Medicaid Expansion Is Proving to Be a Bad Bargain for States

New ObamaCare enrollees and costs have exceeded estimates and threaten to swamp budgets.
By Evelyn Everton & Chris Hudson

Advocates in Washington of the Affordable Care Act have been fighting tooth and nail to preserve the president’s signature health-care law—and they’re fighting even harder to expand it in the states. Conservative lawmakers in our home states of Utah and Florida recently defeated a combined three proposals to expand Medicaid under ObamaCare. They were absolutely right to do so, as the fiscal messes in states that did expand Medicaid demonstrate.

Recall that the Affordable Care Act was designed to essentially bribe states to expand their Medicaid programs: The feds offered to pay 100% of additional costs through 2016, dropping to 90% by 2020. This “free money” prompted 30 states and the District of Columbia to take the deal. Democratic activists have joined with state hospital lobbies to pressure lawmakers in the remaining 20 state capitals to follow.

That was certainly the case this year in Utah and Florida, where we live. This spring the Utah state Senate passed a Medicaid expansion bill backed by Gov. Gary Herbert, who espoused the “free money” argument during his January State of the State address. “We can either watch our hard-earned tax dollars remain on the table in Washington, D.C.,” he said, “or we can bring back a significant amount of our own money to be spent on Utahans.” The more conservative House, which noted the proposal’s $328 million price tag over 10 years, never passed the bill out of committee.

In September Mr. Herbert and five other state leaders—colloquially, the “Gang of Six”—came back with a revised, and even worse, offer. The proposal would create 16 new taxes on health-care providers, amounting to roughly $50 million annually by 2021. Starting in 2017, this would cost each hospital about $4.5 million a year, and each doctor roughly $800. Taxes would also have been levied on ambulances, podiatrists, opticians, chiropractors and even nurses. House Republicans rejected it 56-7 in an October caucus vote, effectively killing Medicaid expansion for the rest of this year.

A more heated fight consumed Florida this spring, when Senate leaders tried to fold Medicaid expansion into the state’s annual budget. According to the Florida Senate Committee on Appropriations, it would cost state taxpayers $96.6 million in the first two years, and a yet-to-be -determined amount when the state assumed its full 10% share in 2020.

The Florida House, concerned over the unknown future liabilities, refused to pass the plan. This led to a budget standoff, forcing a 20-day special session in June. After almost seven hours of debate, the chamber rejected the Senate’s proposal 72-41.

Florida and Utah taxpayers will thank their legislators in the years to come. Consider the experience of the states that did expand Medicaid. “At least 14 states have seen new enrollments exceed their original projections, causing at least seven to increase their cost estimates for 2017,” the Associated Press reported in July.
The AP says that California expected 800,000 new enrollees after the state’s 2013 Medicaid expansion, but wound up with 2.3 million. Enrollment outstripped estimates in New Mexico by 44%, Oregon by 73%, and Washington state by more than 100%.
This has blown holes in state budgets. Illinois once projected that its Medicaid expansion would cost the state $573 million for 2017 through 2020. Yet 200,000 more people have enrolled than were expected, and the state has increased its estimated cost for covering each. The new price tag? About $2 billion, according to the Chicago Tribune. TPUB -3.17 %

Enrollment overruns in Kentucky forced officials to more than double the anticipated cost of the state’s Medicaid expansion for 2017, the AP reports, to $74 million from $33 million. That figure could rise to $363 million a year by 2021.

In Rhode Island, where one-quarter of the state’s population is now on Medicaid, the program consumes roughly 30% of all state spending, the Providence Journal reports. To plug this growing hole, Rhode Island has levied a 3.5% tax on insurance policies sold through the state’s ObamaCare exchange.

Even Ohio, whose Republican Gov. John Kasich is running for president on a platform of fiscal responsibility, finds itself in a Medicaid bind. State spending on the program has grown by $5.8 billion since 2011. The Ohio Department of Medicaid projects that by 2017 spending will total $28.2 billion—a 59% increase during Mr. Kasich’s tenure.
Unlike the federal government, most states have strict balanced-budget requirements. As Medicaid costs spiral, lawmakers must cut spending from vital priorities like education and infrastructure, raise taxes or do both.

Which is to say that expanding Medicaid under the pretense that it represents “free money” from the federal government is the epitome of being penny-wise and pound-foolish. State legislators in Florida and Utah who rejected these temptations deserve much credit for their principled stands. Lawmakers in the remaining 18 states that have yet to accept ObamaCare’s Medicaid expansion would do well to follow their lead and stand firm against this deceptive bargain.

Ms. Everton and Mr. Hudson are Utah and Florida directors of Americans for Prosperity.

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