Medicaid expansion raises complicated questions

By Scott Mooneyham | Feb 05, 2013

RALEIGH -- If they are true fiscal conservatives, the Republican legislators who control the North Carolina General Assembly will think long and hard before rejecting additional Medicaid money slated to come to the states as a part of the federal health care overhaul.

On the surface, it may appear that the fiscally conservative thing to do is to reject the Medicaid expansion that is part of the Affordable Care Act. States were afforded the opportunity to do just that by the U.S. Supreme Court, and about a dozen are expected to do so.

Republican rhetoric of rejecting "Obamacare" certainly serves up a good portion of red meat to the party faithful. But setting the politics aside, the pluses and minuses of Medicaid expansion are not so easily determined.

Proponents of the expansion argue that the additional federal money coming into the state (the expansion would be all federal dollars in the first three years and 90-percent federal money afterward) would be a boost to the medical economy.

One study put the additional economic activity at $1.4 billion. But spending taxpayer dollars and expanding government programs can't be justified based on how many people are employed. Taxpayer money is paying for the expansion, whether from federal taxpayers or state taxpayers.

States that accept the money also limit themselves regarding future changes to the program.

The feds don't want states to take their money, only to create eligibility restrictions that  allow them to play a shell game and swap federal and state dollars. To prevent that from happening, the feds are requiring that states make no changes to what is called their "maintenance of effort."

Those restrictions are understandable. So too is the reluctance of governors and legislators to enter into an agreement that limits their ability to change how states operate their Medicaid programs. After all, this is big bucks. Right now, Medicaid in North Carolina is about a $10 billion program, with the state paying about $3 billion of that cost.

So, legislators reluctance to expand the program should come as no surprise. But a knee-jerk reaction may not be in the best interest of taxpayers or private insurance ratepayers. One of the myths about Medicaid is that it provides health care coverage to the poor. In fact, it provides that coverage only to certain categories of the poor.

The poor who don't fit into one of those categories often end up uninsured, with the cost of their care passed on to other private payers or state and local taxpayers.

A recent N.C. Institute of Medicine study concluded that the state would save $65.4 million a year by agreeing to the Medicaid expansion. The study, though, looked at direct revenues and costs, and economic benefits.

What legislators -- even those who can justify to themselves turning away federal tax dollars -- ought to be concerned about whether they would be plugging one hole that only forces more water through another hole, drowning the taxpayer nevertheless.