August 20, 2012
In a battle to see who will pick up the cost of expanding Medicaid, hospitals are playing tug of war with financially distressed states that have chosen to opt out of the program.
When the Supreme Court decided states could not be penalized for not expanding Medicaid under Obamacare, Republican Governors Bobby Jindal of Louisiana, Rick Perry of Texas, and Rick Scott of Florida quickly announced that their states would not participate.
The three governors, whose states have among the highest uninsured populations and some of the most limited Medicaid programs in the country, say their states can’t afford Medicaid expansion and don’t want the federal government interfering with their programs. Texas, for example, spent over $27 billion in 2010 on Medicaid—fully seven percent of the all U.S. Medicaid spending. Florida spent over $17.3 billion, and Louisiana spent $7 billion. But hospitals in those states say they stand to lose money, and are urging their state leaders to reconsider.
Under Obamacare, the federal government will pay states 100 percent of the additional cost of expanding their programs to individuals and families earning up to 133 percent of the poverty level through 2014. After that, federal funding gradually decreases but does not drop below 90 percent.
Governors in states opting out of the program say expanding Medicaid comes with a costly price tag. From 2014-2019, an estimate by the Kaiser Family Foundation shows Florida would spend $1.2 billion, and Texas would spend $2.6 billion more over 2014-2019.
“Some might argue that the federal government will pick up the tab, so states won't have to worry. But the truth is, they're promising to pay for only the first couple of years before they begin shifting the burden to the states,” Gov. Scott of Florida said in a written statement.”
“If we don’t do this, Florida taxpayers will be paying to expand coverage to children and families in other states,” Dr. Peter Gorski, the chief health and child development officer of The Children’s Trust in Florida, told The Fiscal Times. “There is no rational reason not to do this.”
In Florida, an individual making $11,000 or more a year and adults without children would not qualify for the state’s current Medicaid program. If states decide not to move forward with Medicaid expansion, their uninsured residents will continue to seek care they can’t pay for in hospital emergency rooms, resulting in higher insurance premiums.
Bruce Rueben, president of the Florida Hospital Association, says choosing to pass on Medicaid expansion is “like doubling down on a bad deal. Opting into Medicaid expansion is the best thing for Florida hospitals and the best thing for people we serve.”
Meanwhile, some Democratic governors whose states are in financial difficulties say Medicaid expansion is the best solution. The Democratic Governor of Illinois, Pat Quinn, who recently signed off on $1.6 billion in cuts to the state’s Medicaid and health care programs, opted in for Medicaid expansion immediately following the Supreme Court’s decision to uphold the ACA in June.
Though Quinn believes the state will fare better economically by expanding its Medicaid program, some state lawmakers disagree and think it will pose a serious threat to the state’s crumbling economy, which is already burdened by high costs from the state’s healthcare programs. Illinois will spend an additional $1.2 billion from 2014-2019 on Medicaid expansion, according to the Kaiser Family Foundation.
The list of which states are opting out or opting in shows an emerging pattern.
With five red states opting out, including Florida, Louisiana, Mississippi, South Carolina and Texas, and 10 blue states opting in; California, Connecticut, Delaware, Hawaii, Illinois, Massachusetts, Maryland, Minnesota, Vermont, Washington, as well as the District of Columbia, the debate appears to not only be a fiscal one, but also an ideological one; small government versus big government, Republicans versus Democrats.
“Gov. Scott has a moral objection to the Affordable Care Act and is less concerned about the impact this will have on children and families,” Gorski said. “It will be a devastating mistake if he’s allowed to go through with this.”
But Governor Scott says his decision is based on the numbers.
“In Florida, Medicaid is the fastest-growing part of our state budget, hands down. It is increasing 3.5 times the rate of our revenue,” Scott said in a written statement. “And that’s before we even begin talking about an expansion. It doesn’t take a mathematician to figure out that such a trajectory doesn’t bode well for our budget.”
The Florida Center for Fiscal and Economic Policy estimated that if Gov. Scott were to change his mind and go forward with Medicaid expansion, an estimated 1.2 million new, low-income Floridians could be enrolled in the program.
While governors from states opting out of Medicaid expansion have acknowledged the need to reform the program, they say taking financial assistance from the federal government is not the answer and comes with a hidden price.
“Medicaid is a system of inflexible mandates, one-size-fits-all requirements, and wasteful, bureaucratic inefficiencies…expanding it would only exacerbate the failure of the current system and would threaten even Texas with financial ruin,” Gov. Perry said in a letter to Kathleen Sebelius, secretary of the Department of Health and Human Services.
But hospitals in Texas disagree with the governor, and say the state’s large uninsured population needs a health care solution.
“With a strained state budget, it’s hard to imagine addressing the uninsured problem in Texas without leveraging these federal funds, which now will go to other states.”
All five states opting out of Medicaid expansion are also opting out of state-run exchanges offered under Obamacare. They are also among 26 states in the multi-state lawsuit against the ACA. All states opting into Medicaid expansion aside from the state of Washington have Democratic governors.