Tennessee’s Plan to Expand Medicaid Doesn’t Add Up

February 1, 2015 11:13AM

This piece by Beacon CEO Justin Owen was originally published in the Wall Street Journal.

Gov. Bill Haslam’s deal with the Obama administration would cost taxpayers plenty and hurt the neediest people already in the program.

Several Republican governors are considering implementing, or have implemented, ObamaCare’s Medicaid expansion in their states. Indiana’s Mike Pence is the latest, announcing a new deal this week that abandons conservative principles by adding 400,000 able-bodied adults to the Medicaid rolls, costing taxpayers $3 billion a year. But one of the first such deal-makers was Tennessee Gov. Bill Haslam, who announced right before Christmas that he had a verbal commitment from the Obama administration to expand Medicaid subject to some changes. But Mr. Haslam’s announcement was only the first step. Thanks to a law passed last year, Tennessee lawmakers must sign off on any expansion of Medicaid. On Monday the legislature will convene in a special session to debate the governor’s plan, called Insure Tennessee. Their decision could have a big influence on what other Republican states might do.

Mr. Haslam’s plan would make eligible for Medicaid an additional 400,000 Tennesseans earning about $16,000 a year, as well as an additional 125,000- 150,000 who are already paying for health insurance through their employer. Enrollees would have two options: traditional Medicaid with meager premiums and copays, and a so-called private option under which they would receive a subsidy to pay for insurance through their employer.

Certain provisions in his Medicaid proposal—such as requesting enrollees contribute toward their own coverage and offering premium assistance—have led Mr. Haslam to sell it as “market-driven” and “outcome-based.” Yet, these provisions are already available in the Medicaid program. Despite this free-market gloss, there is nothing fundamentally different between Mr. Haslam’s plan and the type of Medicaid expansion ObamaCare architects envisioned in 2009. Insure Tennessee faces many of the same pitfalls as any expansion of Medicaid, and includes some additional problems of its own. Here are five important things to know: First, there are no free federal dollars. Despite claims that Mr. Haslam’s plan would not cost state taxpayers another dime, every dollar used to finance the expansion of Medicaid is a dollar borrowed and added to the national debt. Second, the plan will hurt the neediest patients already struggling on the current Medicaid program. Nearly 90% of the additional people eligible to enroll are able-bodied, working-age adults with no dependent children. With Health Affairs reporting that two in five Tennessee doctors already refuse to see new Medicaid patients, a flood of new patients would strain the program for those already enrolled and struggling to find a physician. Third, the so-called private option, called the Volunteer Plan, is a bad deal for the public. The Volunteer Plan provides a premium subsidy for workers eligible for ObamaCare’s Medicaid expansion. To get the subsidy, employers only need to pay 50% of an enrollee’s premiums. On average, Tennessee employers currently pay 65% of an employee’s premium (according to the Robert Wood Johnson Foundation), while some cover the total cost. The private option provides an incentive for many employers to drop their share of premiums down to 50% so taxpayers can “volunteer” to pay the rest. Insure Tennessee would require certain new enrollees to pay a monthly premium equivalent to 2% of income. While skin-in-the-game provisions are helping in welfare programs, the governor’s plan requires less of the small premiums and copays allowed in the Medicaid program today. Mr. Haslam also wants to dis-enroll individuals if they fail to pay, but such threats are meaningless. Mr. Pence included a similar provision in Indiana, but the federal government prohibited more than three-quarters of that state’s Medicaid-expansion enrollees from being dis-enrolled for nonpayment. Everyone else in Mr. Pence’s ObamaCare expansion can claim one of a number of broad exemptions to the rule. Or as we like to call it, “No premium? No problem!” Finally, the funding scheme used to draw federal dollars is sketchy at best. Hospitals front the state money through a provider tax, which the state then uses to prove to the federal government that it has funded its portion of the program in order to get additional federal tax dollars. In the end, the hospitals get their money back, plus billions more, in reimbursements paid for by taxpayers. Tennessee’s two U.S. senators, Republicans Bob Corker and Lamar Alexander, have spoken favorably of Insure Tennessee—yet both have previously called for ending this deceptive financing mechanism, which is now used by 49 states and would be the primary means for funding Mr. Haslam’s plan. If the provider tax comes under attack from the U.S. Congress or fails to keep pace with growing costs, state taxpayers will be forced to foot the bill. Tennessee lawmakers must decide if they are going to burden more state residents—and American taxpayers—with ObamaCare’s broken promises, failed schemes and unsustainable policies, or whether their state will lead the march toward more freedom, greater access, and better health outcomes. With several other red states including Utah, Wyoming and Montana waiting in the wings on Medicaid expansion, what Tennessee does next week could have implications far beyond the state’s borders. Ms. Herrera is a senior fellow at the Foundation for Government Accountability. Mr. Owen is president and CEO of the Beacon Center of Tennessee.