By Robert Alt

Summary

The question of whether to expand Medicaid is complex and wrought with misinformation and misunderstanding about the options available to Ohio, and the effects of a potential expansion.  This report identifies and refutes some of the most common myths, and will help guide a careful evaluation of the realities.

Myth: Expanding Medicaid is necessary to provide coverage for our most vulnerable populations—pregnant women, children, the elderly, and the working disabled.

Reality: These groups are already eligible for Medicaid coverage in Ohio today under the current Medicaid program, as are parents with children below 90% of the federal poverty line (FPL) or working parents below 96% of FPL. All Ohioans between 100 and 400% FPL will be eligible for subsidized health insurance coverage on the exchanges created by the Affordable Care Act if Ohio does not expand Medicaid. The expansion would provide coverage predominantly for able-bodied men and women without children, which would transform Medicaid into a broad new welfare program. However, unlike other welfare programs, this one would not provide incentives for these able-bodied individuals to obtain employment.

Myth: Expanding Medicaid is compassionate, and will improve health outcomes for citizens who lack health insurance.

Reality: Numerous studies have shown that patients in Medicaid have worse health outcomes than individuals with no health insurance at all, including a higher risk of death. Studies making these findings have included Ohioans, Medicaid recipients in HMOs, and controlled for factors including socio-economics and co-morbidity.

Myth: Expanding Medicaid is good for Ohio taxpayers, because it assures that our tax dollars do not go to other states.

Reality: Medicaid is an open-ended program with no preset spending amount. Unlike federal funds for programs like high-speed rail, there is no fixed spending pool whereby failure to accept funds literally shifts federal dollars from one state to another. Rather, with the potential expansion, the more states that participate, the more that Medicaid will cost all taxpayers—including Ohioans. Every state that refuses expansion lowers the level of taxation, or debt burden, necessary to cover the overall program costs. Far from benefitting Ohio taxpayers, Medicaid expansion would create the risk of the federal government shifting a larger portion of Medicaid costs back to the states in the future (something the Supreme Court called a “very real possibility”), which would likely result in a sizable state-level tax increase to pay for these new costs.

Myth: Expanding Medicaid reduces uncompensated care costs and reduces the “hidden tax” of higher private insurance premiums caused by shifted uncompensated care costs.

Reality: States like Maine and Arizona, which expanded their Medicaid programs in prior years, have seen increases in uncompensated care costs and the “hidden tax” after expanding coverage.

Myth: Ohio needs to act quickly to opt into the expansion, because—pursuant to the Affordable Care Act—the federal government will be cutting the Disproportionate Share Hospital (DSH) payments it makes to hospitals that provide charity care.

Reality: The Obama administration itself recommended a one-year delay for DSH cuts in its proposed budget, so there is no need to rush to judgment. While the Affordable Care Act specifies that the federal government must reduce DSH payments, it also requires that federal funds be cut even deeper for states that have lower rates of uninsured individuals. As such, by expanding Medicaid, Ohio would actually see a larger reduction in DSH payments. Furthermore, a recent study by Jason Hart of Media Trackers shows that of 88 hospitals and hospital networks in Ohio, 26 reported no direct offsetting funding for charity care, and only 30 hospitals and networks reported charity care offsetting funds exceeding 1% of total revenue.

Myth: If Ohio opts into the expansion, it can always opt out in the future.

Reality: Once Ohio opts into expansion, legal and political restrictions will make exiting the expansion impossible. The Supreme Court ruled that the states could not be forced to expand Medicaid by the threat of a loss of the first dollar of existing Medicaid funding. However, the Court said that after a state chooses to enter the program, the existing law governing Medicaid would apply, which means that the federal government can withhold first dollar funding should Ohio try to opt out of the expansion later. This is true even if the federal government changes the match rate, shifting more of the financial burden to Ohio. Verbal and “Q&A” assurances made by the Obama administration that it will allow states to opt out are not legally enforceable.

Myth: A “hybrid,” “private option,” or “Arkansas” plan that buys private insurance on the exchanges for individuals who would be newly eligible for Medicaid does not require the state to opt into ObamaCare’s Medicaid expansion, and is a better option for Ohio.

Reality: The so-called hybrid, private option, or Arkansas plans all rely first on the state opting into Medicaid expansion, following which the state would use the enhanced Medicaid funds to purchase insurance on the exchange. Because the state must opt into Medicaid in order to receive these funds, all of the onerous requirements of Medicaid remain in effect. Therefore, Ohio would have little flexibility in how it actually runs the program. Additionally, the Congressional Budget Office estimates that health insurance purchased on the exchange will be 50% more expensive than Medicaid coverage. Because the federal government can threaten states with the loss of all Medicaid funds if they fail to continue coverage after opting into the expansion, Ohio will not have the option of exiting the hybrid plan if it becomes too costly or is not meeting the needs of Ohio’s citizens. Representatives from the Kasich administration have testified that if buying coverage on the exchange were too costly in the future, the state would consider simply shifting recipients back onto regular Medicaid.

Myth: Ohio should expand Medicaid if it can negotiate with the Obama administration to obtain a demonstration project 1115 waiver, which would allow Ohio greater flexibility in how it runs the program.

Reality: Any 1115 waiver is temporary—generally lasting 3-5 years. At the expiration of the waiver, the state must either give up its flexibility or seek a waiver renewal from the federal government—which would be from a different Health and Human Services Secretary and different administration than the one which granted the initial waiver. The Secretary may deny continuation of the waiver, at which point Ohio would be forced to provide the expanded Medicaid program in perpetuity without the added flexibility. The state thereby takes on a long-term responsibility to continue the Medicaid program for the expanded population, but only gets short- term assurances that it will be able to run the program with any degree of flexibility.