The 2015 legislative session has commenced, which means that the House and Senate will be hashing out their differences about how best to reform our state’s Medicaid program. The Senate favors a privatization approach, where multiple managed care companies (MCOs) compete for state contracts to manage North Carolina’s Medicaid populations. The MCOs are financially responsible for any cost overruns. Meanwhile, the House champions Accountable Care Organizations. Within this system, provider groups and health systems can partner together to provide medical care to populations of at least 5,000 Medicaid patients within a benchmark budget. Any savings or cost overruns will be split between providers and taxpayers.
Despite this divide, it looks as if the Republican-controlled legislature can agree that reform is not a precursor to Obamacare’s Medicaid expansion. Pro-Tem Phil Berger and Speaker Tim Moore officially announced that expanding Obamcare isn’t in the cards.
But the media report Governor McCrory being open to the idea in 2017, so long as medical benefits are linked to a work requirement. Other states with Republican Governors like Utah and Pennsylvania sought to link expansion with employment, but ultimately lost to the feds’ ruling:
U.S. Health and Human Services Department spokesman Ben Wakana said "encouraging work is a legitimate state objective" and the agency looks forward to continuing negotiations over Medicaid expansion. "However, work initiatives are not the purpose of the Medicaid program and cannot be a condition of Medicaid eligibility," Wakana said.
2017 also marks the year when Washington will cease to fully fund medical benefits for new enrollees, meaning state budgets will begin to shoulder the cost. Hospitals in Tennessee plan to circumvent this budget strain through provider assessments — a crazy shell game in which hospitals agree to be taxed, knowing that they will receive the collected revenue back plus more from the federal government in the form of higher Medicaid reimbursement. It’s pretty doubtful that scheme will work, however, considering that actual sign-ups are already surpassing projected enrollment for some expansion states.
While it is admirable that many states are rethinking their Medicaid programs, it is unfortunate that more GOP governors believe that opting for Medicaid expansion on the condition of incorporating optional Republicanesque components like health savings accounts, cost sharing, or work training programs will reduce government dependence.
Take Arkansas’s "private option," for example. This plan is sold through a private insurer on the exchanges, but it is funded by Medicaid expansion and only offers Medicaid benefits. Certain individuals are subject to cost sharing based on their income, but the program is riddled with disincentives designed to transition people off of the private option and onto the exchanges. Jonathan Ingram over at the Foundation for Government Accountability explains:
An individual earning slightly under 138 percent of the federal poverty level pays no premiums and has an out-of-pocket spending cap of $604 per year. But if that same individual earns one dollar more, he or she must pay $522 per year in premiums. The cap on his or her annual out-of-pocket costs would also increase to between $754 and $2,117 per year. Depending on how much medical care the individual uses, he or she would end up paying between $672 and $2,035 more simply by earning one extra dollar.
North Carolina should continue to be wary of Medicaid expansion. On average, over 80 percent of the Medicaid "gap" population represents non-disabled childless adults who normally do not receive benefits from other government assistance programs. Those who work a full time minimum wage job qualify for subsidized private coverage on the exchanges. Moreover, expanding the welfare state to this population would take away resources from those who truly cannot help themselves — children, the elderly, and blind and disabled populations.
Furthermore, the guarantee of a federal influx of funds is still tenuous. Congressional discussions continue about whether Medicaid’s perverse match rate formula will shift to a blended rate — computed as the average of a state’s current match rate, the children’s medical assistance match rate, and the expansion match rate. Put simply, the federal government may end up pushing more of the jointly financed tab onto state budgets. Even President Obama does not object to this idea, and our very own Senator Richard Burr has introduced legislation on the matter.
Whether or not the Supreme Court issues a June ruling that health insurance subsidies can only be distributed to state-established exchanges, Congress has the opportunity to re-examine the law. Health care coverage can be more affordable for low to middle income individuals if Congress decides to strike out the various health insurance mandates and excessive taxes imposed at the federal level. Access to medical care can also be more affordable if insurers can offer "copper" plans — a step below current bronze plans. Private coverage can still be partially subsidized for some, but to a much lesser degree. Policymakers should wait on expansion, and in the meantime configure legitimate ways to move more people away from government dependence.
Click here for the Health Care update archive.
You can unsubscribe to this and all future e-mails from the John Locke Foundation by clicking the "Manage Subscriptions" button at the top of this newsletter.
