AFP Texas on Medicaid Expansion

March 14, 2013

Medicaid Expansion Won’t Help Texas Businesses

We at Americans for Prosperity have seen the new argument in favor of Medicaid expansion that we’re hearing in multiple states over the past 24 hours:

“States should expand Medicaid to protect businesses from the PPACA tax levied when their employees between 100-138% FPL buy insurance through the exchanges instead of being covered by the Medicaid expansion.”

This argument is flawed for several reasons.

First, this will not impact Texas.  As Jonathan H. Adler and Michael F. Cannon* have ably argued, this tax will only hit businesses in states that have state-based exchanges; federal or partnership exchanges don’t trigger the tax.  None of the states that are currently on the fence about expansion have state-based exchanges: Arkansas (partnership), Texas (federal), Florida, (federal), Ohio (unofficially partnership), Pennsylvania (federal), Arizona (federal), etc. …

Second, the tax would only apply to businesses when their employees purchase insurance through the exchange.  How many people between 100-138% federal poverty level (FPL) will be able to afford and actually purchase private insurance through an exchange even with the federal subsidy? I’d argue not very many.  So even if the tax does apply, it will be insignificant.

Third, it’s very difficult for a full-time employee to make only 100-138% FPL.  Most people in this income range are part-time employees.  This will lessen their aggregation toward the 50 FTE equivalents necessary to trigger the business tax, even with the lower 30-hour definition of FTE.

So even as new arguments are rolled out to encourage Texas and other states which have refused to expand Medicaid to go the way of Florida, there is no reason Texas should change course.  We are right to reject expansion of a program that doesn’t work and put more vulnerable Texans on Medicaid – the health care equivalent to the Titanic.

* Mr. Adler is professor of law and director of the Center for Business Law and Regulation at Case Western Reserve University. Mr. Cannon is director of health policy studies at the Cato Institute.

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