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N.C. policymakers should reject Medicaid expansion, state insurance exchange

New JLF book offers ideas to promote real health care reform

Contact: John Hood
919-828-3876
jhood@johnlocke.org

February 04, 2013

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Click here to view and here to listen to John Hood discussing the John Locke Foundation's recommendations for N.C. health care policy.

RALEIGH -- North Carolina should reject both the proposed Medicaid expansion and state-based health insurance exchange tied to the 2010 federal health care law. The John Locke Foundation's new book says those two decisions would help state leaders focus on addressing real health care problems.

First in Freedom: Transforming Ideas Into Consequences for North Carolina explains how state policies that promote competition and reduce mandates offer a better solution than the federal plan often labeled Obamacare.

JLF is releasing its book as Gov. Pat McCrory and state lawmakers weigh decisions about both the Medicaid expansion and the health insurance exchange. McCrory cited a new state audit in raising questions last week about North Carolina's Medicaid program. The N.C. Senate could vote this evening on Senate Bill 4, which would reject Medicaid expansion and a state-run exchange.

"In essence, policymakers now find themselves at a critical decision point," writes Sean Riley, JLF Adjunct Policy Analyst. "One path would see states voluntarily establish exchanges and expand Medicaid, serving as agents of the federal government and becoming further beholden to federal largesse and regulations."

"The other would see states opt out of state-based exchanges and Medicaid expansion, serving as stewards of real health reform and requiring the federal government to take responsibility for deeply flawed policies passed against the will of the public," Riley added.

Riley explains that the federal law falls short of its stated goals. "The law's provisions fail to address health care costs and quality of care, instead opting for more spending, taxes, and regulation," he said. "Rather than serve as a formula for true reform, the law exacerbates the underlying problems in health care, leading to increased costs and ultimately reducing access to quality care."

North Carolina leaders are fortunate that the "twin pillars" of the federal law -- the insurance exchanges and the Medicaid expansion -- give states "considerable leverage" over nearly $1.66 trillion of $1.68 trillion in projected new health care spending.

First In Freedom details problems and unresolved questions linked to the exchanges. Key questions involve the state's potential administrative costs, level of control, and role in distributing new health care subsidies funded by Obamacare's taxes and penalties.

Under one legal interpretation of the federal law, North Carolina could derive economic benefits by rejecting a state-run exchange, Riley explains. It's possible that subsidies would be available only in states with state-run exchanges. If so, North Carolina employers and many individuals could be exempt from mandates and penalties.

"While this would be a considerable victory for individuals, the consequences for employers would be strikingly larger," Riley said. "If employers are exempt from mandates to provide coverage for employees, states refusing to establish exchanges would stand at a considerable advantage in attracting businesses compared to states where employers are mandated to provide coverage. North Carolina would potentially be in a position to attract employers from other states by refusing to create an exchange."

Shifting to Medicaid, Riley details existing problems linked to that joint federal-state program. The federal health care law does nothing to fix those problems, he said. "Rather than leave states to reform their Medicaid programs to meet new economic challenges, the federal government simply shifted more money into a system that was unsustainable," he said. "The 2010 federal law essentially doubles down on Medicaid by expanding eligibility."

Medicaid expansion would place additional burdens on North Carolina to maintain its current eligibility standards, while opening the door to a total enrollment of more than 2.2 million people, or more than 20 percent of the state's population. Federal budget concerns also raise questions about the total bill for state taxpayers in future years, Riley said.

While it makes sense for North Carolina to reject both the state-based health insurance exchange and Medicaid expansion, state leaders can seek solutions to the underlying problems that prompted the federal health care law in the first place, Riley said.

"Fundamentally, health care delivery in the United States needs to move away from the current system in which patients are unaware of the true costs," Riley said. "While the short-term benefits in the form of subsidies and tax credits have the allure of seemingly being 'free,' they come with a price. Once individuals become dependent on the government, it is no longer the patient or the doctor who is in control, but government."

North Carolina should pursue increased Medicaid flexibility through waivers or block grants, eliminate overly burdensome licensing requirements and certificate-of-need laws, and reduce mandated benefits tied to state health insurance policies.

"The strongest strategy for blunting the federal government's attack on federalism begins with holding the federal government accountable for the laws it passes," said JLF President John Hood. "Refusing to build state exchanges and refusing to expand Medicaid places the responsibility for the law in the hands of those who support it."

"There is a solution: competitive markets," Hood added. "Pursuing free-market policies gives rise to innovations that cannot be created by bureaucrats. The multitude of problems facing the nation simply cannot be solved through a government fiat coming from Washington. Under any policy proposal, all citizens should remain free to choose a health plan that best suits their needs."

Copies of First in Freedom: Transforming Ideas Into Consequences for North Carolina are available at the John Locke Foundation's online store.

For more information, please contact John Hood at (919) 828-3876 or jhood@johnlocke.org. To arrange an interview, contact Mitch Kokai at (919) 306-8736 or mkokai@johnlocke.org.

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