Medicaid Expansion Under Obamacare Points to New State Taxes

Obamacare facts: Medicaid expansion points to new state taxes

July 13, 2012

Examiner - One way that Obamacare proposed expanding access to health insurance is by an expansion of Medicaid. According to PolicyMic.com, Congress mandated that the states expand Medicaid to include people within 133 percent of the poverty line as part of the Affordable Care Act. This means that an individual earning less than about $14,856 or a family of four earning less than $30,656 would qualify for Medicaid. Although this mandate was struck down by the Supreme Court, states can still choose to expand their Medicaid programs.

Some leftists have advocated a similar back-door solution to providing a universal single-payer health plan. Instead of passing a new health takeover law from scratch, some Democrats believe that Congress should simply remove the age restriction from Medicare and force all Americans onto the government health insurance rolls.

There are serious problems with the Obamacare mandated expansion of Medicaid or a similar expansion of Medicare. According to the 2012 Medicare trustee report, Medicare’s hospital insurance (Part A) is inadequately funded and will exhaust its trust fund by 2024. Expanding the rolls of Medicare or Medicaid would help speed the programs toward insolvency unless they receive more funding.

Under the terms of the Affordable Care Act, the federal government would pay for the Medicaid expansion in full for the first three years. Afterward, the states would pay 10 percent of the costs while the federal government would pay the remaining 90 percent. The PolicyMic article estimates that there would be between 16 and 18 million new Medicaid enrollees. According to the Kaiser Family Foundation, the average cost per Medicaid enrollee is $7,898. This means that 16 million new enrollees would cost approximately $126 billion per year.

According to Georgia Health News, Georgia’s Medicaid program, which currently covers 1.7 million people, is already facing a shortfall of over $300 million dollars for current recipients. Georgia already spends more than $4.3 billion on health care. This represents 22.5 percent of the state budget and is second only to education in Georgia state spending.

According to the AJC, an estimated 650,000 Georgians would be added to Medicaid. Georgia’s share of the cost for the expansion would be a minimum of $4.5 billion over ten years. As the federal debt rises, Gov. Deal and Georgia lawmakers worry that this number might well increase as Congress shifts more of the financial burden to the states. With the state budget already stretched to the breaking point, the addition of more expenses for the state would require more revenues. This means that the state would probably be required to raise taxes.

"To pay for the expansion without tax increases would require the state to cut nearly a quarter of its annual budget," Brian Robinson, a spokesman for Gov. Deal, told the AJC. "And that's after we've shaved off billions in state spending since the beginning of the Great Recession."

The second major problem is that Medicaid coverage no longer guarantees access to health care. Many doctors are now refusing to accept Medicaid patients because the program’s reimbursement rates are so low. According to the New York Times, reimbursement rates can be as low as $25 for an office visit. This means that doctors often lose money when they see Medicaid patients. The AJC reports that Medicaid reimbursement rates are about 76 percent of those for Medicare, the health program for the elderly. In 2009, even the world famous Mayo Clinic stopped accepting Medicare and Medicaid patients at several of its facilities. The Atlanta Journal’s Kyle Wingfield cites a statistic that 42 percent of Georgia doctors will not accept new Medicaid patients. Nationally, one in three refuses new Medicaid patients and one in four doctors won’t see Medicaid patients at all.

If Medicaid continues to pay below market rates for care, then it will become increasingly hard for Medicaid patients to find doctors. The expansion of Medicaid to vast numbers of new enrollees would make the problem worse by dramatically increasing the numbers of Medicaid patients without increasing the number of doctors who will treat them.

On Georgia Public Radio, Donald Palmisano, Executive Director of the Medical Association of Georgia, agreed.

Palmisano said, ““We do not believe expansion is financially sustainable especially with our state budget looking at a $400 million hole on Medicaid.” He added, ““By expanding another 600,000 additional patients into the system where the system itself does not cover the cost of providing the care, it only makes it that much more difficult for a physician to be able to accept those patients and remain financially viable.”

Several states have already announced their decisions to opt out of the Obamacare Medicaid expansion. Florida led the lawsuit against Obamacare and became the first state to announce its intention to opt out. According to CNBC, South Carolina, Louisiana, Missouri, Mississippi, and, most recently, Texas have also announced their intention to forgo the federal mandate. Twenty-six states were part of the lawsuit so more states are likely to follow. Several governors cited the cost of the expansion in their decision.

In Georgia, which was also a party to the lawsuit, Gov. Nathan Deal told the AJC that Georgia would not make a decision on the expansion until after the elections. Georgia is also delaying the decision on whether to start a health insurance exchange as required by the Obamacare law. If President Obama is re-elected, the General Assembly might be called for a special session to consider those questions.

Georgia’s congressional Democrats recently sent a letter to Nathan Deal urging him to comply with the expansion. Hank Johnson, John Lewis, David Scott, and Sanford Bishop jointly say that “the Medicaid expansion is the right thing to do and it is a good deal for Georgia.” They do offer advice on how to pay for it.

The Medicaid expansion required by Obamacare is certain to be costly to cash-strapped state governments as well as the federal government. Complying with Congress’ mandate will likely require higher taxes or deep cuts to other state programs. The resulting increase in Medicaid patients will also exacerbate current shortages of doctors who accept Medicaid as a form of payment.