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No, Conservative Medicaid

Expansions Dont Work Either


December 2015
Nebraska legislators are fully aware that Medicaid was a failed, broken, costly program long before the Affordable
Care Act was passed into law. Manhattan Institute Senior Fellow and noted health policy expert, Avik Roy, went as
far as to call it a humanitarian catastrophe, the greatest scandal in America. Bigger than Madoff, bigger than the
Wall Street bailout, bigger even than the plight of the uninsured.1
The nation will soon spend more than $500 billion a year on Medicaid. Yet beneficiaries on average, fared worse
than those with no insurance at all. Medicaid is a program meant for Americas most vulnerable, but as a result of
low doctor reimbursement rates (which even President Obama has proposed cutting in the past to save money),
patients have an incredibly hard time accessing quality care. Sadly, 1 in 5 Americans 65 million people total are
enrolled in this broken program.
At the state level, Medicaid consumes about a quarter of all state spending and is growing, crowding out funding
for other priorities like roads, schools, and public safety as states struggle to comply with their balanced budget
amendments the federal government does not have.
Medicaid is squeezing state budgets, worsening the national debt, and delivering atrocious health outcomes. As
many Nebraska policymakers understand, expanding it should be a nonstarter.
But as desperation to entrench his signature achievement into the states grows, President Obama is purporting
to demonstrate increased flexibility in discussions around Obamacares Medicaid expansion. In several
traditionally conservative states, lawmakers have explored ways to expand Medicaid with reforms they consider
more conservative or market-based than traditional expansion, seeking to get back dollars that they send to
Washington. However, this thought process is based on a fallacy expansion does not bring back dollars. Each
Medicaid expansion is paid for with new debt and deficit more money borrowed from China, the bill for which is
passed onto our children. Medicaid expansion in any form is the wrong direction for state lawmakers in Nebraska
and elsewhere.
While many of these reforms are well-intentioned, they simply do not meet the muster of sound policy when
coupled with Obamacares Medicaid expansion. Ultimately, even the conservative plans amount to Obamacares
expansion, and have the same negative consequences other states that expanded Medicaid are experiencing, leading
other states to veer away.

ARKANSAS
Arkansas was one of the first states to negotiate a reformed Medicaid expansion with the Obama administration.
The so-called Private Option was billed as a compromise that would put people into private insurance rather than
traditional Medicaid, allow state flexibility, and save taxpayer dollars.
Exactly the opposite has come true and worse.
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Like traditional Medicaid expansion, the Private Option has added thousands of able-bodied, childless, workingage adults to the rolls of taxpayer-funded health insurance. While the expansion was meant to cover individuals
with incomes up to 138% of the poverty line, the truth is that nearly half of them have no income at all 40%
of these able-bodied, childless, working-age adults are not working, according to the Foundation for Government
Accountability (FGA). This is a population that receives no other welfare they need jobs, not Medicaid expansion.
Moreover, the program ran over-budget every single month of 2014, putting state taxpayers on the hook.
Enrollments far exceeded expectations and the program has been widely acknowledged among fiscally conservative
lawmakers and observers as an unsustainable boondoggle.
As detailed2 by FGA, the state projected about 172,000 enrollees at the end of 2014, but in reality had over 230,000
a 36% difference. In fact, they projected a maximum enrollment of 215,000 ever, but there were over 254,000
people enrolled as of May 2015.
Worse yet, an audit revealed3 the Private Option is riddled with waste, fraud, and abuse, like Medicaid programs
all over the country. They found over 20,000 people with out-of-state addresses. Over 100 were deceased prior to
authorization. Over 12,000 Medicaid enrollees have property values over $100,000, including one with a $419,000
property in Florida and another with a $749,000 property in New Jersey. Another 1,000 were incarcerated, meaning
they were already receiving care due to being in jail.
Finally, the Private Option has become an enormous political liability. The states Medicaid director resigned last
year. In November 2014, voters replaced 33 members of the state House and 5 senators with almost all of whom
made eliminating the Private Option their number one campaign priority.
This year, the legislature voted to end the Private Option in December of 2016. Shortly thereafter, Utah voted not
once, but twice to reject an Arkansas-style private option Medicaid expansion.
The Private Option was a well-intentioned plan that, like Obamacare from its inception, simply could not live up to
its promises. Private insurance is by nature far more expensive than Medicaid. But taxpayers simply cannot afford to
insure thousands of able-bodied, childless, working age adults without tax increases or cutting spending elsewhere
down the road.
Nebraska should learn from Arkansas mistakes, and avoid Medicaid expansion all together.

IOWA
Another state that pursued a so-called free-market Medicaid expansion was Nebraskas neighbor to the east, Iowa.
But like any other expansion, the Iowa Health and Wellness Plan uses federal dollars with strings attached to
provide the same services to the same population of able-bodied, working-age, childless adults hurting the states
most vulnerable and putting taxpayers at risk in the process.
Under the Iowa plan, Medicaid pays for the employer-sponsored coverage of people between 100 and 138 percent
of the poverty line. Those under 100 percent of the poverty line are dumped into traditional Medicaid. And those
above 100 percent of the poverty line without access to employer-sponsored coverage are redirected onto the
Obamacare exchanges.
However, ultimately two-thirds of the expansion population would be covered under old Medicaid. Moreover, as the
Foundation for Government Accountability details4, the Obama administration denied basically every request Iowa
made that would have added personal responsibility and saved money.
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Now, like Arkansas, Iowa is saddled with huge overruns. The state projected 81,000 enrollees at the end of 2014, but
ended up over 121,000 a 50% increase. They projected 122,900 enrollees ever, but had over 131,000 in May of
2015.
With all of the issues it is no wonder Iowa officials announced in July 2015 that they were closing the Medicaid
expansion waiver5.
Iowas Health and Wellness Plan a free-market Medicaid expansion entrenched Obamacare in their state,
dumped more people onto a failed program, created a disincentive for work, ultimately put state taxpayers at risk.
Nebraska should learn from Iowa that the Obama Administration has no interest in state flexibility only
expansion of their failed health care law.

UTAH
Another conservative state that felt as though doing nothing is not an option was Utah, and their Republican
governor Gary Herbert. Utahs Health Reform Task Force also formulated an alternative expansion, but the same old
problems did not disappear. Ultimately, the plan redirected limited funding away from Utahs most vulnerable and
toward coverage for able-bodied, childless, working-age adults, who make up 85 percent of the expansion-eligible
population.
Utah tried two iterations of alternative Medicaid expansion one Arkansas-style private option, and another
that would have taxed healthcare providers (and thus sick patients) to pay for the expansion. The latter would
have created sixteen new taxes on providers (including ambulances, podiatrists, chiropractors, and even nurses)
amounting to $50 million a year by 2021. It would have cost each hospital about $4.5 million a year and each
doctor about $800 a year costs that would inevitably have been passed down onto patients.
But thankfully, after seeing the results in other states that expanded Medicaid, the legislature rejected6 every proposal
to expand Medicaid under Obamacare.
Nebraska legislators should learn from Utah that there is no conservative or affordable route to Obamas
Medicaid expansion.

TENNESSEE
Earlier this year, Tennessee made headlines for seeking a nontraditional Medicaid expansion. But once again, the
Insure Tennessee plan would present a massive wealth transfer to thousands of able-bodied, childless, working age
adults, at the expense of taxpayers and more vulnerable patients.
Like the Iowa plan, part of the Insure Tennessee initiative would have forced taxpayers to subsidize employersponsored coverage for part of the expansion population. It included some cost-sharing, but the cost sharing
proposed in Tennessee was actually lower than the maximum allowed by federal Medicaid rules. Many of them
already have coverage, which would mean taxpayers are just giving money to people who already have and are paying
for health insurance.
Moreover, Governor Bill Haslams idea to ask $20 monthly premiums of adults above the poverty line was merely a
suggestion there would be no meaningful penalty for refusing to pay the bill.

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Most ironically, Tennessee has already tried, failed, and reverted with Medicaid expansion7 in its recent pass. The
state expanded eligibility in 1994. In the decade that followed, the states cost more than tripled. By the mid-2000s,
Medicaid was taking up one-third of the entire state budget. One governor even proposed instituting an income tax,
taking away the states biggest economic advantage.
Thankfully, in 2005 Democrat Governor Phil Bredesen rolled back the Medicaid expansion. 170,000 people were
kicked off the program. There was a 100% increase in job search activity, 63% increased their employment, and
90% of those increasing their employment gained employer-sponsored health insurance.
Medicaid expansion ruined the Tennessee budget. Eliminating the expansion provided an economic boom. Having
learned these lessons the hard way, the Tennessee legislature rejected even a reformed version of Medicaid expansion
three separate times in 2015.
Nebraska lawmakers should heed the lessons Tennessee learned the hard way about the unaffordability of
Medicaid expansion.

FLORIDA
In the Sunshine State, the Republican State Senate was united behind expanding Medicaid, supported by a powerful
hospital lobby, business groups, and other special interests. The Senate also sought to do so with conservative
reforms, such as work requirements and the institution of what amounted to a Medicaid marketplace, in which
enrollees above the poverty line would use premium credit to purchase coverage on the federal healthcare exchange.
Senate President Andy Gardiner sold this plan as a free-market, consumer-driven alternative to Obamacare
Medicaid expansion instead of a one-size-fits-all Washington approach. He ignored that this plan still had to meet
all of Obamacares requirements.
Moreover, proponents could not even accurately estimate a price-tag (other states overruns notwithstanding) for this
supposedly affordable, free-market Medicaid expansion plan. The Florida plan would have cost state taxpayers $96.6
million in the first two years, but the cost was unknown once the states full 10 percent share kicked in, in 2020.
The Florida House, standing firm on its fiscally conservative values, refused to pass this plan and other Medicaid
expansion plans, concerned about future unfunded liabilities. This led to a budget standoff, forcing a 20-day special
session and seven hours of debate on the floor which ultimately saw the plan fail 72-41. Three different iterations of
Medicaid expansion failed in Florida in 2015.

INDIANA
Finally, Indiana Republican governor Mike Pence unveiled what he called the most conservative plan to reform
Medicaid. Pence, known for his fiscal conservatism, was lauded significantly for his plan. The Pence plan certainly
includes several constructive free-market reforms to Medicaid but unfortunately, those reforms come at the cost of
adding thousands of newly eligible people to the program.
Governor Pences Healthy Indiana Plan 2.0 would make some improvements to the traditional Medicaid system
meant for the most vulnerable people in his state, but would at the same time crowd out services by adding
thousands of able-bodied, childless, working-age adults to the program who would otherwise be eligible for subsidies
on the health care exchanges.
Pences plan relies on Personal Wellness and Responsibility (POWER) accounts, which he says function similar to
Health Savings Accounts. However, under the Pence plan, taxpayers pick up the vast majority of the costs unlike
an actual HSA which encourages financial responsibility. Moreover, the new plan provides a far more robust (and
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costly) package of benefits, adding to Obamacares disincentive to work.


As the Foundation for Government Accountability8 shows, HIP 2.0 is far from a market-friendly plan. It is
ultimately a massive expansion of welfare that will cost taxpayers and patients alike.
While it may seem more palatable than President Obamas traditional Medicaid expansion, Indiana is similarly on
track to saddle taxpayers with cost overruns from its Medicaid expansion, crowding out state funding for other
priorities like roads, schools, and public safety.

CONCLUSION
Traditional Medicaid expansion doesnt work, and neither do its so-called free-market conservative alternatives.
The facts remain Medicaid is broken. It is in need of reform, not expansion. Regardless of what politicians might
claim, Medicaid expansion does not mean getting back the tax dollars that a state has paid in to the federal
government, as confirmed by the Congressional Research Service, the Congressional Budget Office, and numerous
think tanks. There is no pile of Medicaid dollars each new expansion is paid for with more deficit spending more
money borrowed from China.
Each state that expands the program not only puts its own patients and taxpayers at risk, but also drives the country
deeper into debt and takes the country one step further away from the ultimate goal of eliminating Obamacare and
replacing it with truly effective free-market reforms.
State after state is learning the hard way just how costly Medicaid expansion truly is. It is harming the vulnerable
populations for whom Medicaid is intended, taxpayers, the economy, and as we saw in Arkansas ultimately
harms the political careers of politicians who support this crucial provision of Obamacare, President Obamas
signature achievement.
Nebraska should not fall victim to those claiming they have a more market-friendly version of the expansion.
The Obama administrations claims of flexibility and willingness to work with states is a farce the same onerous
requirements and mandates will apply to any plan involved with Obamacare.
Instead, the state should reject any plan that adds more people onto taxpayer-funded health insurance using
Medicaid dollars, and pave the way for legitimate free-market health care alternatives that actually helps the
vulnerable, encourages work and responsibility, and protects taxpayers.

AMERICANSFORPROSPERITY.ORG/NEBRASKA
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