Responding to the barrage of criticism over the so-called “Cornhusker Kickback” — a special deal added to the Senate health care bill that would have funded Nebraska’s Medicaid expansion for perpetuity — Sen. Ben Nelson (D-NE) announced that he is “working for reform to treat all states equally on Medicaid expansion“:
“I’ve been in serious discussions with Senate leaders and others to secure changes in the bill to treat all states equally,” Nelson added. “At the end of the day, whatever Nebraska gets will apply to all states.” Among options Nelson has discussed would be for the House and Senate conference committee to change the legislation to provide full federal funding of the Medicaid costs for all states, or allow every state the ability to opt out of the expense they’ll begin to pay in 2017. “My view is: either fund it or un-mandate it,” Senator Nelson said.
While fully funding Medicaid expansion may be unrealistic (given President Obama’s $900 billion ceiling), Nelson’s new plan to allow states to opt-out of Medicaid funding is better than his earlier idea to “ask states to opt in”. The politics of taking away a federal benefit would likely force most states to stay in the program under his new proposal. In fact, policymakers could strengthen the provision by introducing language requiring states to prove that the expansion-population can find affordable health insurance elsewhere before allowing them to opt out. Alternatively, they could design a trigger mechanism that would opt states back in if the uninsurance rate is still too high.
But again, if states opt out of the Medicaid expansion, fewer Americans would have access to affordable health care. Residents below 133% FPL would have to buy unaffordable and unsubsidized coverage from the exchange or the individual health insurance market. Most would likely go uninsured, increasing costs in the long run. In other words, Nelson — who wasn’t too keen on reforming the health care system in the first place — would be undermining two key goals of health care reform: (1) expanding coverage (2) lowering health care spending.
And he’s wrapping his demands in the cloak of “equality.” The word has a nice ring to it, but doesn’t make a whole lot of sense when it comes to determining the federal government’s contribution to the Medicaid program. After all, why shouldn’t the government consider each state’s unique economic conditions and circumstances in determining its reimbursement rates? Not all states are created the same — they have different Medicaid programs, income disparities and poverty levels. Some states need more help than others. In fact, even today, the federal matching formula varies from state to state, depending on each state’s poverty level.
Nelson’s desire to eliminate “unfunded federal mandates” is certainly understandable, but his stance suggests that states either pay for the Medicaid expansion or spend nothing at all. He sets up a false choice.
Under the Senate bill, the federal government is funding the expansion for the first several years and increasing its contribution to Medicaid over the long term. States, which have a certain degree of flexibility in how the implement the Medicaid program, are required to partly finance the Medicaid expansion in out-years of the 10-year budget window. But in doing so, they’re also make an investment towards lowering health care costs. With reform, states would be spending less on health care than they would if they did nothing at all. Without reform, costs continue to rise. States are forced to spend millions on uncompensated care for the uninsured. Residents with coverage are paying higher premiums to compensate emergency room services. State must stretch their Medicaid budgets, particularly during periods of economic recession, and have little to spend on other social services.
From the state perspective, neither picture looks particularly appealing — each requires a certain level of investment. But by opposing reform, states are simply putting off inevitable spending.