibility is a potential budget buster that we can’t afford. This isn’t free money from the federal government. In order to qualify for the funding, Virginia will have to alter our Medicaid eligibility requirements to allow for expanded coverage for all individuals from ages 19 to 65, including parents and adults without dependent children, and increasing the eligibility levels to allow anyone making up to 133% of the federal poverty level (FPL) to apply under the program.
Right now, Virginia Medicaid eligibility rules only cover older adults up to 80% of the FPL and parents up to 24% of FPL. Thus, this expansion could bring as many as 430,000 additional Virginians onto the Medicaid rolls if the General Assembly approves it.
The Federal Government has assured the states that it will cover 100% of the cost of the expansion from 2014 to 2016, but that number decreases incrementally from 100% to 90% over the next six years, finally going down to 90% in 2020. That means Virginia will be on the hook for the significant increase in Medicaid enrollees after FY 2016, with no additional revenues coming into the Commonwealth to cover those costs.
And what does that mean? Tax increases or devastating cuts to education, public safety or transportation.
The Commonwealth’s budget is balanced, as it is required to be under our Constitution, every year. But every year we do that by tinkering with as many different things as possible to balance the budget without draconian cuts and without tax increases. This expansion would throw a monkey wrench into that budgeting, forcing Virginia to cover the increased costs one way or another. That either means tax increases on all Virginians, or it means cuts to education, public safety and transportation. Neither of those options are acceptable to most Virginians.
Are there upsides to the Medicaid expansion? Sure. That’s one of the reasons why a large number of organizations that would otherwise be opposed to an expansion of entitlements that could lead to tax increases, like the Chamber, are moving closer towards full blown support. And it also why there will be some Republicans in the House and Senate are tempted to go along with the Governor on this. But regardless of the benefits, we have to weigh the costs along with the benefits.
Proponents claim that the costs will be met by reductions in other areas of the budget, but there’s no way to know that for sure, because the cost of Medicaid fluctuates based on use. And, frankly, since there’s no good way to project how much the 10% is going to cost, there’s no way to know if we’ll be able to afford it a few years from now. And even now, there’s been no real discussion over how to pay for Virginia’s increasing share in the post 2016 years.
Considering that Medicaid has seen record increases over the last twenty years (Medicaid spending between 1987 and 2009 has increased 813% nationally according to the Mercatus Center at GMU), it’s unlikely that the cost savings proponents anticipate are going to cover the large number of increased enrollees. Even proponents of the expansion accept the fact that Medicaid costs have grossly exceeded revenues over the last two decades.
And, yes, expanding Medicaid will increase the number of health insured Virginians. But isn’t Obamacare itself supposed to do that? Individuals who make close to the FPL but not enough to qualify for Medicaid are eligible for subsidies to allow them to purchase their own insurance through the Obamacare exchanges. So there is that option for the working poor, which was supposedly the primary reason for Obamacare to exist in the first place. And, again, the cost of the expansion will end up being borne by Virginia, even if the current law remains the same.
Federal law isn’t etched in stone. There is nothing stopping Congress from changing the formulas to require the states to pay more for Medicaid in the future, so even the 90% match can’t be taken for granted. And as Congress continues to deal with voter complaints about runaway government spending and deficits, the real way to solve those problems continues to be entitlement reform. It seems reasonable that any kind of entitlement reform would result in increased costs on the states, especially for joint state/federal programs like Medicaid and other social welfare programs.
And, from a fundamental fairness perspective, we have already heaped enough debt on future generations as it is. Expanding Medicaid may provide some benefits, but in the long run, it is simply unaffordable on the national level. There are an equally large number of purely philosophical arguments against the expansion, from expanding dependence on government, to fundamentally changing a program that was designed as a social safety net for the truly poor into a program that could push working families under the poverty line. But those questions only need answers if we decide that we can actually afford to pay for a Medicaid expansion.
At the Virginia level, we simply don’t know if we can afford to expand Medicaid over the long term. That’s one of the reasons why the legislature set up the Medicaid Innovation and Reform Commission – so that these issues can be explored and the economic impacts, costs and benefits can be analyzed. This isn’t something we should be rushing, but Governor McAuliffe is unwilling to wait for the Commission to do its duty. He simply wants the federal money as quickly as possible. Just accepting the money without looking at ways to contain the long term costs is a recipe for disaster.
There are plenty of areas where Republicans should work with the Governor – education reform, ethics reform and redistricting reform come to mind. But this is one area where Republicans in the General Assembly need to stand firm. An expansion of Medicaid with no reform and with no real plan to pay for it in the out years is simply not acceptable. The politics of the expansion are still evolving and it will be interesting to see what kind of a coalition is formed both for and against the expansion in the next few weeks.
When the chips are on the table, regardless of what the Governor wants, it’s up to the General Assembly to make this decision. It is critical that Republicans in the General Assembly – especially Republicans in the Senate – hold firm against the Governor’s rash rush to grab a couple billion in borrowed federal dollars that could leave Virginia on the hook for billions more. And those billions are dollars we don’t have the luxury to borrow.
Ensuring that all Virginians have access to health insurance is a laudable goal. This expansion of Obamacare, however, is the wrong way to do it.
