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By Jonathan Ingram and Josh Archambault— Mr. Ingram is Research Director and Mr. Archambault a Senior Fellow at the Foundation for Government Accountability.
We have expressed our disappointment in Gov. Gary Herbert (R-UT) for his decision to pursue expanding Obamacare in Utah. Herbert has spent months negotiating an Obamacare expansion plan with the federal government, despite the lack of legal authority to commit the state to any “deal” he strikes with the Obama administration. His drive to expand is seemingly out of character, as he has been solid in the past expressing concerns about the insidious federal strings that come with Obamacare.
Sadly, rather than address our concerns of his proposed plans, Gov. Herbert has recently resorted to name-calling and, in the process, has committed a disservice to the residents of his state by denying them a robust policy discussion on this important issue. He has attacked us on his blog, in comments to the media and at official press conferences. At this point, we have to hope his plan covers thin skin.
It’s unfortunate that Gov. Herbert wishes to avoid a comprehensive discussion of his plan to expand Obamacare in Utah. Rather than discuss the merits of his plan, Herbert has decided to spend his time discussing our geography. (We’re a national organization with staff in six states and we work exclusively on health and welfare reform across the country.) But if Gov. Herbert doesn’t want taxpayers outside of Utah to discuss his plan, he shouldn’t demand taxpayers everywhere pay for it.
We Met With Herbert To Explain Our Concerns
Last week, Gov. Herbert complained in a press conference that we never consulted with him about his Obamacare expansion plan. Although our disappointment with Gov. Herbert’s decision on Obamacare has been quite public, we also took the time to sit down with him and his chief of staff to explain our concerns with the plan several months ago. We once again extend an open invitation to further discuss the issues with him or his staff at their convenience.
Gov. Herbert Is Pinning Hopes On False
Gov. Herbert is pinning his hopes on the false promise of “free” federal money that virtually everyone agrees won’t be there in the future. Even his federal representatives, including U.S. Senator Orrin Hatch and U.S. Representative Jason Chaffetz, warn that the funding simply won’t be there in the future.
Republicans were swept into new Congressional majorities on the promise of Obamacare repeal. They now hold the largest majorities they’ve held in nearly 100 years and are poised to repeal Obamacare’s “enhanced” funding for Medicaid expansion. This funding creates a twisted incentive for states to prioritize this new class of able-bodied adults over the truly vulnerable. With the federal government facing $18 trillion in debt, it’s no wonder they want to repeal this puzzling funding formula.
They may find an unlikely ally in President Obama, who has already proposed reducing this funding in various budgets and during debt-ceiling negotiations. Since the President has openly expressed interest in the idea, it could soon become part of a larger budget deal between President Obama and a Republican Congress.
Most Of The Details Of A Utah Obamacare Expansion Remain Secret
Gov. Herbert insists that his administration has been very transparent about the details of his plan to expand Obamacare in Utah. He points to occasional updates to the Health Reform Task Force on how negotiations with the Obama administration are going and has made a few presentations to stakeholders. (We’ve watched and listened to those updates ourselves, which is how we know he’s pulling back on elements like a meaningful work requirement.) And while it’s true that his administration has provided a modest overview of the broad features of his plan, the devil is in the details.
Those details have remained a mystery. His office has not released a draft waiver application or even a concept paper, which are usually the first steps in waiver negotiations. His office has not released a list of specific federal requirements that the Governor is seeking to waive. His office has not released budget neutrality calculations for his plans. His office has not released draft terms and conditions that would govern his plan. Public hearings and a public comment period won’t come until later, when there is something for the public to comment upon.
But don’t take our word for it: Speaker Becky Lockhart acknowledged that she and her members have yet to see the details of the Healthy Utah proposal. Gov. Herbert now says he won’t share the full details with lawmakers until December. Keeping legislators in the dark will only prolong an important discussion of the plan, and provides little insight into why he has given up on components he used to call “non-negotiable.”
Gov. Herbert’s “Work Requirement” Will Disappear
We were critical of Gov. Herbert for backtracking on his plan to include a work requirement in his plan to expand Obamacare in Utah. Although he initially claimed the work requirement was “non-negotiable,” his administration has already made it public that they are watering this requirement down. We also warned that Herbert’s plan could quickly go the way of Pennsylvania Gov. Tom Corbett’s, where the “requirement” disappeared entirely and became nothing more than a voluntary program that has no effect on eligibility or benefits.
Gov. Herbert insists that this is not the case, but a similar pattern has already appeared in Utah. Herbert has already admitted to watering down his work requirement proposal, morphing it into a “work effort” program that looks nothing like the bipartisan workfare reforms of the 1990s. Although Gov. Herbert insists that this remains an “integral” part of his plan, it appears that this new “work effort” program will be completely voluntary. Herbert admits that the federal government has not agreed to enable the state to actually enforce participation in the program. In other words, the federal government has not agreed to any meaningful “consequences” for refusing to participate.
Just how integral can a voluntary program actually be?
Obamacare Expansion Will Not Help The Most Vulnerable
The Governor promises that his plan will help the most vulnerable, but his plan does nothing to help the truly needy: seniors, poor children, pregnant women and individuals with disabilities. Instead, Herbert is seeking to extend Medicaid eligibility to a new class of able-bodied adults who have never been considered among the most vulnerable or generally eligible for other taxpayer-funded welfare. He says it’s “blatantly false” that his plan would primarily cover working-age adults with no dependent children and no disabilities keeping them from work.
Of course, individuals with disabilities are already eligible for Medicaid because Utah uses the same disability criteria as the federal Supplemental Security Income program. Federal law also limits expansion funding to coverage for non-disabled adults between the ages of 19 and 64. And everyone, including his own administration, acknowledges that the vast majority of those eligible are adults with no dependent children.
Many of these able-bodied adults also have checkered criminal histories. Gov. Herbert strangely calls this observation “unsubstantiated,” despite the fact that the Obama administration estimates that up to 35 percent of potential enrollees have prior involvement in the criminal justice system, having spent time in jail, prison or on probation. The effort to enroll prisoners as they leave jail in states that have expanded Obamacare has been covered in many press outlets over the last year.
And not only will Herbert’s plan create a new entitlement for these able-bodied adults, it will prioritize them over truly needy patients.
“Healthy Utah” Is An Obamacare Expansion By Another Name
The Governor insists his plan is not an expansion of Medicaid under Obamacare. But window dressing cannot change the simple fact that the plan is nothing more than an Obamacare expansion in disguise.
His plan would deliver the same required benefits as Medicaid and be subject to the same cost-sharing limits as Medicaid. Those benefits would be delivered through Obamacare-compliant plans sold on the Obamacare exchange. The plan would cover the exact same able-bodied adults as the optional Medicaid eligibility category created by Obamacare. Those enrollees would be legally classified as Medicaid enrollees, making them entitled to all the same rights and protections as any other Medicaid enrollee. The plan would operate under a Medicaid waiver, would need an amended Medicaid state plan to implement and would be funded through the Medicaid program.
One only has to ask if the Governor would be pursing this expansion plan if there was not Obamacare expansion dollars on the table. The answer is likely no, which demonstrates how closely linked this expansion plan is to Obamacare.
Gov. Herbert claims there are a number of minor tweaks that make his plan “different and better than Medicaid expansion.” (Of course, the actual details of his plan are a secret, so nobody can run a full comparison of the two.) We’ve heard this claim many times before, in states like Arkansas, Iowa, Pennsylvania and Indiana, but it never turns out to be true. If these other stats are any guide, Gov. Herbert’s plan will simply slap the word “Healthy” on his Medicaid expansion and capitulate to the Obama administration’s demands.
But adding bows and ribbons and calling it “Healthy Utah” doesn’t change its fundamental nature as an Obamacare expansion . That’s why even the federal government says that Healthy Utah enrollees “remain Medicaid beneficiaries” and are “entitled to all benefits and cost-sharing protections” required by federal law.
Gov. Herbert’s Plan Will Create A Massive New Welfare Cliff
We have previously noted that Gov. Herbert’s Obamacare expansion plan will create a massive new tax cliff, where earning a single extra dollar could cost enrollees moving off the program hundreds or even thousands of dollars in higher out-of-pocket costs and premiums.
The Governor contends that his plan will eliminate this welfare cliff, creating a “seamless transition” from Medicaid to the exchanges. How does he plan to do this? He insists that Healthy Utah enrollees will be subject to the same premiums and out-of-pocket costs as individuals on the Obamacare exchange.
But that’s simply not possible. Healthy Utah will be subject to the same out-of-pocket caps required by federal law.
Medicaid enrollees, whether they’re in traditional Medicaid or “Healthy Utah,” can be charged no more than 5 percent of their income as cost-sharing, whether it be through copayments, premiums, coinsurance or other out-of-pocket costs. For an individual right below 138 percent FPL, that works out to roughly $805 per year.
But earning a single dollar more would subject that same individual to premiums adding up to $531 per year for the benchmark Silver plan. They would also be subject to up to $2,250 in copayments, coinsurance and other out-of-pocket costs. Simply put, earning a single extra dollar would increase individuals’ cost exposure by nearly $2,000. This translates into a 200,000 percent marginal tax rate increase, hardly a “smooth transition.” Gov.
Herbert’s Plan Will Discourage Work And Shrink the Economy
The Healthy Utah plan contains exactly the kind of welfare cliff that has trapped so many Americans in poverty and government dependency. The Governor says that he believes that his plan won’t discourage work, but the available evidence tells a different story.
The Congressional Budget Office confirms that expanding Medicaid to able-bodied adults will discourage work and cause thousands of working-age adults to drop out of the labor force or reduce their hours, ultimately reducing economic output.
There is strong evidence of that happening after previous Medicaid expansions to able-bodied adults in Arizona, Iowa, Maine, Maryland, Michigan, New Mexico, New York, Pennsylvania, Tennessee Washington, D.C., Wisconsin, and even Utah itself. The Governor can’t ignore the peer-reviewed evidence, and voters could expect to see as many as 15,000 to 20,000 able-bodied adults drop out of the labor force if his plan passes.
The Governor appears to believe that “free” federal money will act as a stimulus, increasing economic activity in the state, even though the Congressional Budget Office estimates that the exact opposite will happen.
This is the modern version of the Broken Window Fallacy, which Frédéric Bastiat debunked more than 150 years ago. As two Harvard professors explained in a recent New England Journal of Medicine article:
Salaries for health care jobs are not manufactured out of thin air — they are produced by someone paying higher taxes, a patient paying more for health care, or an employee taking home lower wages because higher health insurance premiums are deducted from his or her paycheck. Additional health care jobs leave Americans with less money to devote to groceries, college tuition, and mortgage payments, and the U.S. government with less money to perform all other governmental functions — including paying teachers, scientists, and social workers. … Treating the health care system like a (wildly inefficient) jobs program conflicts directly with the goal of ensuring that all Americans have access to care at an affordable price.
Gov. Herbert wants voters to look at half of the equation, ignoring the fact that the actual math is pretty simple: his plan will shrink the economy.
Gov. Herbert’s Plan Prioritizes Able-Bodied Adults Over The Truly Needy
Gov. Herbert calls it a “bold-faced falsehood” that his plan moves more than 100,000 able-bodied adults to the front of the line, while children and adults with intellectual and developmental disabilities remain languishing on waiting lists for services. It is unclear why he brands this simple fact false but offers no evidence to refute it.
Nearly 2,500 individuals, most of whom have intellectual or developmental disabilities, are on waiting lists for Medicaid services in Utah. Some of them have been waiting for ten years or more for services. The plan doesn’t erase that waiting list. Instead, it creates a new eligibility class for more than 100,000 able-bodied adults.
So while those 100,000 able-bodied adults will immediately go to the front of the line and receive coverage under Healthy Utah, many of those who have spent years languishing on the waiting list will still be left behind, waiting. And given the fact that the state will soon have to pay a share of the cost of Obamacare expansion, money that could have gone toward reducing or eliminating those waitlists could instead be siphoned away to pay for this new entitlement for able-bodied adults.
Gov. Herbert’s Plan Is Based On A Plan That Arkansas Is Poised To Repeal
In our initial criticism of Gov. Herbert’s Obamacare expansion plan, we noted that he was borrowing heavily from Arkansas’ failed Obamacare experiment. It’s no surprise that a number of Utah legislators have reached out to their peers in Arkansas to find out how their Obamacare expansion is faring.
This has been communicated through private conversations, a number of editorials and through other means. Senator Bryan King, for example, serves as the chairman of Arkansas’ audit committee, which has tracked implementation of the Private Option.
Senator King warned Utah legislators of the growing buyer’s remorse in Arkansas. Representative Joe Farrer, the only hospital executive in Arkansas’ legislature, joined Senator King in highlighting many of the problems the program has created.
Gov. Herbert correctly notes that two legislators quickly responded to an editorial by one of their colleagues. But he must have misremembered them, as it was Senator King and Representative Farrer correcting the record after a pro-Obamacare legislator made demonstrably false statements in support of Arkansas’ Private Option. Even Arkansas Senator Michael Lamoureux, the outgoing Senate President and one of the first boosters of the Private Option, agreed that it would be a mistake for Utah to copy Arkansas’ failed model.
Given the utter disaster that has unfolding following Arkansas’ Obamacare expansion, it’s no surprise that state policymakers are looking for an escape hatch. Even before Tuesday’s elections, the Private Option had an uphill climb for reauthorization. Critical wins by over a dozen anti-Obamacare candidates have made that climb all but impossible.
Arkansas’ new Republican governor has also expressed serious reservations about the cost of the program going forward and floated the possibility of ending the program outright. His new chief-of-staff warned that there are no longer enough votes in the Senate to reauthorize the plan next year.
The debate in Little Rock has moved away from whether to repeal the Obamacare expansion and instead moved into how to roll it back. Leaders in Utah would be wise to learn from this history in Arkansas and avoid Obamacare’s Medicaid expansion altogether.
Utahns Should Avoid Obamacare’s Expansion in Any Form
The decision to expand Obamacare in Utah will have profound impacts on the future state budget, undermine marriage, and negatively impact the unique culture in the state of neighbors helping neighbors. Instead of spending time expanding Obamacare, the state should continue in its efforts to decrease the cost of care to make health care more affordable for all.
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