Wednesday, July 29, 2015
Situation critical: Obamacare costs set to pummel state budgets
States receiving federal Obamacare expansion cash will soon be hit with a share of the program’s exploding costs.
In most of the states expanding Medicaid, enrollment has dramatically exceeded projections — no problem for states in the short-term, since federal taxpayers are covering all benefit costs.
But each participating state will have to pay 5 percent of its expansion’s benefit costs in 2017. The state share will increase to 10 percent by 2020.
If a 10 percent state share sounds manageable, bear in mind that California’s Obamacare expansion has enrolled 2 million people. Enrollment is around 600,000 per state in Illinois, Michigan and Ohio.
With costs exceeding $500 per enrollee per month in many states, even a 5 percent state share will cost millions — or tens of millions — every month.
How will states pay their share? Encouraged by estimate-shattering enrollment, some expansion advocates are calling for tax hikes.
“Exceeding the initial projections for the number of West Virginians who enrolled in the Medicaid expansion is a very good thing,” Terri Giles, director of West Virginians for Affordable Health Care, said in an email to Watchdog.org.
West Virginia should pay its share of expansion costs with a tobacco tax hike, a new fee assessment on care providers, or both, Giles said.
Hospitals and other health-care providers “are profiting from having more paying patients and substantially reduced uncompensated care,” she pointed out.
WVAHC believes Medicaid expansion is improving residents’ access to health care and can be funded without cuts to education, transportation or other public services.
In Maryland, Maryland Health Care for All policy and communications director Matthew Celentano agrees.
“We know that having a much higher enrollment level than was originally anticipated is a good thing,” Celentano told Watchdog.org.
“We think a smart economic and public health manner in which to take care of that extra cost would be to raise the state tobacco tax to cover the cost of the Medicaid program, which we know is a brilliant program that saves lives and saves us all money.”
Maryland increased its tobacco tax by $1 per pack in 2007 to pay for a previous expansion of Medicaid, Celentano noted.
Mary Kay Clunies-Ross, vice president of communications and public affairs for the Washington State Hospital Association, noted Obamacare expansion is paid for, in part, with cuts to Medicare and uncompensated care payments.
“It’s millions and millions and millions of dollars in every state, so that’s already paying for the expansion,” Clunies-Ross told Watchdog.org.
How Washington state would cover its share of Obamacare expansion costs “wasn’t part of the legislative conversation” over the recently passed state budget, she said.
In Washington, Clunies-Ross says, state share for the expansion is still expected to be offset by savings to previously existing programs.
To varying degrees, this is true in every state: making health care for low-income residents the responsibility of federal taxpayers doesn’t cost less overall, but it looks good for state budgets.
Obamacare’s Medicaid expansion — meant to be mandatory for states but rendered optional by the Supreme Court — is different from the traditional Medicaid program in two critical ways.
First, the promised 90 percent permanent Obamacare match rate is much higher than the match for traditional Medicaid, which ranges from 50 percent to 74 percent, depending on the state.
Second, the expansion transforms a program previously targeted at the most vulnerable populations into a sweeping welfare program for working-age adults with no kids and no disabilities.
Obamacare expansion gives states a reason to cut programs for the most needy first, because states bear a larger share of traditional Medicaid costs.