Forbes: TN’s Obamacare Expansion Would Give ‘Free’ Cash To The Insured

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

Gov. Bill Haslam (R-TN), who has previously stood strong against Obamacare expansion, announced just before Christmas that he will push the legislature to create a new entitlement for able-bodied adults in a fast-approaching special session. We’ve previously written on Gov. Haslam’s backroom deal to expand Obamacare and its questionable financing structure.

Legislators still have very little information on the plan, having only sketched out the “basic concepts” and leaving many details blank. The informational packet Haslam recently delivered to legislators, for example, noted that many “operational details will be finalized” at a later date. But what little is known leaves no room for excitement.

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Taxpayers to Crowd Out Private Coverage Support with Volunteer Plan

A key provision of Haslam’s Obamacare plan is what he’s calling the “Volunteer Plan.” Haslam officials don’t yet know how many of the program’s features will actually function, but they’re certain that it will be a success. Here’s what we know so far.

The Volunteer Plan is designed for individuals who already have access to employer-sponsored insurance and whose employers are willing to cover at least 50 percent of the cost of their premiums. Individuals eligible for the Volunteer Plan would then receive a “voucher” from taxpayers, equivalent to what it would otherwise cost the state to provide them benefits through the TennCare (Medicaid) program. Haslam officials indicate that these vouchers would offset any remaining premiums and also help offset enrollees’ deductibles, copayments, coinsurance and other out-of-pocket costs.

But it’s likely Tennessee would have to provide more than just a voucher. According to the U.S. Department of Health and Human Services, such a plan would require states to provide additional coverage “to the extent that [employer-sponsored insurance] benefits are less and cost sharing requirements are greater than those in Medicaid.”

Haslam officials say they don’t want to provide those additional wrap-around benefits, but they have no binding commitment from the federal government that those requirements can be or will be waived.

Haslam’s Plan Would Give Free Cash to Those Who Already Have Insurance

The Haslam administration isn’t sure how many people may ultimately sign up for the voucher. According to data from the Census Bureau, just 16 percent of uninsured adults who could become eligible for Haslam’s Obamacare expansion work full-time jobs year-round. (Nearly half don’t work at all, while the remainder work only part-time or seasonal jobs.) It’s unclear how many of those with full-time jobs have access to employer-sponsored insurance.

But even those who already have insurance will qualify for this cash handout. We do know there are somewhere between 125,000 to 150,000 able-bodied adults in Tennessee who earn less than 138 percent of the federal poverty level, but already receive private insurance through their employers. Despite the fact that they are already insured, all of these individuals would be eligible to receive “free” cash from taxpayers under Haslam’s plan.

This means that a new class of able-bodied adults who already have private insurance will be told that they can keep their existing insurance, but simply shift the costs of their premiums and out-of-pocket expenses to taxpayers. Employers will also be shifting some of their cost onto taxpayers as well, as many would simply drop their level of support down to 50 percent. Who would pass up a deal like that?

Nothing Innovative About Volunteer Plan

Gov. Haslam believes that his Volunteer Plan will spark a new wave of innovation in the Medicaid program. The only problem? Congress authorized states to dole out welfare subsidies through this type of program way back in 1990 and similar programs already exist in 39 states for those in ‘old’ Medicaid. The only difference here is that Gov. Haslam wants to expand this type of program to a new class of able-bodied adults who have never qualified for long-term welfare.

Some lawmakers have expressed concern that the Volunteer Plan will be ripe for waste, fraud and abuse of taxpayer resources. They’re right to worry, based on the experiences of other states.

Nebraska auditors recently investigated more than a quarter of the expenditures paid out through a similar program. Auditors discovered that the state lacked appropriate documentation in every single reviewed case file, calling into question the entirety of expenditures made under the program. More than three-quarters of the audited cases had received incorrect payments, with auditors identifying several cases of apparent fraud.

Haslam’s plan creates a new program ripe for fraud and misuse, which will ultimately mean stealing precious taxpayer resources away from the truly needy.

Costs Will Soar Under The Volunteer Plan

Haslam officials aren’t yet sure how much the Volunteer Plan, or the entire Insure Tennessee plan, will cost taxpayers. They originally estimated that just 160,000 to 190,000 of the nearly 575,000 uninsured and privately insured adults earning less than 138 percent of the federal poverty level would ultimately enroll in the Medicaid expansion. Those numbers, are unrealistic to begin with, and will surely have to be revised upwards. (Even the Tennessee Hospital Association admits the plan would extend eligibility to 400,000 able-bodied adults.)

The Volunteer Plan alone may attract between 125,000 to 150,000 able-bodied adults who already receive private insurance through their employers. Using the state’s ownestimates for the per capita cost of new enrollees, taxpayers could be looking at forking over an extra $824 million to $989 million to fund these vouchers solely for individuals who are already insured.

That doesn’t even count the added costs of covering the remaining 425,000 to 450,000 adults who would also become eligible under Haslam’s Obamacare expansion.

Who Will Pay For It?

Gov. Haslam has devised a questionable provider tax scheme to help cover the state’s share of Obamacare expansion costs. Even if that tax scheme survives – and there are serious doubts that it will – taxpayers will ultimately pay the price of expansion through higher federal taxes and higher medical costs.

But the truly needy will also pay a serious price as well. Every tax dollar spent providing welfare to able-bodied adults who already have private insurance is a dollar diverted from the most vulnerable who already rely on the Medicaid program. Haslam officials have already hinted that the Medicaid expansion could siphon away money from the existing program.

When the bill for Gov. Haslam’s “Insure Tennessee” Obamacare expansion comes due, voters should be asking who will be put on the chopping block first?

Thanks to Haslam’s plan to send cash to privately insured able-bodied adults, this could be one of the most expensive Obamacare expansions yet. Taxpayers everywhere are counting on Tennessee lawmakers to make the sensible decision now to avoid painful decisions in the future.

This story originally appeared at Forbes on January 13, 2015.

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