Forbes: How States Can Unwind Obamacare Expansion And Restore The Working Class

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

In November, voters across the country elected new Republican governors and legislators, many of whom campaigned heavily against Obamacare’s Medicaid expansion. Although some of these new leaders (including Governor-elect Asa Hutchinson in Arkansas) will be taking control of states that have opted into Obamacare expansion, there is new hope that these governors and state legislators will work to reduce government dependency and restore the working class.

One idea rapidly gaining currency among legislators and new governors’ transition teams is the possibility of renewing Medicaid expansion on a temporary basis for those who have already signed up, but immediately freezing enrollment going forward. This approach would stop the bleeding, but allow for a more gradual wind down of the program and allow enrollees to keep their plans until they increased their incomes, transitioning out of eligibility.

We first heard rumblings of Obamacare expansion rollbacks in Arkansas, but similar ideas for winding down Medicaid expansions have been gaining traction in other states, including Arizona, New Hampshire and Ohio. The idea is gaining more and more momentum, with more legislators signing onto the idea daily.

This approach is far from untested: several states have successfully used enrollment freezes to scale back Medicaid expansions in the recent past. As more and more states explore this option, it’s important to understand what exactly happened in these previous expansion freezes in order to predict what may come in the future.

Why Enrollment Freezes Work

Policymakers and taxpayers are right to want to reduce the government dependency Obamacare seeks to create. Obamacare’s Medicaid expansion creates a new entitlement for able-bodied adults. By and large, these adults have no dependent children at home to care for and no disabilities keeping them from meaningful employment. And the peer-reviewed evidence is clear: expanding Medicaid to this new class of able-bodied adults will discourage them from working and, as a result, shrink the economy. Able-bodied childless adults have never been considered among the most vulnerable, which is why they do not typically qualify for other types of welfare, including cash assistance and long-term food stamps.

But lawmakers are also wise to take a careful approach at unwinding this Obamacare disaster. Freezing enrollment allows states to begin the hard work of reducing dependency, but allows them to do it a thoughtful way.

Poverty is a short-term situation for most Americans. According to the latest data from the U.S. Census Bureau, nearly half of individuals in poverty will increase their incomes and exit poverty within four months. Nearly three-quarters of them will increase their incomes and exit poverty within a year. In fact, the median length of time an individual spends in poverty is just 6.6 months. By closing the front door to expansion, enrollees will gradually transition off of these welfare programs as their incomes naturally rise – just as they would anyway.

Enrollment Freezes Have Worked Before

In 2000, Arizona expanded Medicaid to cover able-bodied childless adults earning less than the federal poverty level, similar to Obamacare’s Medicaid expansion. Enrollment and spending grew far faster than state lawmakers expected, ultimately costing taxpayers more than four times what was initially projected.

Facing massive cost overruns, Arizona policymakers froze enrollment in the Medicaid expansion at 230,000 adults in 2011 and during the first year of the freeze, enrollment dropped by more than 5.5 percent per month. In fact, within the first six months, more than 65,000 adults (29 percent) had cycled off of the Medicaid expansion program. By the end of the first year, nearly 115,000 adults (49 percent) had left the program. This natural attrition continued beyond the first year, with nearly 155,000 adults (67 percent) transitioning out of the Medicaid expansion by the end of the second year of the enrollment freeze.

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In 2002, Maine followed Arizona’s lead and expanded Medicaid eligibility to able-bodied childless adults below the federal poverty line. But in 2005, as costs and enrollment began to soar, Maine froze enrollment in its Medicaid expansion at more than 24,000 adults. Within the first six months of the freeze, nearly 8,000 adults (31 percent) had cycled off of the Medicaid expansion program. By the end of the first year, nearly 13,000 adults (52 percent) had left the program.

The state re-opened and capped enrollment in the Medicaid expansion at various times over the next several years. Each time it froze enrollment, it experienced similar rates of attrition. The state imposed its last enrollment freeze in 2011, ultimately ending the expansion altogether at the end of 2013.

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Similar enrollment freezes have also worked in states’ SCHIP expansions. For example, in the early 2000s, Colorado and North Carolina each froze enrollment in their respective SCHIP expansions. In Colorado, policymakers froze enrollment at roughly 51,000 children. Within the first eight months, roughly 14,000 children (27 percent) had moved out of the program as their families’ incomes rose. Likewise, policymakers in North Carolina implemented an SCHIP enrollment freeze at 72,000 children. Within the first nine months, 21,000 children (29 percent) had cycled out of SCHIP eligibility and moved off of the program.

Arizona imposed a similar SCHIP enrollment freeze in 2009. After freezing enrollment at 47,000 children, families began exiting the program at a rapid rate of more than 5.4 percent per month during the first year. Within the first six months, nearly 15,000 children (31 percent) had cycled out of SCHIP eligibility. By the end of the first year, nearly 23,000 children (49 percent) had moved off SCHIP as their families increased their incomes. The natural attrition continued beyond the first year, with nearly 33,000 children (71 percent) transitioning out of SCHIP by the end of the second year of the enrollment freeze.

Enrollment Freezes Are Politically Popular

Lawmakers need look no further than the recent election results as proof that the American people are ready to unravel Obamacare. But recent polling also shows support for unwinding Medicaid expansions at the state level in a thoughtful, compassionate way.

Even before November’s elections, Arkansas’ Obamacare expansion had an uphill climb for reauthorization. But critical wins by over a dozen anti-Obamacare candidates last month have made that climb all but impossible. So the Foundation for Government Accountability commissioned a poll of mid-term voters to find out how they’d prefer to exit the state’s failed Private Option Obamacare expansion.

The results were pretty compelling: when asked how to end the Obamacare Private Option, the vast majority of voters support freezing enrollment and setting a definite end date for the program to expire. This strategy even managed to gain large bipartisan support.

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Ending Obamacare Expansion Will Increase Employment And Grow The Economy

As the Congressional Budget Office confirms, expanding Medicaid to able-bodied adults will discourage work and cause thousands of working-age adults to drop out of the labor force or reduce their hours, ultimately reducing economic output. Those conclusions are supported by evidence from previous Medicaid expansions in Arizona, Iowa, Maine, Maryland, Michigan, New Mexico, New York, Pennsylvania, Tennessee, Utah, Washington, D.C. and Wisconsin (all pre-Obamacare). Tennessee’s experience may be particularly instructive in predicting what could happen if states begin rolling back their Obamacare expansions.

In 1994, Tennessee expanded Medicaid eligibility to a new class of able-bodied childless adults. By 2002, severe budget shortfalls had sent lawmakers looking for an exit strategy. Beginning in July 2005 and over the course of just a few months, Tennessee disenrolled 170,000 able-bodied adults from its Medicaid expansion program.

The state’s economy immediately felt a positive impact: Tennessee’s economy saw a sudden employment increase not seen in anywhere else in the South. According to researchers at Northwestern University, Columbia University and the University of Illinois, the vast majority of that increase was the result of able-bodied adults re-entering the labor force.

Rolling back the Medicaid expansion also led adults with part-time jobs to increase their hours, moving into full-time employment, employer-sponsored health insurance and self-sufficiency. Not surprisingly, data also showed that job-search behavior significantly increased immediately after the state began disenrolling able-bodied adults from its Medicaid expansion. Applications for Social Security disability benefits sharply declined following the rollback of the state’s Medicaid expansion. To top it all off, the state’s credit rating was upgraded after it repealed Medicaid expansion, with the rating agencies saying the restructured Medicaid program was a major factor in the upgrade.

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Getting America Working Again

As Arkansas and other states begin to explore exit strategies for Obamacare expansion, policymakers can be certain that these strategies will help encourage work, increase employment and grow the economy. By repealing Obamacare’s Medicaid expansion, state lawmakers can help restore the working class and provide key guidance to Congress on workable strategies to reduce dependency. Unwinding Obamacare expansion is a strong first step towards a renewed American economy. And, after all, the best safety net is a good-paying job.

This article originally appeared at Forbes on December 3, 2014.

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