States Should Wait Before Accepting Obamacare The Supreme Court upheld Obamacare's individual mandate to purchase health insurance, but it also struck down part of the law. That part—forcing states to expand their Medicaid programs—offers governors some much-needed relief.
Expanding Medicaid, the government health insurance program for the poor and disabled, was one of President Obama's main ways to increase the number of insured people through Obamacare. This was no magic solution for the uninsured, especially since Medicaid is in need of reform, not expansion.
States' share of the cost of Medicaid is already crushing state budgets. "In the past decade, Medicaid spending has increased at nearly twice the rate of states' tax revenue," according to a new report.
The only ways to expand Medicaid are to raise taxes, cut other state programs, or slash health care providers' reimbursements in Medicaid even more. And so far, the majority of America's governors have said they won't do it.
Governor Bob McDonnell (R–VA) sent a letter to President Obama on behalf of the Republican Governors Association: "Before making any final policy decisions," he explained, "governors must carefully consider the short and long-term implications of an expanded entitlement program and the consequences of significantly increasing the size of government to manage these programs." The question of a Medicaid expansion faces every state, including Democratic governors who are still on the fence.
Governor Phil Bryant (R–MS), who has declared that his state will not expand Medicaid, explains the necessary trade-off between state priorities: "I would resist any expansion of Medicaid that could result in significant tax increases or dramatic cuts to education, public safety and job creation."
Obamacare's unconstitutional mandate on the states was an all-or-nothing proposition: States would have been required to expand their Medicaid programs to cover all individuals up to 138 percent of the federal poverty level or risk losing all of their federal Medicaid funds.
As Heritage's Nina Owcharenko noted, Long before the Supreme Court's decision to strike down the Medicaid mandate on the states as unconstitutionally coercive, opponents of the health care law argued that it would be financially unsustainable and administratively unworkable. The Court's decision likely puts the law on a faster pace to collapse.
The Court's decision definitely exposes President Obama's promise to reduce the number of uninsured in the country—half of the reduction in uninsured promised under the law was based on mandating that states expand Medicaid.
And that isn't the only broken promise. It may also lead to health care costs increases. The law stipulates that only individuals who are not eligible for Medicaid can qualify for Obamacare's new federal subsidy. With the Court's decision, many of those who would be Medicaid-eligible under an expansion—specifically those above 100 percent of the FPL—will now qualify for the federal subsidy. Heritage estimates that there are between 3.5 million and 6.2 million people who will now qualify for the subsidies, raising the cost of the subsidies between $35 billion and $63 billion over 10 years. (These figures are based on either 26 states opting out or all 50 states opting out of the expansion, respectively.)
There's really no way to pay for this—by state or federal taxpayers. Between now and the election, states should not entangle themselves in implementing the law, in particular with regard to committing to a Medicaid expansion or even pursuing the Obamacare exchanges. Owcharenko writes that "Even if President Obama is reelected and full repeal fails, the law will undoubtedly have to be reopened. States could push for reopening and use their power to reverse and restructure key provisions in the law."
What Medicaid needs is reform, not expansion. In President Obama's words, "it is not sufficient for us to simply add more people to Medicare or Medicaid to increase the rolls, to increase coverage in the absence of cost controls and reform.… Another way of putting it is we can't simply put more people into a broken system that doesn't work."
Read Nina Owcharenko's report: "The Supreme Court's Medicaid Decision: The Obamacare Mess Just Got Messier"
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