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The Myth Of ‘Alternative’ Medicaid Expansions


Last week, Pennsylvania Gov. Tom Corbett became the ninth Republican governor to expand Medicaid under the Affordable Care Act. He will likely not be the last. Indiana Gov. Mike Pence is actively negotiating with the Obama administration, and GOP leaders in Tennessee and Wyoming are reportedly developing expansion proposals of their own.

As Republican governors cave, a narrative is taking shape that the Obama administration is willing to work with state leaders in good faith and seriously address their concerns in exchange for expanding Medicaid under the ACA. Sometimes the media refers to these GOP proposals as “alternatives,” as if states were not expanding their Medicaid programs at all but devising something wholly new. Because the White House has shown a willingness to compromise and accommodate Republican ideas, the argument goes, the only possible justification for rejecting Medicaid expansion at this point is irrational ideology or partisan politics.

This is nonsense. It’s like saying states should have set up their own health insurance exchanges in order to have more control over them. Remember that argument? Turns out the exchanges were never going to be anything but a mechanism to deliver standardized insurance plans according to federal rules. No wonder most states opted for the default federal exchange in the end. Whatever control they might have had over the exchanges was merely cosmetic—a thin ruse to get states to implement an otherwise rigid federal policy on their own dime.

So too with Medicaid expansion. The “accommodations” the White House has granted to a handful of GOP-controlled states pay lip service to the notion of state flexibility while rejecting any substantive reforms to traditional Medicaid.

A Closer Look at the Medicaid Expansions

The deal Corbett cut with the feds is a case in point. In negotiations with the Centers for Medicare and Medicaid Services (CMS), the governor requested dozens of changes to Medicaid for the expansion group (those earning less than 133 percent of federal poverty, or $15,500). He wanted to tie cost-sharing reductions to employment and job training, for example, and increase co-pays for a non-emergency ER visit from $8 to a whopping $10.

Other states have agreed to Medicaid expansion alternatives only to discover the concessions they thought they won were illusory.

Almost all these requests were denied. In fact, as Josh Archambault and Nic Horton noted at Forbes, “not a single ‘state-unique’ request was approved as included in Corbett’s original application. Of the roughly 24 changes he asked for, only 3 were granted, but in severely watered down forms.”

This should not come as a surprise. Other states have agreed to Medicaid expansion alternatives only to discover the concessions they thought they won were illusory. Arkansas’ much-vaunted “private option,” whereby the state would use Medicaid expansion funds to pay for private coverage on the exchange, obliged the state to pay for all Medicaid benefits not covered by a private plan and also kept all cost-sharing restrictions in place. In practice, this meant Medicaid expansion enrollees would get superior private insurance, plus all the additional Medicaid benefits, but wouldn’t be charged higher co-pays or deductibles than those in the traditional Medicaid program. That’s partly why Arkansas ran into massive cost overruns earlier this year, prompting state leaders to seek a federal bailout.

The media nevertheless continues to propagate the myth that minor bureaucratic tweaks to Medicaid are something more than window dressing on the standard Obamacare Medicaid expansion. A piece from Vox’s Sarah Kliff last week, for example, posited that the Obama administration has been willing to bend Medicaid to entice GOP governors to expand, but not break it. It’s unclear what Kliff means by “bend,” since almost all the changes CMS has approved for “alternative” expansion plans involve things that were allowed under federal waivers prior to the ACA.

Ending Health Care Innovation

The one case Kliff cites where a state was arguably doing something innovative in its Medicaid program prior to the ACA—the pre-Pence Healthy Indiana Plan (HIP), which uses health savings accounts to encourage cost-conscious health care consumption—is actually a model lesson in why states should not embark on Medicaid expansion negotiations with the White House. As I explained in these pages back in May, Pence’s Medicaid expansion scheme—dubbed HIP 2.0—simply dresses up an entitlement program to look like consumer-driven health coverage, which it manifestly is not.

Medicaid is an entitlement program, after all, which means you can’t kick anyone out if they’re eligible, no matter what.

Consider the details of Pence’s expansion proposal. While Kliff rightly notes that under the original HIP, enrollees had to contribute a monthly premium to their health savings accounts (HSAs) or get kicked out of the program, she fails to mention that HIP 2.0 would get rid of such requirements. If enrollees don’t pay their premiums, they’ll simply be bumped down to a “HIP basic” plan, which still requires nominal co-pays, but paid out of an HSA account funded entirely by Medicaid. Deductibles would increase, but who cares? They would be paid with taxpayer dollars, defeating the entire purpose of using health savings accounts in the first place.

Kliff writes that HIP 2.0 “would, by far, be the broadest use of health-savings accounts in the Medicaid program—so broad that Pence wasn’t initially sure the White House would sign off.” Why might the White House refuse to sign off? Because the old HIP program kicked people out if they didn’t pay their premiums and dumped them back into traditional Medicaid. If you want to put the entire Medicaid population into something like HIP 2.0, as Pence is proposing, you can’t require enrollees to pay anything. Medicaid is an entitlement program, after all, which means you can’t kick anyone out if they’re eligible, no matter what. Federal law simply won’t allow it.

Don’t Look at the Feds Behind the Curtain

And here we arrive at the heart of the problem with Medicaid expansion: it’s a federal entitlement program, and the feds write the rules—thousands of pages of mind-numbing rules, down to the minutest detail—and every one of them trumps whatever conflicting rules a state might want to put in place.

Republican governors are bending over backwards to call their schemes anything but Medicaid expansion.

Republican governors like Corbett and Pence know this, and are therefore at pains to appear as though they’re winning big concessions from the Obama administration. They want their constituents to think they’re getting something important and substantive in return for capitulating. They are bending over backwards to call their schemes anything but Medicaid expansion. They are loath to admit that expansion is even a feature of Obamacare, let alone one of its pillars.

The media is trying to do the same thing, although for different reasons. If they can make it seem like the White House will meet GOP governors halfway on Medicaid expansion, governors who refuse to negotiate with the feds must be acting in bad faith. They must be ideological. They must be obtuse. Most of all, they must not care about the poor.

As intellectually dishonest as these tactics might seem in light of the plain facts, conservative leaders should be paying close attention—because it’s working.