Forbes: Herbert’s Obamacare Expansion Won’t Work — And Neither Will Its Enrollees

By Jonathan Ingram, Nic Horton and Josh Archambault   Mr. Ingram is Research Director, Mr. Horton is a Policy Impact Specialist, and Mr. Archambault a Senior Fellow at the Foundation for Government Accountability.

The Obama administration and liberal activists hope that Gov. Gary Herbert (R-UT) will be the next governor lured into Obamacare expansion on the false promise of flexibility and free money. Herbert says he is nearing the end of negotiations with the federal government and wants to call a special session for the legislature to sign off on the Obamacare expansion plan. Unfortunately, most of the details of the plan remain a mystery. He’s given a few snippets of information here and there, but has thus far not released a detailed proposal.

Utah is often seen as a national leader for its values of helping individuals help themselves. Yet Medicaid expansion undermines that very value system. Governor Herbert’s Obamacare expansion efforts are disappointing for the many unintended consequences that will follow in the state, and in light of his very strong position against Obamacare in the past. Obamacare Medicaid expansion will replace Utah’s compassionate ‘neighbors helping neighbors mentality,’ and weaken the family values that have been strong in the state for so long.

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Gov Herbert has been working to expand Obamacare in Utah using Medicaid expansion. (AP Photo/Rick Bowmer)

Legislators themselves haven’t seen the proposal, but will be expected to vote on it if the governor calls a special session. Thankfully, the legislature has already refused to write Herbert a blank check for Obamacare expansion and the few public details of his  plan to expand Medicaid haven’t helped his cause.

Speaker of the House Becky Lockhart, for example, has called Herbert’s plan “straight-up expansion of Obamacare.” But Speaker Lockhart is not alone, as other legislative leaders and many members seem to have little appetite for resolving the issue in a special session. They deserve immense credit for their leadership, opposing Obamacare expansion regardless of what label and window dressing is put on it. It’s not every day that legislators are willing to stand up to governors from their own parties, even when they’re making poor policy decisions. (Look no further than the silence of the majority of Republicans in Iowa, Pennsylvania and Indiana for evidence of this.)

If Herbert does call a special session, however, Speaker Lockhart and other Utah legislators will have plenty of reasons to oppose his Obamacare expansion plan.

Gov. Herbert’s Plan Creates a New Obamacare Entitlement for Able-Bodied Adults

Currently nearly 2,500 seniors and individuals with intellectual or developmental disabilities are sitting on Medicaid waiting lists in Utah. Some of them have been waiting for ten years or more for services.

But these aren’t the people who can expect help under the expansion plan. In fact, despite Gov. Herbert’s claim that his plan will serve the “neediest among us,” his plan actually creates a new entitlement for able-bodied adults. His plan would move 100,000 to 150,000 able-bodied adults to the front of the line, pushing those on waiting lists even further to the back.

These newly-eligible adults are in their prime working years, largely have no dependent children and have no disabilities keeping them from gainful employment.

More than a third of them have checkered criminal histories, with many having spent time in jail, prison or on felony probation. And, to top things off, this entire Obamacare expansion is financed by nearly a trillion dollars in cuts to Medicare for seniors. It’s an access disaster in the making, as 51,783 seniors in Utah are projected to lose their Medicare Advantage plan by 2017 as a result.

Gov. Herbert’s Plan is Modeled After Arkansas’ Failed Obamacare Experiment

While the governor says he is crafting a “Utah-specific” Obamacare expansion, the truth is that his plan borrows heavily from Arkansas’ failed “Private Option” experiment that launched earlier this year.

Costs in Arkansas have run over budget every single month. The Medicaid director who spearheaded the program abruptly resigned to “pursue other opportunities.” The program’s chef legislative architect, a three-term Republican state representative, lost his primary for an open Senate seat to a political newcomer, despite a three-to-one fundraising edge.

Sadly, the Obamacare Private Option also prioritizes coverage for able-bodied adults over care for truly needy patients like Chloe Jones. The Government Accountability Office confirmed that the plan would be nearly $1 billion more expensive than traditional expansion – and far more costly than no expansion at all.

News is so bad in Arkansas that Gov. Beebe’s (D-AR) office is secretly trying to silence negative press and prematurely leaking misleading information in hopes of generating some positive press about this failed Obamacare experiment.

Arkansas legislators have even warned their colleagues in Utah of the state’s growing buyer’s remorse. The Obama administration has even started walking back from these kinds of expansions, rejecting Pennsylvania’s request to do something similar. But unfortunately, it seems that word has not gotten to the governor yet about Arkansas’ mistakes, likely an indication that his own Obamacare expansion plan is sure to repeat them.

Gov. Herbert’s Plan Will Have No Meaningful Work Requirement

Gov. Herbert has promised to institute a strong work requirement in his Obamacare expansion plan, saying that there was “no room for compromise” on the issue. If the federal government balked at the work requirement, he said, he would walk away. Well, if past negotiations with the federal government are any indication, it’s time for Herbert to get his walking shoes ready.

Gov. Tom Corbett (R-PA), for example, promised the same thing: he promised to deliver an Obamacare expansion built on a meaningful work requirement. By the time he submitted his waiver request to the federal government, Corbett’s work requirement had been watered down to nothing more than a “work search” requirement in which certain adults would engage in “work search” activities as a condition of eligibility. Hoping to get federal approval, Corbett provided numerous broad exemptions to the requirement, effectively making it more a suggestion than a requirement.

But these plans proved too much “work” for the federal government. After negotiations with the Obama Administration stalled, Corbett caved again, instead proposing a one-year pilot program that permitted enrollees to reduce their nominal Medicaid cost-sharing by participating in a voluntary work search program.

But even this approach was denied by the federal government. According to the final terms of Pennsylvania’s Obamacare expansion deal, the state can only offer a completely voluntary work search program, but it must do so outside of the Medicaid program and participation in the program can have absolutely no effect on Medicaid eligibility or benefits, and federal Medicaid dollars can not be used to reduce cost-sharing.

It’s likely the governor’s negotiations will be just as unsuccessful, which may explain why he is already moving the goalposts: During the course of negotiations, Herbert apparently stopped pushing for a “work requirement,” and instead began seeking a “work effort” requirement. But even that appears to have hit snags in Washington, D.C., signaling that the “requirement” will disappear altogether.

Gov. Herbert’s Plan Will Discourage Work and Shrink the Economy

Contradicting rhetoric around the expansion, the Obamacare plan will actually discourage work and shrink the economy. The plan will create a massive new tax cliff, where earning a single extra dollar could cost enrollees moving off the program hundreds or even thousands of dollars in higher out-of-pocket costs and premiums. This welfare cliff unfortunately discourages work, trapping people in a system of government dependency.

Already, despite the fact that these able-bodied adults who would be eligible for “Healthy Utah” have no dependent children and no disabilities keeping them from working, few actually work full-time jobs, even during good economic times.

In fact, just 18 percent of Utahns who would be eligible for Herbert’s new welfare program work full-time, year-round. Eighty-two percent of these possible enrollees do not work at all or only work seasonally or part-time.

And if that’s not bad enough, economic analyses have shown that expanding Obamacare and creating a new entitlement will only make these problems worse.

new study released by the National Bureau of Economic Research confirms that previous Medicaid expansions to able-bodied, working-age adults have reduced employment and earnings among this population. According to researchers at Texas A&M University, Georgetown University and the University of Illinois, expanding Medicaid eligibility to childless adults could lower the likelihood of working by up to 10 percentage points. In Utah, that means as many as 15,000 to 20,000 adults could drop out of the workforce as a result of the governor’s Obamacare expansion plan. The researchers further found that Medicaid expansions could reduce earnings by up to $1,200 per year.

This builds on existing research finding that previous expansions reduced full-time employment and led to able-bodied adults dropping out of the labor market. The Congressional Budget Office recently highlighted these problems, also concluding that Obamacare’s Medicaid expansion and exchange subsidies will discourage work, ultimately reducing economic growth.

In addition, new research from economist J. Scott Moody finds that the Obamacare expansion would reduce Utah’s long-run economic growth by up to $749 million. That translates into an $805 cut in personal income for every single household in Utah, or the loss of 14,125 private sector jobs.

Overall, as Utahans who are mostly not working become eligible for new types of welfare, they will work even less and have fewer employment opportunities. This will in turn create the need for more welfare, further straining the state budget and taxpayers. It’s an economic death spiral for Utah. This surely is not a compassionate policy solution.

Gov. Herbert’s Plan Prioritizes Able-Bodied Adults Over the Truly Needy

Gov. Herbert’s plan is to use “private insurance” for his Obamacare expansion, meaning able-bodied adults will get these private plans, while seniors, poor children, pregnant women and individuals with disabilities remain trapped in a broken Medicaid program. This plan is sure to create a two-tiered system of care, and end up hurting the wellbeing of the most vulnerable.

Because these private plans reimburse doctors and hospitals at higher rates than Utah’s traditional Medicaid program, providers will have large financial incentives to treat the new able-bodied adults comprising the Medicaid expansion, rather than the truly needy already enrolled in Medicaid. For a state where nearly every single county faces a severe provider shortage, Obamacare expansion will turn the Medicaid safety net into a tightrope . This exact situation is already playing out in Arkansas, which pioneered the failed model Herbert hopes to use as a blueprint for his own Obamacare expansion.

Worse yet, Obamacare’s perverse funding formula ensures that any future attempts to control Medicaid costs will prioritize coverage for able-bodied adults over care for the most vulnerable. The result will be devastating cuts targeting those on traditional Medicaid. If previous expansions are any guide, truly needy patients could lose access to life-saving organ transplants or advanced-stage cancer treatment, all to protect coverage for this new class of able-bodied adults.

Time to walk away

Gov. Herbert is unlikely to get a number of the waivers that he has been seeking, which may explain why the proposal appears to be getting weaker by the day. The hope for flexibility from federal bureaucrats is a false one. Washington holds all the cards and they’re interested in only one thing: expanding Obamacare.

If past negotiations are any indication, Gov. Herbert will be denied his most important requests. Will he take that as an opportunity to walk away from the negotiating table? We hope so. Or will he cave, as Gov. Terry Branstad (R-IA) and Gov. Tom Corbett did, and waste his political capital to implement Obamacare, even after Obama snubs his plan?

While the governor is busy negotiating an Obamacare expansion deal with Washington D.C., Utah legislators are being left in the dark. Soon, we hear, they’ll be asked to go to Salt Lake City to vote for the plan, even though no one knows how many of the details will be given to them beforehand.

Legislative leaders have taken a careful, thoughtful approach to Medicaid expansion. This isn’t something that can or should be rushed through in a two-day special session. Let’s hope that Speaker Lockhart’s good sense prevails and puts a stop to an expansion of Obamacare once and for all in Utah.

This post originally appeared at Forbes on October 16th, 2014.

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