Medicaid Expansion Is An Empty Promise

by Charles Katebi

When progressives make the case for Medicaid Expansion, without fail they remind their listeners that the federal government has pledged to cover 90 percent of the cost of expansion. But a report from the Foundation for Government Accountability sheds light on just how empty the federal government's promises really are. On multiple occasions, the federal government has reneged on its commitments to cover the cost of programs it collaborates with states to fund, leaving them with billions of dollars in additional obligations. And while the Obama Administration has continued to market Medicaid Expansion as "free money" to the state legislatures, the White House has proposed changes to Medicaid's cost-sharing formula that would substantially increase the proportion of the program's expenses that states will be stuck paying.

With the exception of laws relating to constitutional issues, the federal government has very few ways to force states to pass laws. When the federal government wants states to pursue certain policies, they will bribe them with grants and other funds–but with strings attached. The Obama Administration followed this tradition by offering to cover 100 percent of the cost of Medicaid Expansion from 2013 to 2016 and then 90 percent of the cost thereafter. But will the current administration and future administrations keep this promise?

A recent report from the Foundation for Government Accountability shows that the answer is mostly likely no. Over the past 40 years, the federal government has reimbursed states far less for programs that the federal government and states collaborate on, leaving state taxpayers holding the bag.

In 1975, Congress passed the Individuals With Education Disabilities Act (IDEA). The law encouraged states to fund programs to educate disabled children by promising to cover 40 percent of the annual costs of IDEA programs starting in 1981. Without fail, Congress has underfunded the program every year to the tune of $250 billion.

Source: http://thefga.org/wp-content/uploads/2015/04/UO-PromisesMadePromisesBroken-Final.pdf

The debate over whether the federal government will renege on its Medicaid promises to states is not hypothetical–it was proposed in the White House's budget proposal to Congress in 2013. Medicaid reimburses states that expanded Medicaid for 100 percent of the cost of the expansion population, then 90 percent after 2016. This covers individuals between 100 and 138 percent of the Federal Poverty Line (or FPL). But Medicaid has a different cost-sharing rate that covers individuals below 100 percent of the FPL. The federal government reimburses Wyoming for 50 percent of the healthcare costs of existing Medicaid enrollees.

The Obama Administration proposed scrapping this patchwork of cost-sharing schemes and move to a uniform or "blended" cost-sharing arrangement. This blended rate is an average of states' current Medicaid match and the expansion match rate. According to the Heritage Foundation, if Congress adopted the White House's changes to Medicaid and applied a single "blended" cost-sharing rate to every state, states will be forced to increase their funding for Medicaid by over $78 billion between 2014 and 2022.

Had Wyoming expanded Medicaid under the existing arrangement, Wyoming's cost would have been $118 million between 2013 and 2022. However, if Congress had passed the blended Medicaid rate in 2013, Wyoming's financial obligation would have risen by more than 258 percent, to $455 million. Where would the money have come from had Congress passed the President's proposed changes to Medicaid? The Wyoming government has a projected budget deficit of $338 million for the 2017-18 biennium, even without the burden of higher Medicaid costs. These broken promises would have either been paid by Wyoming's taxpayers or Medicaid's beneficiaries in the form of lower reimbursements and reduced access to care.

State legislators would be foolish to take the federal government's word that it will cover 90 percent of Medicaid Expansion's costs. Washington has welshed on promises worth hundreds of billions of dollars in the past—why would it be different this time? Let's face it, the federal government's promises are not worth the paper they're printed on.