Rejecting a Medicaid expansion

July 24, 2012

Twenty-six states, including Virginia, challenged the constitutionality of the president’s health-care law, and while they lost their widely reported arguments on the individual mandate, they won on the lesser-discussed argument. States cannot be forced to expand their Medicaid populations in 2014 as required by law. So now states such as Virginia must decide whether to vastly expand a broken system or stand their ground against federal health-care takeover. Gov. Bob McDonnell and the Virginia legislature should reject this disastrous Medicaid expansion.

Medicaid is a jointly run program by the states and federal government that is intended to provide insurance to low-income individuals, the disabled and pregnant women. The federal government pays 50 cents on the dollar of all expenses incurred under Medicaid in Virginia. In exchange for the large federal subsidies, Virginia functions as the bureaucratic arm of the federal government, managing thousands of directives from Washington.

As designed, all individuals below 138 percent of the federal poverty level (approximately $30,000 for a family of four) will be eligible for Medicaid starting in 2014. This vast expansion will add more than more than 420,000 in Virginia and 17 million nationally to the rolls.

Before the Supreme Court’s ruling, if a state refused to expand its Medicaid program, then it would lose federal funding for both the current and new portions — more than 22 percent of states’ budgets. The Supreme Court said this punishment was too drastic and too coercive. States must have the option whether or not to expand their Medicaid programs, and the federal government cannot pull funding for the current portion of the programs if they decide against expanding.

For Virginia, the answer is clear: Virginia should not expand its Medicaid rolls.

Medicaid expenses constitute more than 20 percent of Virginia spending before Medicaid enrollment expands by 40 percent in two years. To encourage Virginia and other states to expand, the federal government is offering to pick up more than 90 percent of the cost of insurance for those newly eligible. But even with that giant carrot, the Kaiser Family Foundation estimates that Virginia will spend an additional $863 million just by 2019. Worse yet, the president’s own budget proposal this year included a section forcing states to pick up a larger share of the cost. Virginia can’t afford the additional spending.

But more important than the cost to Virginia taxpayers is the fact that Medicaid is broken. Expanding Medicaid subjects residents to a failed health-care program.

Medicaid pays doctors less than what is paid for privately insured patients, takes longer to reimburse doctors and requires much more paperwork to comply with the numerous regulations. As a result more than 28 percent of doctors admit that their practice does not accept new Medicaid patients. Some studies actually show that uninsured individuals have better health outcomes than Medicaid patients.

Handing someone a card with “Medicaid” stamped on the front does not guarantee access to quality health care. Passing real, patient-centered reforms and allowing the market to innovate is the best way forward. Instead of vastly expanding the rolls and subjecting residents to this failed insurance plan, policymakers should force Washington to pass real reforms to Medicaid.

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