Rejection of Medicaid Expansion Will Save Federal Taxpayers Money

June 4, 2013

by James Wigderson
Special Guest Perspective for the MacIver Institute

Governor Scott Walker’s health care plan is under attack, including from some state senators within his own party. Walker’s plan would reject the federal expansion of the Medicaid program in favor of increasing health care coverage for those below the federal poverty line while allowing those above the line without coverage to enroll in the federal exchanges of private insurers.

By rejecting an expansion of Medicaid to cover 133% of the federal poverty line, Walker is rejecting a proposed 90% matching rate by the federal government. According to the MacIver Institute, “If the state were to take the expansion, it would cost Wisconsin $3.39 billion over the next seven years, but the federal government supposedly will cover $3.25 billion as a part of it.”

Supposedly is a key word. The Milwaukee Journal Sentinel article on a Legislative Fiscal Bureau analysis of the Walker plan editorialized in the headline, “Unreasonable assumptions may threaten Medicaid plan.” However, the unreasonable assumptions are on the part of those who believe that Medicaid reimbursement will remain at the levels promised by Obamacare.

As Congressman Paul Ryan pointed out, “The fastest thing that’s going to go when we’re cutting spending in Washington is a 100 or 90 percent match rate for Medicaid. There’s no way. It doesn’t matter if Republicans are running Congress or Democrats are running Congress. There’s no way we’re going to keep those match rates like that.”

President Barack Obama already tried lowering existing Medicaid reimbursement rates to the states with a proposed “blended rate” that was part of his 2013 budget proposal. There is no reason to believe that the federal government will not attempt to lower its Medicaid costs again given the rising national debt and the increasing costs of Obamacare.

We have to question policy makers that see federal money as “free money” for Wisconsin. Where do they think the money is coming from? Wisconsin taxpayers are federal taxpayers, too.

Increasing federal obligations to the states can only result in one of three things: more borrowing by the federal government, higher federal taxes, or the federal government will reduce its commitments to the states. Most likely it will be a combination of all three, and Wisconsin should not place itself at risk by betting on the federal printing press.

Critics of the Walker plan point to a recent analysis by the Legislative Fiscal Bureau that purports to show that the Walker plan may cost more in the long term. However, the LFB analysis relies upon the current projected federal reimbursement of Medicaid, and it does not take into account the potential long-term impact on the federal taxpayers in Wisconsin of increased federal obligations to the states.

What the LFB analysis does do, however, is say what a significant improvement the Walker plan is over the status quo.

“Although the Governor’s proposal is not a “full expansion” under the ACA, it represents a major commitment of additional state resources toward providing MA coverage to low income childless adults. These are individuals who, for the most part, are not able to receive MA benefits today due to closed enrollment in the Core Plan, which had 18,700 enrollees in April 2013. In addition, these individuals will not be eligible for premium assistance tax credits or cost-sharing subsidies under an ACA insurance exchange starting in 2014 because that federal assistance is not available to individuals with family incomes less than 100% of the FPL. By expanding MA coverage to these low-income childless adults, the Governor’s proposal may also help address issues related to uncompensated care and cost-shifting that currently occur within the system if these individuals are uninsured.”

The Walker plan will cover all individuals under the federal poverty line, instead of the current waiting lists for insurance coverage under the BadgerCare programs. This means that those most in need of state aid for medical coverage will receive it.

It also means that those above the federal poverty line will still be able to get subsidized private coverage under the Obamacare exchanges. Critics of the Walker plan caution that the premium costs may be too much for the enrollees. However, that is a flaw with the federal program, not the state program. If the private health care exchanges do not have the anticipated enrollment levels, it will be up to the federal government to make the required adjustments to the program benefits to make the health care policies more affordable.

Wisconsin may actually be increasing health care options for those that qualify for the exchanges. One-third of primary care physicians are not accepting new Medicaid patients. Where will all the new Medicaid patients under the Obamacare expansion go? Is it any wonder that a recent study showed Medicaid does not improve health outcomes for the poor? They’re better off in the exchanges.

When the credit cards are maxed out, the roof is leaking and dad is out of work, that’s not the time the family plans a vacation to Hawaii. However, the federal government is currently promising the states a trip to Hawaii every year.

Wisconsin policy makers reject the Walker plan have a responsibility to recognize that the high reimbursement rates promised by the federal government cannot continue. If they reject the Walker plan, they will be stuck with the awful choices of increasing taxes on Wisconsin residents to meet an increased Medicaid commitment or pushing Wisconsin residents into the exchanges they did not like in the first place.

It wasn’t that long ago that Wisconsin was trying to figure out how to cut $600 million from the Medicare budget while waiting lists grew for BadgerCare. The governor’s plan is a rejection of Doyle-era budgeting and directly helps those who need state aid the most. It does not rely upon false promises from the federal government or the false promise of free money. Policy makers need to look beyond the short-term politics and towards the long-term fiscally responsible plan by Governor Scott Walker.