Mitch Daniels’s Obamacare Problem
His state’s health-care plan promotes dependence on government.


Michael F. Cannon

Mitt Romney isn’t the only Republican presidential hopeful with an Obamacare problem: Indiana governor Mitch Daniels, were he to become the GOP’s nominee, could also undermine the repeal campaign that has united the party’s base and independent voters.

To be sure, Daniels’s Obamacare problem is less obvious than Romney’s; the law that Romney signed as governor of Massachusetts in 2006 is essentially identical to Obamacare. It sent insurance premiums higher and left Massachusetts struggling with runaway Medicaid spending. Romney’s stubborn “no apology” stance on his own law could sink the repeal effort by making it appear unprincipled and political. President Obama is already laying the groundwork, most recently by reminding the National Governors Association that Romney remains “proud” of Romneycare.

But Mitch Daniels’s record also bears similarities to Obama’s, and his approach to Obamacare as governor has been an anchor on the repeal movement. Like Obama, Daniels increased cigarette taxes to expand government-run health care. Whereas Obamacare requires states to open their Medicaid programs to families of four earning $31,000 (138 percent of the federal poverty level), Daniels expanded Indiana’s Medicaid program to families of four earning $44,000 (200 percent of poverty). From 2008 to 2010, Indiana’s Medicaid enrollment spiked: Adult enrollments grew 21 percent, a rate nearly double the national average. By 2010, Daniels had enrolled another 62,000 Hoosiers in government-run health care.

Daniels and his conservative fans make much of the fact that this “Healthy Indiana Plan” (HIP) offers high-deductible coverage combined with a taxpayer-funded health savings account, whereas Obamacare simply expands traditional Medicaid with its notoriously lousy access to care. But that’s just another way of saying Daniels made Medicaid more attractive: Under his plan, the government hands out coverage plus something a lot like cash.

Conservatives should not consider it a selling point, then, that 94 percent of HIP enrollees are satisfied with the program, or that HIP enjoys a much higher retention rate than the regular Medicaid program, or that HIP’s waiting list is now 50,000 Hoosiers long. Health savings accounts are supposed to reduce dependence on government. Daniels is using HSAs to expand dependence on government.

Also like Obamacare, HIP is fiscally unsound and pushes states’ Medicaid costs onto federal taxpayers. Every $1 Indiana spends on HIP triggers at least $2 of spending by the federal government; no matter what state you call home, you’re paying for Mitch Daniels’s government-run health-care plan. Even so, an independent review found that Daniels’s cigarette-tax hike hasn’t kept pace with Indiana’s share of the spending, and further cost overruns may be on the horizon. If Obamacare remains on the books, Daniels wants to put all new Medicaid enrollees into HIP, with the feds paying 100 percent of the cost.

Meanwhile, Daniels is stunting both the momentum for repeal of Obamacare and his credibility as a standard-bearer for it. Indiana was party to a lawsuit in which a federal judge declared the entire law unconstitutional and void. That court order relieved Daniels of any obligations Obamacare creates. Shortly after that ruling, however, Daniels orchestrated a letter co-signed by 20 other governors suggesting “improvements” that they would like to see before implementing their own Obamacare bureaucracies. While those changes would effectively gut much of the law, they would leave Obamacare’s entitlement spending intact, and would even allow governors to offload the cost of their Medicaid programs onto taxpayers in other states.

The letter’s biggest flaw may be strategic. “Why is Governor Daniels,” wrote Pacific Research Institute health-care expert John R. Graham, “extending the hand of peace . . . when Obamacare has been mortally wounded in the courts and the U.S. House of Representatives?”