Idaho’s Last-Minute, Backdoor Obamacare Expansion Would Be A Mistake

Nicholas  Horton
|
Posted: Mar 25, 2016 12:01 PM
Idaho’s Last-Minute, Backdoor Obamacare Expansion Would Be A Mistake

For the past several years, Idaho lawmakers have rejected every attempt to bring Obamacare’s Medicaid expansion to the Gem State. Earlier this year, they rejected two expansion plans that were so unpopular, they failed to even earn a committee vote. But with the legislative session winding down, there’s another last-minute, backdoor attempt to expand Medicaid on the horizon.

The latest plan, dubbed the “Idaho Accountable Care Waiver Act,” would require the state to “provide for managed Medicaid services” to a new class of able-bodied adults. Although the legislation nominally limits its Medicaid expansion to able-bodied adults below the poverty line, it immediately thereafter says that the expansion shall be “in accordance with” Obamacare’s Medicaid expansion provisions.

Under federal law and regulatory guidance from the Obama administration, the only way for an expansion to be “in accordance with” those provisions is to expand Medicaid to all able-bodied adults earning less than 138% of the federal poverty level. The enhanced federal funding available under those provisions can only be received if a state expands Medicaid under Obamacare.

Given this dynamic, the Obama administration would likely press Idaho into either footing an even larger share of the expansion costs or raising eligibility even further.

And the current language appears to give the welfare agency the authority to expand further: the legislation both requires and authorizes the agency to take any and all “actions necessary to implement” the expansion plan. Does that include expanding eligibility “in accordance with” Obamacare and beyond the poverty line threshold specified in the bill? It certainly seems that way.

Expanding Medicaid in Idaho would also crowd out existing private coverage. According to estimates from the Lewin Group Health Benefits Simulation Model, more than 57 percent of new able-bodied adult enrollees would be shifted out of private insurance and into Medicaid. This means the majority of the new enrollees in Medicaid expansion would come not from the ranks of the uninsured but from employer-sponsored coverage, from the individual market, or from the Obamacare exchange.

Actual crowd out could be even worse because expansion would discourage work and reduce opportunities for employer-sponsored insurance. Idaho’s latest proposal would create a new welfare cliff, where earning even a single dollar above the eligibility limit could subject individuals to hundreds of dollars more in premiums and out-of-pocket costs, even after Obamacare subsidies are taken into account.

This welfare cliff would discourage work and ultimately shrink the economy. Based on past research, Idaho could expect to see as many as 16,000 able-bodied adults drop out of the labor force if it expanded Medicaid, creating a new drag on economic output at a time when Idaho’s labor force participation is still near record lows.

Ultimately, this latest proposal will mean fewer resources available for education, public safety, and care for the most vulnerable. All this at a time when Medicaid is already the largest and fastest-growing line item in the state budget. In fact, the state now spends more on Medicaid than on higher education, transportation, corrections, and public assistance combined.

According to the most recent data from the state’s actuary, expanding Medicaid to able-bodied adults below the poverty line would add at least $4.5 billion in new costs to taxpayers over the next decade. But if the feds forced Idaho to bump that eligibility level up in order to secure approval of the “enhanced” Obamacare funding, which seems increasingly likely, those expansion costs would soar to more than $8 billion.

Given the experiences of other expansion states, it is likely those costs will go much, much higher. Policymakers in Washington state, for example, had to increase their biennium budget by $2.3 billion just to deal with higher-than-expected Medicaid expansion costs. In neighboring Montana, Obamacare’s Medicaid expansion was over-budget on Day 1. Similar overruns have plagued Illinois, Kentucky, and Ohio.

This pattern has repeated itself all over the country. In states with available data, actual expansion enrollment outpaced official projections by a whopping 91 percent in 2014. If that weren’t bad enough, each and every one of those states have already blown past their projected maximum enrollment. In some states, more able-bodied adults signed up than officials thought would ever even be eligible.

Expanding Medicaid would leave Idaho policymakers in a near-constant state of budget panic. Those budget overruns would ultimately mean fewer dollars available for education, public safety, and any other critical services the state currently provides.

Idaho legislators were wise to carefully consider and then ultimately reject each previous plan to expand Medicaid to a new class of able-bodied adults. There’s nothing in this new, last-minute proposal that should change their minds.