Politics & Policy

Expanding Medicaid Isn’t a ‘No Brainer,’ Ralph Northam

Ralph Northam at a campaign stop in Richmond, Va., in October. (Reuters photo: Jonathan Ernst)
Federal taxpayers get stuck with the bill.

Virginia governor-elect Ralph Northam told the Washington Post on Friday, as the paper paraphrased it the next day, that he “has no plans to try to force Republicans to accept a broad expansion of Medicaid.” By Sunday afternoon, when the Post published a story highlighting furious reactions from Obama-administration alumni and other left-wing activists, the Democrat had changed his tune.

“I have and will continue to advocate for Medicaid expansion because it is a no-brainer for Virginia families, our budget, and our economy,” Northam tweeted.

Northam’s assertion that expanding Medicaid — a program previously reserved for the elderly, the disabled, pregnant women, children, and impoverished families — to working-age adults with no kids and no disabilities “is a no-brainer” largely relies on a fundamental misunderstanding of how the expansion is paid for.

“Every year since 2013, Virginia Republicans have rejected proposals to expand Medicaid,” Northam wrote in an April op-ed. “To date, we have forfeited $10.4 billion of our tax dollars by forgoing expansion — money we literally send to surrounding states we are competing with.”

Republican Ohio governor John Kasich popularized this talking point in 2013, when he told state lawmakers they could “bring $13 billion of Ohio’s tax dollars back to Ohio” by expanding Medicaid, warning that their failure to do so would “send our tax dollars to another state to be spent.”

But that’s not how the Medicaid expansion works. Instead, as the Congressional Budget Office has explained, “of the costs that states incur for newly eligible enrollees under the ACA, the federal government will pay 100 percent from 2014 through 2016, a declining share during the next few years, and 90 percent in 2020 and thereafter.”

In other words, the law promises a bottomless pit of money for any and all states that expand Medicaid, rather than creating a fixed pot of money that’s divided up among states that opt in. “If a state doesn’t implement the ACA Medicaid expansion, the federal funds that would have been used for that state’s expansion are not being sent to another state,” a 2015 Congressional Research Service memo affirmed. “There is not a set amount of federal funding for Medicaid.”

Therefore, when a new state opts in, federal spending on Medicaid simply rises. In a 2014 forecast, the CBO estimated that federal Medicaid spending would double from 2013 to 2024 as a result of states’ expanding the program.

By the time CBO and the Congressional Research Service debunked Kasich’s fiscal arguments for Medicaid expansion, Kasich had already expanded Ohio’s Medicaid program unilaterally. Unable to follow Kasich’s example in Virginia by circumventing the General Assembly, outgoing Democratic governor Terry McAuliffe has settled for borrowing Kasich’s rhetoric.

“Since the Affordable Care Act became the law of the land, Virginia has left more than $10.5 billion of our own tax dollars on the table, rather than bring them back to Virginia to benefit those who need it most,” McAuliffe said on Monday.

Unlike McAuliffe, whose attempts to expand Medicaid have been stymied by Republican majorities in both houses of the General Assembly, Northam will have an evenly split House of Delegates and a narrowly Republican-controlled Virginia Senate to work with.

Northam’s pleas for the legislature to expand Medicaid will be amplified by lobbyists for wealthy nonprofit hospitals that are eager to push more of their costs to federal taxpayers, but Republican opponents have been vindicated by Medicaid-expansion data from across the country.

Medicaid-expansion data from across the country vindicate the policy’s opponents.

In less than three years, 24 expansion states added more able-bodied, working-age adults to their Medicaid rolls than they had projected would ever sign up, the free-market Foundation for Government Accountability (FGA) reported in a November 2016 study. Combined, those states expected they would never have more than 5.5 million expansion enrollees — but actual enrollment was 11.5 million by the end of 2016.

Within two years, Kentucky’s enrollment was 134 percent higher than the projected all-time maximum, West Virginia’s was 84 percent higher than its projected peak, and Maryland’s was 62 percent greater than state officials expected it would ever be, FGA found.

The enrollment flood — and higher per-enrollee spending than expected — has resulted in dramatic cost overruns, soaking federal taxpayers for billions and putting state taxpayers on the hook for a gradually increasing percentage of those costs. Kentucky’s expansion was nearly $2 billion over budget after 18 months. In Ohio, Kasich’s Medicaid expansion has cost twice as much as he said it would.

By rejecting Medicaid-expansion funding and the attached strings, Virginia Republicans have saved federal taxpayers billions of dollars and avoided crowding out state programs for the truly needy with spending on a new handout for able-bodied, working-age adults. They should continue to do so, whether their governor-elect likes it or not.

READ MORE:

Republican’s Choose Dessert-First Tax Strategy

The Biggest Welfare Crisis You’ve Never Heard Of

Medicaid Is Making Insurance Companies Rich

Jason Hart — Jason Hart is a health- and labor-policy analyst in central Ohio.

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