Politics & Policy

Which State Will Be the First to Abandon the Obamacare Medicaid Expansion?

(Juan Moyano/Dreamstime)

President Reagan once opined that “government programs, once launched, never disappear,” calling them “the nearest thing to eternal life we will ever see on this earth.”

Today, Arkansas is proving why Reagan’s pithy sound bite has matured into a truism. In recent days, officials came as close as any state ever has to throwing in the towel on the Obamacare Medicaid expansion, but parliamentary maneuvers by Governor Asa Hutchison — a Republican — mean he’ll likely muscle through more funding for the program.

The Arkansas fight, however, is a leading indicator of what’s to come, as lawmakers around the country discover they got more than they bargained for when they chose Medicaid expansion — and it’s poised to explode their budgets.

Arkansas — a state President Obama lost by 24 points in 2012 — reached an unprecedented agreement with the administration to accept the Obamacare expansion, but only under the condition that the newly eligible population would enroll in private health plans, theoretically in order to avoid the many well-known problems of traditional Medicaid.

They called it the “private option,” and claimed it would control costs.

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Though it was hailed by the New York Times, President Obama, and even Hillary Clinton, problems mounted almost immediately. By the end of its first year in 2014, Arkansas had enrolled over 61,000 more people than the state expected to have by that point. It ran over budget every single month, and by July 2015, nearly 40,000 more people were in the program than the state had projected would ever enroll. Today, over 40 percent of the state is dependent on Medicaid.

The private option was supposed to be “budget-neutral” for the federal government, but federal auditors have calculated it will cost $778 million more than expected over just the first three years.

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After 2014’s bruising elections in Arkansas, it became clear that not only was expansion unaffordable, it was also unpopular. Dozens of pro-expansion legislators were defeated in 2014, including the chief architect of the private option.

So in 2015, the legislature passed and Governor Asa Hutchinson signed a bill that would end expansion on December 31, 2016, and restore the original Medicaid eligibility requirements. In March’s primary elections, the governor endorsed candidates, praising their vote to end the program.

#share#Despite the optics, though, Governor Hutchinson and several of his allies in the state legislature entered April 2016 intent on preserving the Obamacare Medicaid expansion in Arkansas. But they would have to find a way to fund the program in the fiscal session and get three-fourths of the legislature to vote in support — an important feature of the state constitution meant to protect Arkansas taxpayers from high taxes or reckless spending.

Since Hutchison didn’t have enough votes, he was determined to use parliamentary tactics to circumvent these taxpayer protections. Through a complex series of votes, Medicaid expansion is likely to survive in Arkansas, for now.

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But the budget scuffle has highlighted the harsh fiscal reality emerging in the Obamacare Medicaid-expansion program — and these lawmakers will have to own it. Beginning next year, Arkansas is obligated to share 5 percent of the program’s cost. Doing this would account for a whopping 60 percent of the year-over-year growth in the state’s budget. With a 10 percent state match on the horizon — coupled with the program’s over-enrollment, cost overruns, and waste, fraud, and abuse — Medicaid expansion will devour Arkansas’s budget over the next ten years.

The budget picture is similarly bleak in other states that took the plunge. Only 18 months into Ohio’s expansion, the state’s total Medicaid costs nearly doubled, to $4.05 billion. By next year, Buckeye taxpayers will be on the hook for over $130 million to meet the 5 percent state match, more than double the projected $55.5 million.

It’s clear that Medicaid expansion will begin swamping state budgets, and it’s inevitable that states will have to find ways to prove the Gipper wrong.

#related#One compromise the Obama administration approved for a 2011 eligibility expansion was to freeze new enrollments and allow the program to end through natural attrition as enrollee incomes grew. Several states, like Arizona, Maine, and Delaware, exemplify how this approach can work without abruptly kicking anyone off their insurance — as Obamacare has already done to millions.

Whatever the solution, as President Reagan attested, ending a government program is no small feat. But the Arkansas tremor signals that it’s only a matter of time. Elected officials must begin backing out of government programs like Medicaid expansion before they cripple us. Even in government, there can be no such thing as eternal life.

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