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Refutation of Gov. Brewer's Medicaid Expansion Arguments

January 16, 2013 J,

Refutation of Medicaid Expansion Arguments
in Gov. Jan Brewer’s Address on January 14, 2013

For a printable pdf version, click here:
Refutation of Brewer Medicaid Arguments

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(AFP-Arizona comments in bold italics.)

Gov. Jan Brewer:   Of course, I’m speaking about Arizona’s Medicaid program and expanded coverage in accordance with the Affordable Care Act [aka ObamaCare].

Like many of you, I oppose the President’s health care plan.

That’s why, after weighing the pros and cons of the ObamaCare health exchange, I opted against Arizona’s participation.

We applaud Gov. Brewer for her wise decision to reject the ACA/ObamaCare insurance exchange, and for her willingness to stand up to heavily-funded lobbying from hospitals, insurance companies and other interest groups.  More here: http://tinyurl.com/brewgrat

I also led Arizona in joining a coalition of states that sought to block the program in court, and I’ve taken every opportunity to argue for health reform with less bureaucracy, more patient choice and fewer costs.

We are grateful to Gov. Brewer for joining the court challenge.  Unfortunately, Gov. Brewer vetoed the 2011 bill that would have expanded patient choices and lowered insurance costs by allowing Arizona health insurance consumers to purchase health insurance across state lines. More here: 
http://tinyurl.com/2011sb1593

Try as we might, the law was upheld by the U.S. Supreme Court. The President was re-elected, and his party controls the U.S. Senate.  In short, the Affordable Care Act isn’t going anywhere – at least not for the time being.

In its 2012 decision in NFIB v. Sebelius, the same court challenge that Brewer proudly joined, a 7-2 majority of the U.S. Supreme Court ruled that the federal government could not withhold Medicaid funds from States that did not participate in the Medicaid expansion under ACA/ObamaCare.  The expansion is entirely voluntary for States.  If Arizona makes the mistake of voluntarily opting into the Medicaid expansion under ACA/ObamaCare, we will have only Arizona politicians to blame.

Gov. Brewer:  By agreeing to expand our Medicaid program just slightly…

Expanding from 100 percent of the federal poverty level (FPL) to 138 percent of FPL is not “just slightly” — full participation in the Medicaid expansion would add 250,000 Arizonans to  Medicaid/AHCCCS.  More important than the fiscal cost to federal and state taxpayers is the human cost of railroading tens or hundreds of thousands of Arizonans into a low-quality, government-managed health insurance system.  As the Manhattan Institute’s Avik Roy explains, “Studies consistently show that patients on Medicaid have the worst health outcomes of any group in America—far worse than those with private insurance and, in some cases, worse than those with no insurance at all.”  Please read more about this crucial point here: http://www.manhattan-institute.org/html/ir_8.htm and here: http://tinyurl.com/gottliebwsj

…beyond what Arizona voters have twice mandated,

Arizona voters also voted for the Health Care Freedom Act in 2010.  In the spirit of that reform, Arizona should avoid railroading people into a government-managed health system.

…we will:   •  Protect rural and safety-net hospitals from being pushed to the brink by their growing costs in caring for the uninsured;

Uncompensated care results in negligible cost shifting to the rest of us who purchase health insurance.  The non-partisan Congressional Budget Office, and the liberal (but reputable) think tank Urban Institute both agree that uncompensated care accounts for 2.8 percent of all health care spending, and AT MOST raises private insurance premiums by 1.7 percent.  For more on this point, go here:  http://tinyurl.com/singeruncomp 

•  Take advantage of the enormous economic benefits – inject 2 Billion dollars into our economy – save and create thousands of jobs; and,

It is odd that Gov. Brewer chose to include President Obama’s famous “save/create jobs” meme in her speech, especially given the track record of job creation in the past four years: http://tinyurl.com/savecreate   In any case, it should be obvious that taxing $2 billion from federal taxpayers (many of whom are in Arizona) or borrowing $2 billion from future taxpayers (again, many of them in Arizona) and dumping that money into Arizona’s hospital industry will not save or create jobs.  That’s like taking a bucket of water from the deep end of a swimming pool, dumping it in the shallow end, and expecting the level of the pool to rise.

•  Provide health care to hundreds of thousands of low-income Arizonans.

Gov. Brewer seems to be borrowing liberally from the speechwriters for President Obama, Harry Reid, and Nancy Pelosi.  A key premise behind the arguments for ACA/ObamaCare is that “health insurance” equals “health care,” and further, that “government-controlled health insurance” equals “health care.”  That is manifestly untrue.  As the Hoover Institution’s Scott Atlas explains, despite claims of “universal coverage,” national health care systems fall far short of actually providing timely access to life-saving and life-improving treatments and drugs:  http://tinyurl.com/accessatlas

Gov. Brewer:  Saying ‘no’ to this plan would not save these federal dollars from being spent or direct them to deficit reduction.

That statement, unfortunately, is true — it’s true of all federal spending.  But please read the next sentence carefully.

No, Arizona’s tax dollars would simply be passed to another state –

That statement is patently untrue.  Under ACA/ObamaCare, if Arizona does not spend Medicaid expansion monies, those funds are NOT transferred to other States.  Under the legislation, the mandate in other States continues to be 138 percent of the federal poverty level, regardless of what Arizona does.  Under the legislation, the FMAP (federal medical assistance percentage) in other States does NOT adjust according to how many States do or do not participate in the Medicaid expansion.  It is hard to believe that Gov. Brewer thought that the statement would survive even the most superficial fact-checking exercise.

…generating jobs and providing health care for citizens in California, Colorado, Nevada, New Mexico or any other expansion state.

Again, “generating jobs” is the bucket-and-swimming-pool fallacy, while the “providing health care” phrase repeats the deceptive Obama-Reid-Pelosi equation of “health insurance” with “health care.”

Remember: Arizona citizens have voted TWICE to expand Medicaid coverage.

Again, Arizona citizens voted for the Health Care Freedom Act in 2010.  In the spirit of that reform, Arizona should avoid limiting people’s health care options by railroading them into a government-managed health system, even if the arrangement is technically voluntary.

With this move, we will secure a federal revenue stream [again, paid for by current and/or future federal taxpayers, many of them living in Arizona] to cover the costs of the uninsured who already show up in our doctor’s offices and emergency rooms.  [Note that health providers also receive some compensation for the uninsured through "dispro share" funds.]

Under the current system, these costs are passed along to Arizona families. Health care premiums are raised year after year to account for expenses incurred by our hospitals as they provide care to the uninsured.

Again, uncompensated care results in negligible cost shifting to the rest of us who purchase health insurance.  See note above, or go here: 
http://tinyurl.com/singeruncomp

This amounts to a HIDDEN TAX estimated at nearly 2 Thousand dollars per family, per year.

The “hidden health care tax” argument is a fraud that was created by a far-left organization, Families USA, in order to sell ACA/ObamaCare to the country.  As noted above, the CBO and the liberal (but reputable) Urban Institute have thoroughly debunked that claim.

Here is a challenge for the hospital and insurance industry lobbyists swarming around the Brewer Administration: If uncompensated care truly results in a “hidden tax” of $2,000 per family per year, then lobbyists should be willing to go on record guaranteeing that if Arizona participates in the Medicaid expansion, Arizonans will see a real decrease in hospital charges and costs, and Arizona families will see a $2,000 per year cut in their insurance premiums.

Of course, that’s not going to happen.  When Prop 204 went into place, and the number of uninsured Arizonans decreased, there was no drop in our health insurance rates, or in hospital costs.  When the precursor to ObamaCare  — RomneyCare — passed in Massachusetts, the increased coverage did not result in significant price reductions at hospitals, or premium reductions in insurance.  For more about the “hidden tax,” go here:  http://tinyurl.com/novacktax

Gov. Brewer:  As I weighed this decision, I was troubled by the possibility that a future President and Congress may take steps to reduce federal matching rates, leaving states with a greater and greater share of health costs over time. And I worried that any expansion of Medicaid – no matter the federal subsidies – could result in costs the State cannot afford.

Gov. Brewer has very good reason to be concerned.  President Obama himself has twice suggested (in the context of the 2011 debt ceiling fight and the FY 2013 budget) cutting the FMAP for States because of the huge cost to the federal government ($800 billion from 2013 to 2022).  As with so many other federal promises, this one is very likely to be broken.

But even the deal that is currently promised under ACA/ObamaCare is a bad one.  If Arizona does the Medicaid expansion, it will be taking “easy” short-term federal dollars (leveraged by a hospital bed tax on Arizona patients) at a serious cost to our long-term fiscal solvency.  In 2014-2016 the feds will pay 100 percent for the newly eligible group of individuals, but that is cut down to 90 percent by 2020 (stair steps down).  It is pointless to talk about how “little” the expansion will cost the state in FY2015, while ignoring longer-term costs.  A study from the Kaiser Family Foundation and the left-liberal Urban Institute estimates Medicaid expansion costs for Arizona for the next ten years (2013-2022) to be $467 million.  (Note: that does not include involuntary aspects of ACA/ObamaCare’s Medicaid regulations or the “woodwork” effect of already-eligible persons getting onto Medicaid.  KFF and Urban estimate the total cost to Arizona of the ACA/ObamaCare changes to be $3.1 billion over ten years.  See Tables ES-1 and ES-2 at this link:  http://www.kff.org/medicaid/upload/8384_ES.pdf

Together with my team, I’ve crafted a plan to address both of these concerns and safeguard Arizona.  First, any expansion of our Medicaid program will include a circuit-breaker that AUTOMATICALLY rolls back enrollment if federal reimbursement rates decrease.

Gov. Brewer’s idea of eliminating the expansion if the FMAP falls below 80 percent is a good effort to make the best of a bad deal.  But nothing in politics is ever truly “automatic” — an “automatic” provision can always be set aside by future legislative majorities and Governors.

While we trust that Gov. Brewer herself has the resolve to cut back on enrollment (she has demonstrated that resolve during the past four years), she will probably not be governor after 2014.  As they become politically addicted to federal matching funds to provide health insurance to ever-increasing numbers of Arizonans, future Governors and Legislatures will find it very difficult to cut back on enrollment, even if the federal government reduces the FMAP.

Gov. Brewer:  I won’t allow ObamaCare to become a bait-and-switch.

A federal subsidy is always a bait-and-switch arrangement.  That’s the nature of the game.

Second, we will allow hospitals and health providers to assess a fee upon themselves – using that revenue to leverage federal assistance.

Even if all Arizona hospitals and health providers wanted to voluntarily contribute funds to AHCCCS to leverage federal Medicaid dollars, AFP-Arizona would still oppose that arrangement, because current and/or future federal taxpayers (including those in Arizona) would still be gouged to the tune of $10 billion over ten years.  But the reality is that not all Arizona hospitals or health providers want to participate in the scheme.  Hospitals with low populations of Medicaid patients have nothing to gain from the Medicaid expansion — but they would still have to pay the bed tax.

This is already done in 47 states. It’s also ongoing in the City of Phoenix and under consideration in other cities across Arizona.

AFP-Arizona opposes city or county adoption of hospital bed taxes for the Medicaid expansion, because health care consumers would be forced to pay those taxes, and federal taxpayers would be forced to provide the matching money.  But under a city/county opt-in model, some Arizona hospitals and health providers (and their patients) would be able to escape from the bed tax.

With the federal revenue this hospital assessment generates, we can assure that our State General Fund bears NO COST in expanding Medicaid.

Please read the fine print here.  The State General Fund would bear no cost (until the FMAP is reduced at some point in the future…).  But hospital patients in Arizona would still be forced to pay bed taxes, and federal taxpayers would still be forced to provide the matching money.

This doesn’t mean it’s free money, of course. We know there is no such thing. I’m as much of a federal deficit hawk as anyone in this chamber.

We respect Gov. Brewer’s dedication to the principles of fiscal conservatism.  But a deficit hawk should not argue for a bankrupt federal government to spend $10 billion more dollars it doesn’t have.

Gov. Brewer:   But Arizona’s Medicaid program – AHCCCS – is not the problem. It is, in fact, part of the solution as the nationally-recognized gold standard for cost-effective, managed care in this country.

Being the tallest guy in the pygmy tribe doesn’t make you tall.  AHCCCS may be a relatively cost-effective Medicaid program, but it is still a government program — a government-supervised managed care program.  While some States are looking to Medicaid managed care programs as an alternative, other States have recently abolished Medicaid managed care plans.  The relative success of AHCCCS at cost containment may be due to the fact that the “legacy costs” of AHCCCS are lower, because Arizona did not start Medicaid until 1982, a full 17 years after the federal program was created.

While AHCCCS costs have soared upward (though perhaps not as rapidly as in other Medicaid programs), patients on AHCCCS, just like Medicaid patients in other States, still have less access to primary care doctors and to medical specialists.   Putting more Arizonans on AHCCCS will in many cases (ironically, given the name of the program) condemn them to having decreased access to health care.

Medicaid programs face the dilemma typical of all government health insurance schemes: unlike producers of goods and services in free private markets, they are not able to simultaneously reduce costs and improve quality for consumers.  When Medicaid programs do try to control costs, progressively decreasing reimbursements to providers mean that fewer doctors take Medicaid patients, and more Medicaid patients have to wait for urgently-needed health services.  In other cases, Medicaid-imposed restrictions on treatment options lead to lower-quality care and adverse medical outcomes (i.e., disability and death).

Remember, having Medicaid coverage is not the same thing as getting health care.  Studies  (including university studies and studies in peer-reviewed journals) show that people on Medicaid have significantly poorer health outcomes than persons with no insurance at alleven when the studies control for wealth, culture and co-morbidity factors.  For a quick summary of some of those studies, go here:  http://tinyurl.com/gottliebwsj

I’ll be releasing more details about my Medicaid plan in the days ahead.   Weigh the evidence and do the math.

And we respectfully ask you to do the same, Governor.

With the realities facing us, taking advantage of this federal assistance is the strategic way to reduce Medicaid pressure on the State budget. We can prevent health care expenses from eroding core services such as education and public safety, and improve Arizona’s ability to compete in the years ahead.

This “federal assistance” will be short-lived.  In 2014-2016 the feds will pay 100 percent for the newly eligible group of individuals, but that is cut down to 90 percent by 2020.  Again,  KFF/Urban estimate Medicaid expansion costs for Arizona for the next ten years (2013-2022) to be $467 million.  See Table ES-2: 
http://www.kff.org/medicaid/upload/8384_ES.pdf 

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