Mike Pence Makes Medicaid A Presidential Issue
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Mike Pence Makes Medicaid A Presidential Issue

Is the "Pence plan" a market-oriented “alternative” to Obamacare expansion?

Medicaid Expansion is now officially a top issue in the 2016 presidential contest.

On Thursday, Mike Pence, the conservative Republican governor of Indiana and a likely 2016 White House aspirant, announced that he wants to make his state the 27th to say “yes” to Obamacare’s Medicaid Expansion. In doing so, he elevated the usually very local and somewhat soporific politics of Medicaid reform onto the national stage.

Pence is describing his “Health Indiana Plan 2.0” as a conservative, market-oriented “alternative” to a straight Obamacare Medicaid Expansion. But it’s telling that progressive health experts at Vox, ThinkProgress, and the Washington Post are celebrating it, while right-of-center experts at Heritage, The Federalist, and Forbes are all panning it.

The conservatives are right. The Pence plan is in fact a straight Medicaid Expansion with a few “conservative” bells and whistles added, such as personal spending accounts for enrollees and modest cost-sharing provisions; but these will almost surely be rejected or gutted by Obama’s bureaucrats, with whom Pence must negotiate. (Indiana’s legislature will almost certainly rubber-stamp whatever Pence and Obama agree to.)

Two camps are emerging among GOP governors: those who oppose the Obamacare expansion, and those who pretend to. Pence has now officially joined the pretender camp.

While senators who aspire to be president can easily duck the Medicaid issue by simply opposing Obamacare in toto, gubernatorial aspirants like Pence cannot. Medicaid is a state-run program (albeit with a lot of federal funding and red tape) and is the largest item in most state budgets. More importantly, it’s a state-level hot potato these days, thanks to Chief Justice John Roberts’s 2012 decision to make the Expansion optional for states.

How governors handle this particular hot potato reveals a lot about their governing philosophy and their views on health care, balanced budgets, and federalism.

Medicaid is a deeply flawed program, one that limits poor people’s access to doctors, offers them inferior health outcomes, and, according to a new NBER study, encourages them to prefer dependence over work.

Medicaid’s problems are a result of its joint federal-state structure, which is truly diabolical, incentivizing politicians at all levels to expand welfare dependency while making sensible reforms well-nigh impossible.

As a result, Medicaid is now among the biggest drivers of federal and state deficits, has become the default health plan for one in five Americans, and pays for half of all US births.

Expanding that isn’t very “conservative.” Which is why conservatives like Pence try to disguise what they’re doing behind a smokescreen of  “consumer-driven, market-oriented” rhetoric.

The real solution to Medicaid’s problems is to end its diabolical, “condominium” structure and devolve it completely to the states. Realistically, this will require a transitional period in which the program is converted into more or less strings-free federal block grants. But neither Congress nor the states is eager to go there right now, because state politicians want to keep the federal cash flowing and avoid imposing painful limitations on eligibility and benefits as long as possible—and so do federal politicians.

The “hell no” camp—which basically consists of Rick Perry of Texas and Bobby Jindal of Louisiana—seems to recognize that devolution is the answer (Perry even wrote a whole book on it).

The “pretenders,” by contrast—a group that includes basically all GOP governors and lawmakers outside the deep south and central plains states—seem to regard themselves as acting “pragmatically.” Devolution, they’re saying, is a pipedream. Get real!

With Pence’s announcement, we should brace ourselves to start hearing the word “Medicaid” a lot on the campaign trail.

Pretenders’ Arguments

The “pretenders” basic motive for opting into Obamacare is, of course, the money. They want the  money the feds are offering to states that agree to expand Medicaid; it’s basically free money in 2014, 2015, and 2016, and should cost only a few pennies on the dollar thereafter. Most “pretenders” live in states with a balanced-budget rule of some kind. And let’s admit it, plunging into the federal trough is a lot easier for politicians than cutting spending or raising taxes. But this bait has hooks in it. For one thing, there’s no guarantee the feds won’t limit their contributions down the road; in fact, it’s more likely they will. And Obama has been insisting that “conservative” Medicaid expansions (in Arkansas, New Hampshire, and now Indiana) be designed so it’s almost impossible for state lawmakers to end them, should the federal share drop. But of course, “pretenders” downplay all this. To their conservative supporters, they argue:

  • This isn’t Obamacare, it’s Medicaid.
  • This isn’t Medicaid, it’s a new, consumer-driven, market-oriented reform program that will be the wave of the future.
  • It’s really the kind of ‘compassionate conservatism’ our party needs to display, if we want to attract voters.
  • If our state forgoes this federal money, it will just go to other states.

Not one of these claims is true, but hey, they have to say something.

“Hell No” Arguments

Rather than summarize the “hell no” arguments, I’ll simply quote from Louisiana’s Bobby Jindal, who presented them quite nicely in a 2013 Times-Picayune op-ed:

Medicaid expansion would be bad for Louisiana’s taxpayers and bad for our health care system. . . .

First, as a general principle, we should not move people from private insurance onto government-run programs. . . .

[Second, w]e should measure success by reducing the number of people on public assistance. . . .

Third, Medicaid expansion could cost Louisiana taxpayers up to $1.7 billion over the first 10 years of implementation, and the cost will keep rising. . . .

Fourth, . . . [e]xpanding the program will make it even harder for Louisiana to invest in programs that will grow the private sector, not the government sector, and to reduce our tax burden. . . .

Fifth, there are better ways to improve health care outcomes for the uninsured and to do so in a more cost effective manner. . . . [S]tates should be given the flexibility to design their own programs for their own populations rather than implementing a one-size-fits-all Washington mandate.

Sixth, contrary to what the president believes, borrowing money from China to expand government spending is not economic development. . . .

Jindal concludes:

This argument over Medicaid expansion is more than a fight about the Left’s desire for a single-payer health care system, it’s more than a fight about dollars and cents, and it’s more than a fight about expanding a program that already delivers subpar outcomes. Rather, the fight over Medicaid expansion is a microcosm of this president’s push towards centralized government control. We are day by day giving up more and more of our freedoms to an ever larger and more powerful government. This president has shown through his policies and rhetoric that he does not trust the American people, does not believe in a local control approach to the problems we face, and instead prefers to expand the power, the price and the reach of government. The era of big government is here.

Governor Pence, how do you respond?

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