A Medicaid conundrum
The U.S. Supreme Court's recent ruling on health care reform brings to mind Apollo 13 astronaut John Swigert's understated line: “Houston, we have a problem." Only now its Harrisburg and 49 other state capitals that have a problem: They must figure out the best political and economic fix to cope with this novel ruling.In a surprising twist, the high court ruled that the federal government can't force states to massively expand Medicaid, the joint federal-state public insurance program for the poor. That expansion was the centerpiece of a law designed to expand health coverage to uninsured Americans earning up to 133 percent of the federal poverty line, or $30,657 for a family of four.
Now, without a clear path forward, the nation's 50 governors are stuck at a fork in the road. They must decide whether to reject the plan or to expand Medicaid at the very time their states are struggling to maintain services to the most at-risk populations. It's not an easy decision, and the consequences could have long-term effects on programs designed to help children, the elderly, and mentally and physically disabled individuals.
Some states have already decided. Florida, Louisiana, Texas and several others with Republican governors have rejected expansion. New York, California and other Democrat-led states have embraced it.
Gov. Tom Corbett (R) has not yet made his decision. His cautious approach is wise. Just as passage of health care reform was a historic moment for our nation, so will be the governors' decisions for their states. Each understands that the social, financial and political ramifications will be substantial, and neither wants to reduce services to those already on Medicaid.
Medicaid remains one of the biggest fiscal challenges in every state. In Pennsylvania, which spends a larger share of its budget on Medicaid than almost every other state, the program consumes nearly a third of state spending, and costs are certain to rise even without expansion.
While the federal government has promised to pay the full cost of the new Medicaid expansion from 2014 to 2016 for those between 100 and 133 percent of the poverty level, its support will be ratcheted back year by year, and the costs to states will grow until they become financially staggering. Even with considerable federal support, according to the non-partisan Kaiser Commission on Medicaid and the Uninsured, Pennsylvania will spend $721 million for newly-eligible enrollees over the next six years.
While the future costs for newly eligible individuals are a concern, an even bigger problem is the costs we're not ready for today. More than 2.2 million Pennsylvanians currently rely on Medicaid for their health care needs. Yet, not all eligible residents enroll in the program.So, if a state agrees to expand its Medicaid program, aggressive outreach campaigns will result in an immediate swelling of Medicaid rolls --- not only by newly eligible enrollees targeted under the law, but also by those who have long qualified for the program but simply never enrolled. Policy wonks call this latter group the “woodworking” effect.
The federal government would cover only 55% of the costs of these new enrollees, and Pennsylvania's woodworking expenditures are expected to reach $1.3 billion, according to the Kaiser Commission.
In the most widely cited example of this problem, neighboring Ohio estimates it will cost taxpayers there $940 million during 2014 and 2015 alone to provide care for the 392,500 residents who already qualify for Medicaid and will come out of the “woodwork” to enroll when the health insurance mandate takes effect. The Ohio numbers should be a lesson for Pennsylvania and other states.
This is critically important because Medicaid reimbursements for much-needed services are already woefully inadequate. If more people join Medicaid, reimbursements for current recipients will inevitably decrease, waits for services will increase, and the frayed social safety net will tear. That won't be healthy for care recipients or their providers.
In his first budget address, Gov. Corbett said the state should be funding the "must-haves," not the "nice-to-haves"; it shouldn't expand programs or entitlements unless it can afford them now and in the future, and it shouldn't roll the dice with taxpayer dollars and expect the federal government to bail it out. He was right then, and he is right now.
The irony of health care reform is that, in its backers' zeal to provide health care to millions of uninsured Americans, they actually put some of our most vulnerable residents at risk. That is the Hobson's choice facing America's governors. Without new tax revenues or program cuts, there is simply no way to expand Medicaid.
That's why Gov. Corbett is right to take it slow and look at all his options. His best choice may be to start small and move slowly as the economy recovers. That would allow Pennsylvania to control costs, preserve current programs, understand the true costs of healthcare expansion, and plan appropriately for the future.
Universal health care is a noble cause, and it's one we must continue working toward. But the all-at-once Affordable Care Act may be too much, too soon.