Co-authored by Nic Horton, Jonathan Ingram, and Josh Archambault
Nebraska legislators are currently considering another plan to bring Obamacare’s Medicaid expansion to the Cornhusker state. The proposal would create a new welfare program, dubbed the “Transitional Health Insurance Program,” for more than 130,000 able-bodied adults, costing taxpayers nearly $15 billion over the next ten years.
Nebraska policymakers have rejected all previous attempts to expand Medicaid under Obamacare. With expansion costs exploding in other states and federal funding now on the chopping block, it’s clear that their decision was the right one. And nothing in this new proposal should give them reason to reconsider. In fact, the latest plan, modeled after Arkansas’ “Private Option,” is Nebraska’s worst expansion proposal yet.
This model has failed to deliver on its promises everywhere it has been tried and would cost taxpayers billions of dollars more than a traditional expansion. In fact, Iowa has already scrapped its own version of this model and Arkansas’ expansion is scheduled by law to terminate later this year. Worse yet, the plan would also prioritize welfare for this new class of able-bodied adults over services for the truly needy.
“T-HIP” A More Expensive Way To Expand Obamacare
The central feature of the latest plan in Nebraska is to deliver Medicaid expansion benefits through health plans sold on the Obamacare exchange, instead of through the state’s managed care system. But, at the end of the day, this is really just a more expensive way to expand Medicaid under Obamacare.
Nebraska’s own actuaries estimate that using these plans to expand Medicaid would increase per-person costs by 94% next fiscal year. By 2021, the cost difference is expected to reach 150%. Overall, this plan would cost taxpayers billions of dollars more (as if regular Medicaid expansion wasn’t expensive enough) and leave even fewer dollars for the truly needy.
Expansion Costs Will Be Unpredictable
Although the state currently predicts that expansion would cost taxpayers “only” $15 billion over the next ten years, the experiences of expansion states suggest costs will soar even higher. Here’s a snapshot of Medicaid expansion overruns from across the country.
- Ohio: $2.9 billion over budget so far.
- Washington: biennium budget increased by $2.3 billion due to higher-than-expected costs.
- Illinois: nearly $1 billion over budget in the first year; more able-bodied adults enrolled than state officials predicted would ever even be eligible.
- Kentucky: $1.8 billion over budget in just the first 18 months.
- Montana: over budget on the day it began.
These aren’t the outliers: in states with available data, actual expansion enrollment surpassed initial projections by a whopping 91%. Worse yet, these states have blown past their projected maximum enrollment by 73% on average. By adopting Obamacare’s Medicaid expansion, Nebraska would be inviting perpetual budget overruns and fiscal uncertainty. Ultimately, this means fewer dollars available for those who need them most.
“Continuous Eligibility” Provision Would Give Medicaid To Adults That Don’t Qualify
The latest plan would also allow able-bodied adults who sign up for Medicaid expansion to continue to receive “covered benefits for twelve months,” even after they become ineligible under federal law.
But the federal government has been clear that it will not pay for the added costs of providing Medicaid benefits to individuals who are no longer eligible. Instead, states must commit to pay for these additional costs. Montana, for example, recently adopted similar procedures and the federal government prohibited it from claiming the “enhanced” matching rate on 2.6% of all expansion costs.
In Nebraska, this would increase state taxpayer costs to nearly $18 million over the first 18 months, instead of the $2.5 million currently expected. Overall, continuous eligibility would increase state costs by nearly $155 million over the first ten years, bringing the state share of the costs up to $1.2 billion over that time period.
Expansion Proposal Would Put The Truly Needy On The Chopping Block
Obamacare Medicaid expansion serves only able-bodied adults. But states receive a higher federal match rate on these new able-bodied adults than they do for traditional Medicaid patients, including seniors, poor children, pregnant women, and individuals with disabilities. This creates a perverse incentive for states to prioritize welfare for able-bodied adults over services for truly needy Americans.
Currently, the federal government reimburses Nebraska for roughly 51% of the cost to provide Medicaid to the truly needy. But if the state were to expand Medicaid, the federal government promises to cover 95% of the cost to provide Medicaid to this new class of able-bodied adults in 2017, ratcheting down to 90% thereafter.
When Medicaid costs run over budget, as they have in other expansion states, lawmakers will be forced to find additional funding through either higher taxes or spending cuts. But, thanks to Obamacare, they will have an incentive to cut from the truly needy first – because cutting from expansion would save just 5 cents out of every dollar while cutting from the truly needy would save nearly 50 cents on the dollar.
It’s happened before. Arizona, for example, eliminated coverage for heart, liver, lung, pancreas, and bone marrow transplants after an earlier Medicaid expansion cost taxpayers nearly four times what was expected. It would be only a matter of time before these difficult choices were thrust upon Nebraska policymakers.
Obamacare Funding Won’t Last
Speaker Paul Ryan has warned for years that Obamacare’s expansion funding won’t last and even President Obama has proposed cutting it. Just a few months ago, Congress passed a bill to repeal all Medicaid expansion funding and sent that bill to the president’s desk. It’s no longer a question of “if” that funding will evaporate, but “when.”
This wouldn’t be the first time the federal government has broken its promises and left states holding the bag. Nebraska’s current Medicaid director, witnessed these dangers firsthand in a previous role at the Louisiana Department of Health and Hospitals. In 2012, President Obama signed a transportation bill that cut Louisiana’s federal Medicaid funding by nearly $1 billion per year, increasing the state’s share of Medicaid costs by nearly 25%.
Obamacare advocates have tacitly admitted that these concerns are real by promising that the state can simply end the expansion if Congress shifts more costs onto state taxpayers. But setting aside the practical and legal concerns of creating a new entitlement only to end it shortly thereafter, Nebraska’s proposed waiver wouldn’t even be submitted until after a new president takes office. By the time the state begins negotiations, the expansion funding may already be gone.
Ultimately, this latest proposal calls for taxpayers to waste millions of dollars designing a new program that relies on funding that almost everyone agrees won’t actually be there.
Nebraska Should Continue To Reject Obamacare Medicaid Expansion
Nebraska policymakers were wise to reject Obamacare’s Medicaid expansion each time it was previously proposed. Nothing in this latest plan warrants a change in direction. In fact, this latest proposal is Nebraska’s most unfavorable yet.
This article originally appeared at Forbes.com on March 15, 2016.