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By Josh Archambault and Nic Horton and —Mr. Archambault is a Senior Fellow, and Mr. Horton a Policy Impact Specialist, at the Foundation for Government Accountability.
Late last week, the Obama administration unveiled the terms and conditions for Pennsylvania’s Medicaid expansion, referred to as “Healthy PA.” The details of the federal government’s terms confirm Washington has become increasingly rigid in what it will permit within a “state alternative” waiver request, killing any notion of state flexibility or a true partnership with states.
We also saw Medicaid expansion supporters in Pennsylvania branding Healthy PA the GOP plan, while organizing themselves as the voice of opposition to it, calling instead for full, traditional ObamaCare Medicaid expansion. The result of this shift is to hijack the debate and put it in terms of either the GOP expansion versus straight-up ObamaCare expansion in the hope of eliminating the third perspective of those legitimately opposed to Medicaid expansion—whether that expansion is Corbett’s or Obama’s.
No More Pretending
The Obama Administration used to give lip service to Republicans’ so-called alternatives that they were not Medicaid expansion. Now, they don’t even bother pretending these GOP “designed” proposals are anything other than straight expansion.
ObamaCare expansion supporters grasp what too many Republican Governors have not — these “alternatives” use Medicaid dollars to pay for Medicaid benefits for a population that becomes eligible for Medicaid under ObamaCare’s Medicaid expansion. “Flamboozled” is the term some have used to define this phenomenon of believing Medicaid expansion to be something other than what it really is.
Gov. Tom Corbett (R-PA) is the latest Republican to be flamboozled, having fallen into this trap with his Healthy PA plan. He appears to believe that as long as you call it something else it isn’t really expansion and won’t have the same consequences to patients and taxpayers. But the old adage rings as true in Harrisburg today as ever: if it looks like a duck, walks like a duck, and quacks like a duck, it’s a duck.
Governor Corbett joins fellow Republicans in Indiana, Arkansas, Iowa and elsewhere in being flamboozled by the Obama Administration into expansion while still thinking they have done something “historic.” Reality is much harsher: these Republicans are merely embarking down a perilous path towards future cuts for the most vulnerable already struggling on the frayed Medicaid safety net.
Who is Put on the Chopping Block with ObamaCare's Medicaid Expansion?
Our colleague Jonathan Ingram has written extensively on the dangerous and perverse incentives in ObamaCare’s Medicaid expansion. Put simply, truly needy patients already on Medicaid are competing with—and losing against—a new Medicaid expansion population for limited resources But who are the winners of ObamaCare’s Medicaid expansion?
Able-bodied, working-age adults; almost all of whom (82 percent) have no children to support, over half of whom (55 percent) do not work, and many of whom (35 percent) with a record of run-ins with the criminal justice system. ObamaCare has picked this population as the winner of its Medicaid expansion.
According to Kaiser, almost 30 percent of this population in Pennsylvania currently has private health insurance that will be crowded-out by taxpayer-funded expansion.
The losers?
Low-income children, poor moms, the elderly, the blind, the disabled. The very people Medicaid was created to protect. And what do these ObamaCare losers have in store for them? States that previously expanded Medicaid had to eliminate coverage for life-saving organ transplants, overload waitlists for services, cap enrollment and raise patient costs, all because promises were broken and costs exceeded projections.
Right now in Pennsylvania, before expansion, more than 18,000 individuals with intellectual and/or developmental disabilities are languishing on waitlists for services. This is due to the limited resources and the high cost of Pennsylvania’s current Medicaid program. Gov. Corbett’s Medicaid expansion plan dumps hundreds of thousands more people into Medicaid, which will make these problems much, much worse.
How the Truly Vulnerable Lose under Corbett’s ObamaCare Medicaid Expansion
In his report, Jonathan Ingram outlines ObamaCare expansion’s immoral funding formula and the financial incentives state budgeters will have to target future cuts in services from the truly needy rather than the expansion population of able-bodied childless adults:
ObamaCare does not change the funding structure for patients currently eligible for Medicaid. States that expand Medicaid under ObamaCare will continue to receive their regular federal matching rate for providing coverage to poor children, seniors and individuals with disabilities.
[However,] the matching rates for the Medicaid expansion population covered under ObamaCare are much different. States that expand Medicaid for able-bodied adults under ObamaCare receive an enhanced matching rate for this new Medicaid population. The enhanced matching rate starts at 100 percent in 2014 and gradually reduces to 90 percent by 2020…
The result will be devastating cuts targeting those already on traditional Medicaid. If and when Pennsylvania commits to bringing Medicaid spending under control, the federal matching rates scheme would require $2.08 in Medicaid spending on the current population of truly vulnerable patients in order to save state taxpayers $1.00.
Or they could cut $20 in 2017 from the expansion population to save that same $1.00. (The number goes down to $10.00 by 2020, but the same principle and concern holds true.) Which cuts are easier to make in order to save $1.00?
The state faces a significant budget deficit this year, so it is very plausible that services for traditional Medicaid patients will be part of any budget reduction deal. This scenario becomes even more likely since the Governor was not prohibited from cutting some benefits for current adult enrollees from the “low risk” population under the new expansion plan.
Not only will Pennsylvania’s most vulnerable be impacted in the short-term, through increased competition for limited services and doctor appointments, but most likely for years to come because of the expansion. As we have seen over and over again in other states that have expanded Medicaid in the past, the consequences can be both heartbreaking and deadly.
We Warned About This--Federal Government Unsurprisingly Inflexible
We predicted at Forbes in June that Corbett’s so-called Healthy PA plan would be stripped of “most of the provisions that have been used to sell the plan to the public.” We also warned readers not to expect Pennsylvania to be granted sought-after provisions the Obama Administration denied in other Medicaid expansion “alternatives” out of states, like Iowa and Arkansas.
Our post was prescient, as many of our predictions have now come true. In fact, the final agreement in Pennsylvania is arguably even more restrictive than we foresaw: the federal government denied the state’s request to place expansion enrollees into QHPs (Qualified Health Plans) on the exchange, a provision granted to Arkansas as part of its so-called Private Option. (Perhaps the Obama Administration has been reading our posts and is now souring on that model after our extensive and ongoing reporting on Arkansas’ Private Option cost overruns.)
Indicative of how poorly the Governor did as lead negotiator with the Obama Administration, not a single “state-unique” request was approved as included in Corbett’s original application. Of the roughly 24 changes he asked for, only 3 were granted, but in severely watered down forms.
No Good — Just Bad and Ugly
The approved waiver leaves Pennsylvania taxpayers with little to celebrate and much to bemoan. In fact, taxpayers everywhere should be worried about what’s coming to Pennsylvania, since all U.S. taxpayers will be footing the bill for this latest ObamaCare disaster.
Fewer Plan Choices
The number of plan designs in the state will be reduced down to 2 (from over 10+), to a low and high risk plan. As part of “reform” of the Medicaid program, the Governor decided to segment the population into just two plan designs. Many details remain unclear about the change, yet a benefit for patients and/or taxpayers is doubtful. The limiting of choice was one of the few requests the Obama Administration did grant to Governor Corbett.
Little Personal Responsibility; Premium Payment a Mere Suggestion
In his original waiver request, Corbett asked the Obama Administration for permission to charge all enrollees above the poverty level $25-$35 monthly premiums, or roughly $300-$420 per year.
This request was denied.
The state will not charge premiums in the first year of the program. In Year Two, the state will be allowed to charge nominal premiums to those above the poverty line, capped at 2 percent of household income. An individual at 100 percent of poverty will therefore only pay roughly $19 for their monthly premiums, instead of the $25-$35 the state requested. How’s that for state “flexibility”?
In addition, enrollees who pay premiums will no longer be responsible for any co-pays they incur, except for the nominal fee for non-emergency ER visits. Instead, taxpayers will pay their co-pays. The result will be over-utilization of services, with enrollees encouraged to seek care more often, without any financial penalty or consequences. We have also seen this in new provisions of Arkansas’s Private Option Medicaid expansion.
This provision of Healthy PA is a step backward, severely reducing patient engagement and undermining the notion of personal responsibility—two key features of Corbett’s argument to sell this plan.
Corbett’s ObamaCare-approved Medicaid expansion is even more generous to the expansion population than traditional Medicaid is to current enrollees . Traditional Medicaid rules allow enrollees to face premiums and cost-sharing of up to 5 percent of their annual income. But with premiums capped at 2 percent and co-pays eliminated, expansion enrollees will pay far less out-of-pocket than what traditional Medicaid allows.
To make matters worse, the federal government will not allow the state to bar enrollees from the program if they fail to make their monthly premiums—modest as they may be. According to the terms and conditions set forth by the Feds, enrollees can fail to pay premiums for three consecutive months before being “removed” from the program. However, enrollees who are “removed” can re-apply immediately and be put back into the program with no wait time. Corbett’s request to be exempted from retroactive coverage was also denied, so enrollees who incur medical expenses while out of the program will have those expenses paid for by taxpayers once they are re-enrolled.
The Governor also requested the ability to consider charging some individuals making under 100 percent FPL a nominal premium in the future. The amount was unspecified in the original waiver proposal, but the Feds roundly rejected that request for flexibility as well.
Googling for a Job is Too Much Work
Before submitting his waiver request to the Feds, Corbett dramatically weakened the work-search requirement he intended for expansion enrollees, watering it down to a "voluntary, one-year pilot program to provide access to job training" in exchange for premium and copay reductions. The Obama Administration rejected even this feeble alternative. State taxpayers will now pay for a voluntary program, which may grant some out-of-pocket reductions for enrollees in the future at additional taxpayer expense.
Pennsylvania’s Medicaid Problems Will Only Get Worse
Access
If the new plans reimburse at a higher rate than traditional Medicaid, health care providers will move the able-bodied adults that comprise the expansion population to the front and kick truly needy traditional Medicaid patients to the back. This access problem could be acute in Pennsylvania as 59 of the 67 counties are already classified as primary care shortage areas by the federal Health Resource and Services Administration.
ObamaCare’s goal of adding millions of able-bodied adults to Medicaid will inevitably make access problems even worse. Expansion greatly increases demand for services, but does nothing to increase the supply of health care providers accepting Medicaid patients. Compounding this problem is a perverse and immoral funding formula that prods states to attack the truly needy with cuts in services and gives preferential treatment to adults without any disabilities or dependent children.
Costs
Even without expansion Pennsylvania’s Medicaid program is projected to cost taxpayers $40.9 billion per year by 2022, up from $24 billion today. Under expansion, this number will increase at least another $20 billion. Governor Corbett was right in the past to point out that this path is unsustainable, but his ObamaCare Medicaid expansion plan will make this situation worse, not better.
Other recent policy decisions will drive up the cost of providing healthcare for state taxpayers. Just a few weeks ago it was announced that enrollees in the Medical Assistance for Workers with Disabilities (MAWD) program would be maintained in their current plan instead of being rolled into the new expansion program. The result will be higher costs for Commonwealth taxpayers. The move also eliminated another portion of the promised “savings” under the original Healthy PA plan cited by the Governor to sell the expansion to state taxpayers months ago.
The final expansion agreement was rushed and included very little on the budget neutrality of the deal. As a result we are simply informed that the Federal government believes it will be budget neutral, thus it will be. Meanwhile, the Government Accountability Office has repeatedly flagged the budget neutrality provision of Medicaid waivers as dysfunctional, and one that has led to billions more being spent on Medicaid than originally projected. There is no reason to expect a different outcome in Pennsylvania under this ObamaCare expansion.
It is important to remember that every addition dollar spent on Medicaid will be one less dollar for education, roads, public safety, or tax relief.
Cost Shifting Onto Private Insurance
As more enrollees are added to a program that under-reimburses for care, doctors and hospitals will shift the additional loss onto private coverage in the state. Instead of fulfilling the promises of lowering premiums in the state, ObamaCare expansion is likely to drive them up.
Large Out-of-Pocket Cliffs
Governor Corbett’s Healthy PA creates tax cliffs that will trap new expansion enrollees in a cycle of poverty and government dependence. Once enrollees make even one dollar over the eligibility threshold, they will fall off the virtually-free Healthy PA plan and be subject to hundreds of dollars in health care costs on the ObamaCare exchange.
Here’s a practical example of how this will impact Pennsylvanians: if enrollees go over this cliff by earning too much, instead of paying roughly $322 per year in premiums (and no copays if they make timely payments), they’ll pay $531 per year in premiums, after subsidies, for the benchmark Silver plan. That’s a 65 percent increase.
They would also pay up to $525 as a deductible and up to $2,250 in total out-of-pocket costs (excluding the cost of premiums after subsidies). The out-of-pocket shock will be painful, and will occur frequently as income fluctuations are common in this population.
Work Disincentive
Governor Corbett’s ObamaCare Medicaid expansion will also act as a disincentive for work, encouraging enrollees to remain under the 138 percent FPL cutoff. They will be inclined to work fewer hours, decline modest promotions, try to hide additional income, avoid seeking higher paying jobs, or drop out of the labor force entirely.
Overall, the federal law is projected to shrink the national economy by the equivalent of 2.5 million full-time (FTE) workers. Put another way, the added cost of Medicaid expansion — along with the exchange subsidies — will shrink the state economy by an estimated 100,630 full-time workers in Pennsylvania, given the state’s population as a share of the nation.
More Seniors Will Lose Medicare Advantage
Medicaid expansion under ObamaCare is partially funded by substantial reductions in payments to seniors’ Medicare Advantage plans. The plan will result in 568,221 Pennsylvania seniors losing their plans and many of the benefits that come with enrollment on a Medicare Advantage plan. This will be especially harmful for low-income seniors that cannot afford supplemental coverage, as their out-of-pocket costs will increase.
A Warning to Other GOP Governors
A clear message has been sent to Governors Mike Pence (R-IN), Gary Herbert (R-UT), Matt Mead (R-WY), Bill Haslam (R-TN) and others considering expansion: the Obama Administration will not compromise.
Time after time the Administration has shown it is not interested in granting state flexibility. Instead, the priority is implementing ObamaCare’s Medicaid expansion, and the plans will fail to fulfill the lofty promises of these Republican governors. If Governor Pence, for example, is true to his word, he will walk away from his pending waiver request when the Federal government denies any of the “state-unique” changes the waiver requests.
As a series of recent polls of Republican presidential primary voters (in South Carolina, New Hampshire, and Iowa) has shown, voters do not look kindly on Republican governors who have embraced ObamaCare’s Medicaid expansion. The terms of engagement have been set and time will tell if governors learn from history or repeat the mistake of the past, expecting a different results.
Representative Matt Baker, Chair of the House Health Committee.
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