Daniels and Obamacare, Round Two
When conservatives start defending expansion of government, we’re in serious danger.


Michael F. Cannon

Indiana governor Mitch Daniels’s policy director, Lawren Mills, Grace-Marie Turner of the Galen Institute, and Bob Goldberg of the Center for Medicine in the Public Interest take exception to my NRO article “Mitch Daniels’s Obamacare Problem.” In brief, the trio believes that Daniels’s expansion of government-run health care is a conservative triumph. I can’t believe we’re even having this conversation.

To recap, the Healthy Indiana Plan, which Daniels signed into law in 2007, bears the following similarities to Obamacare:

1. Both expanded Medicaid, which crowds out private insurance — Obama to 138 percent of the federal poverty level, Daniels to 200 percent.

2. Like Obamacare, the Daniels plan raised taxes to pay for part of its expansion of government-run health care. (Daniels’s 126 percent hike in Indiana’s cigarette tax mirrors Obama’s 159 percent hike in the federal cigarette tax.)

3. Like Obamacare, the Daniels plan pushes part of its cost onto other states. Taxpayers in other states bear two-thirds of the spending burden (through the portion of Medicaid funding that comes through Washington, D.C.), and Daniels has proposed making other states pay even more.

4. Just as Obamacare will cost more than projected, an independent review found that Daniels’s cigarette-tax hike hasn’t kept pace with Indiana’s share of the spending, and further spending overruns may be on the horizon.

5. Both Obamacare and the Daniels plan contain a “slacker mandate.” Obamacare mandates that insurers cover “children” on their parents’ policies up to age 26. Daniels mandated that insurers do so up to age 24. (A similarity I overlooked in my original article.)

Turner says the Daniels plan “could not be more different” from Obamacare. I’ve just listed five ways that it could. And it gets worse:

6. Daniels has accepted Obamacare grants and is implementing an Obamacare “exchange” in Indiana — something he is under no obligation to do, contrary to what Turner claims.

That’s enough to cause problems for the repeal effort were Daniels to be the GOP’s presidential nominee.

Mills, Turner, and Goldberg defend the Daniels plan with an argument that boils down to this: Daniels expanded Medicaid with health savings accounts, and that makes it okay.

In fact, it may seem counterintuitive, but if anything, the fact that Daniels used HSAs makes his Medicaid expansion worse.

I support HSAs because they allow workers to reclaim control over a portion of their health-care dollars, and I support expanding them so workers can control all their health-care dollars. Within the context of Medicaid, however, the advantages of HSAs are actually a problem. Medicaid is welfare. By offering Medicaid enrollees the freedom and opportunity for wealth accumulation that HSAs create, the Daniels plan makes Medicaid more attractive, and thereby lures more people out of private insurance and into dependence on government.

Turner writes, “Cannon calls this a ‘taxpayer-funded health savings account’ and makes it sound like the state is handing out cash. It’s not. He needs to get his facts straight.” Actually, I wrote, “the government hands out coverage plus something a lot like cash.” Which is true: Enrollees can spend their HSA funds on any provider they choose, and whatever they don’t spend rolls over. That makes Indiana’s Medicaid HSAs a lot more attractive than either traditional Medicaid (which few doctors accept) or Medicaid managed-care plans (which limit coverage to a provider network). The only ways these taxpayer-funded HSAs are unlike cash is that enrollees can spend them only on medical care and must forfeit them if they leave the program. The incentive to remain enrolled in Daniels’s Medicaid expansion is therefore greater than in the rest of Medicaid. And if you do leave, there’s a use-it-or-lose it incentive to spend the taxpayers’ money before you go, which runs completely counter to the whole idea of HSAs. “It sounds to me,” Turner writes, “like Governor Daniels got the incentives right.” Really?