Friday, July 6, 2012

The next battleground: states that plan to deny health coverage to the poor

The Supreme Court ruling poked a major hole in the Affordable Care Act by allowing states to opt out of expanding Medicaid to people below 133 percent of the Federal Poverty Level. As the law was originally written, states would have been offered a very strong incentive—100 percent federal funding initially of the costs of covering the new enrollees, gradually declining by 2020—to expand coverage to the poor and near-poor, and a very strong disincentive to opt-out—the potential loss of all federal dollars for their existing Medicaid programs. The Supreme Court ruled that the government can still offer the incentive of more federal funding to encourage states to go along, but it can’t punish states that don’t by cutting off existing Medicaid funds to them.

And, because of the way that law is written, the official "poor"—those who make the poverty level or less—are not eligible get the subsidies to buy health insurance available to people with higher incomes, because they were supposed to be brought under Medicaid. So if a state chooses not to go along with the Medicaid expansion, their poorest and most vulnerable residents might have no access to affordable coverage.

Well, it didn’t take long for a number of governors in Republican-controlled states to announce that they will not go along with the Medicaid expansion, and for many others (including a few Democratic governors) to indicate that they are thinking twice about it. The major justification offered is that they are concerned about the costs to the states—even though the federal government pays almost all of the cost (they either don’t trust that the money will be there, or argue that it really won’t cover their costs). Ideological opposition to "Obamacare" is another factor, of course. A desire to pressure Congress into converting Medicaid into a block grant program may be another.

How all of this will play out remains to be seen, and it certainly is possible that some of the states that are now saying that they will opt-out may be singing a different tune as we get closer to 2014, when the Medicaid expansion is supposed to go into effect.

But if some states don’t go along—especially some of the larger ones like Florida, whose governor, Rick Scott, has already given thumbs down to the Medicaid expansion—it will mean that the United States will have many millions more uninsured persons in 2014 (all of whom, by definition, will be the poorest of the poor). In explaining his position, Governor Scott said that "the most important thing is working on getting everybody a job," to increase the numbers of people with health insurance. But the fact is that having a job doesn’t guarantee health insurance. A new Gallup survey finds that only 55.9 percent of adults aged 26 to 64 received employer-provided health insurance in 2012, down from 61.6 percent in 2008.

And the fact is that most of the poor have a job. More than three-quarters of the uninsured are in working families: 61 percent are from families with one or more full-time workers and 16 percent are from families with part-time workers. But the poor (including the working poor) are more likely to be uninsured mainly because their employers don’t offer it, or they can’t afford the employee contribution, and they don’t qualify for the existing Medicaid program (most states don’t cover adults without children, no matter how little they earn), and they aren’t old enough to qualify for Medicare.

So it is a fiction that "getting everyone a job" (a good thing, of course!) will get everyone health insurance coverage, it won’t. It is a fiction that the poor don’t have health insurance because they don’t have a job, they do.

And it is a fiction that Medicaid doesn’t do any good for the people enrolled in it, it does. A new study found that new enrollees to Medicaid have marked improvements in reported health status and financial well-being than their counterparts that do not have access to Medicaid.

By the way, speaking of fiction, the independent fact-checking organization PolitiFact, winner of the Pulitzer Prize for journalism, said that Governor Scott "gave a misleading account of how much the Medicaid expansion would cost the state."

I understand that governors have a responsibility to think carefully about taking on new budget obligations, but they should at least get their facts right. The facts are that most of the poor work, but having a job doesn’t necessarily mean they can get health insurance they can afford. And the costs to the state(s) of enrolling all of their poor in Medicaid is much lower than being represented by some in explaining their decision to opt-out.

All of this means that the states will be the next big battleground in the fight to expand health insurance to (nearly) all Americans. But if the Governor Scotts of the world have their way, we will end up with the poorest of the poor having no access to health insurance coverage.

Today’s question: Do you think most states won’t go along with providing Medicaid coverage to the poor? And what will be the impact if they don’t?


Steve Lucas said...

My thoughts on the issue are based on a broader view of taxation and government spending. Our current tax system is designed to support the government consumption of about 18% of GDP. Planed changes in government spending will move spending into the 24% range, or a 33% increase. Other changes in the last years have created a class that results in 50% of the population not paying federal taxes. This 6% increase in taxes based on GDP will fall on half the population.

Remembering that the top10% of wage earners generate 90% of tax revenues the government has a choice of trying to increase taxes on the rich, which will not result in large enough receipts, or increase taxes on those 40% who we most commonly call the middle class.

The Medicaid expansion will create an entitlement that will not go away in future years regardless of tax receipts. So, if DC reduces funding the states will be left to make up any shortfall with increased taxes. Most states today are facing budget shortfalls and look at paying even a percentage of Medicaid as a tidal wave that will sweep them up in a never ending wave of higher spending.

Caring for the uninsured is a very real issue. The problem is we need a new and creative way to offer care without expanding government programs that carry with them uncertain funding and government cost overruns.

I don’t know that even with a breakthrough in a new medical service model we would see change as the vested interest in our current system see profit in keeping everything the same.

One small change I would like to see is to allow the tax deduction of money spent on cash and retainer practices by consumers. Along with this allow doctors to set up cash and retainer practices without suffering financial penalties under Medicare or Medicaid.

Our current insurance based system with the resulting incentive to over test and over treat creates a cost base that many consumers cannot afford. People may be able to afford a $50 office visit, but could not afford a $20 co-pay along with a $1,000 per month insurance premium.

The problem is real and we need real solutions. We also need to work within our current tax revenues to find that solution.

Steve Lucas

Arvind said...

Now the truth comes out...that Medicaid is the main vehicle to "cover the uninsured" under ObamaCare. It will help to read this piece, if you truly care for the poor.

Harrison said...


Federal tax receipts in 2011 were 15.4% of GDP.
In 2000, before the tax cuts put in place during the early part of the George W. Bush administration the receipts were 20.6% of GDP.
We had a surplus that year.

Cororate tax rates as a function of GDP were in the 2.1% to 2.2% range throughout the last half of the 90's. In 2011 those were 1.2%.

The argument that is so often made by right wing sound bites is that we are way over taxed, when in fact the numbers don't bear that out.

We have a poorly run government on many levels.

But mostly we have a very dishonest debate about public policy.

The governors of the various states were elected to make governing choices to benefit the populations of their state.
They are now offered a Medicaid expansion with no strings attached for 3 years that covers many of the uninsured within the state.

How is it not irresponsible for them to turn that money down?

It is not their priority, or it should not be, to make a political statement about the woes of the federal deficit.
Their self interest and their jobs involve the welfare of the people in their state.

They are choosing to not do that job in the cases of Gov Scott in Fla and Gov Haley in SC and Gov Walker in WI, and Gov Branstad in Iowa.
Gov Perry in Texas has threatened the same irresponsible decision.

I feel it is indefensible.


BDoherty said...

It never was a secret thar half of the uninsured would get coverage though Medicaid, the other half through subsidies to buy private HI through state exchanges. This has been reported all along and I have written extensively about it in this blog. The best evidence on Medicaid's effectiveness in improving outcomes and access comes from the closest thing we have to a controlled study,, comparing people enrolled in Oregon Medicaid through a lottery with their uninsured counterparts who did not win the lottery. Read

BDoherty said...

Steve Lucas makes the point that 50% of Americans pay no federal taxes. Actually, the number who pay no federal INCOME taxes is more like 40 percent but they pay Medicare, Social Security and numerous excise taxes, all of which are highly regressive. The marginal tax rate for the lowest earners is higher than for top earners. Read this analysis.

Steve Lucas said...

This debate often comes down to how we parse the numbers. Examples can be found on both extremes to make the desired point. Lower wage earners pay into Medicare and Social Security, thus raising their effective tax rate. Problematic with this argument is that under the current payouts each person collecting benefits under these programs will receive more than they pay into them over the average life of the benefit.

The simple reality is that very few people make over $1M per year and less than 1% of those pay no taxes, while as a group they pay a great deal more than lower wage earners. This link will lay out the very specific numbers:

Stated tax rates are how people look at the world. Do I want to locate my business in the US or Germany. When certain ACA tax increases go into affect I may find a tax advantage to locating in Germany. Currently billions of dollars are being held off shore to avoid a double taxation that takes effect if returned to the US.

I will not argue that those who receive regular medical care have better outcomes than those who do not, that becomes only part of the argument. The real issue is how we pay for this service. Federal dollars do not grow on trees. This program will need to be supported by tax revenue at the Federal level.

Several sound bites from the left stick in my mind:

Raising taxes will allow us to borrow more money to spend now.

The ACA will get rid of the free riders in our medical system.

Economists don’t understand politics.

I would counter that:

Politicians don’t seem to understand economics.

For every right comes a responsibility.

There is no free lunch.

Steve Lucas

Harrison said...

I don't believe the arguments on the left and those of proponents of the ACA can be characterized as you suggest.
One thing is that the left does not necessarily support the ACA.
Many on the left see the ACA as a political win for large insurance companies.
They would not be sad to see it die.
They would prefer something more like a Medicare for all plan.

Proponents of the ACA that are also on the political left see the law as a compromise that can work.
Of course it will not lower taxes and will in fact cause some taxes to be raised.
The law finds ways to give more people access to doctors, and that will take money.

But the argument against the ACA that suggests that it will cost too much and that we can't afford it is a bit hard to swallow.
When Medicare Part D was passed, the same politicians who voted for it are now making the argument that we have to pay for an expansion of health care benefits to people who are less likely to vote and who are more pushed outside of the political mainstream.
That is wrong.

I agree that our federal budget is an important planning issue.
It is important to get it in line.

But to use it at this moment when similar arguments were not made in the past requires some explanation.

Why is the budget now an urgency?
Why was it not an urgency in 2005 or 2006 (whenever Medicare Part D was passed)?

Our bond rating as a country was threatened not by our actual debt structure, but because of our dysfunctional political system that cannot even agree to borrow the money needed to pay for existing obligations.

The governors who now are threatening to refuse the Medicaid expansion are espousing irresponsible campaign rhetoric.

Gov Perry in Texas is the latest.
He promises to refuse an infusion of over $1 Billion to the state of Texas.
I wonder if he will back down from that when the hospital and physicians groups and pharmaceutical companies in Texas start lobbying his office.
He is refusing to take money that they could use to help take care of people they will have to find a way to care for anyway.
And we all agree that the care and the outcomes will be better if the disenfranchised people are effectively covered by Medicaid and given access to doctors and hospitals.

It is easy to refuse some money as a political statement when it is months before it is a real issue.
Gov Perry doesn't really have much of a backbone.
Neither does Gov Scott.

I wonder what they'll really do.


Steve Lucas said...


The “free riders” and “raise taxes so we can borrow more money” comments were taken from a Democratic leader.

Laws passed in 2005 were based on a very different economic picture. You made the comment once, valid, that an improving economy would go a long way towards solving some of our budget and social issues. This economic downturn has been the longest since the 1930’s and people tend to reflect the time in which they live. Pessimism rules the day, and the way we make decisions.

Political discourse is nonexistent. All we see as the public is this very big game of gotcha being played with our money and our lives. The right and the left have reduced themselves to squabbling children arguing over the toys in the sandbox.

Governors often see Medicaid as the single largest line item in their budget. Increasing the number of people may be only part of the cost, the real issue becomes the turn and churn nature of some practices that drive cost. In my community most of the practices are owned by the big hospital, and they are very forward in explaining that these practices are sales centers, designed to drive revenue for the hospital through testing and additional office visits.

We must also consider the President’s own decree regarding immigration and the possible addition of 800,000 previously illegal immigrants to the Medicaid roles.

All of this ads cost at the national level. What we have not seen is any action on a deficit reduction plan, and there have been valid starting points from both parties.

Harrison, you and I are about as far apart as anyone that comments on this blog. We both recognize that medical care for those unable to participate in an existing insurance program is an issue. Put us in a room and not let us out until there was a solution and there would be yelling and desk pounding, but there would be a solution.

I wish we could do the same with our politicians and believe they would come to a solution.

Steve Lucas