Hospital Lobby's Very Good Deal

The hospital lobby is out in force urging states to expand their Medicaid programs. Their faulty claims are spurring Republicans governors to embrace the giant expansion of the broken, costly Medicaid program. This week, Governor Kasich of Ohio and Read more

Medicaid Provider Taxes: A "Charade"

Medicaid is dominating state budget battles this year. States must decide whether to expand their Medicaid programs to include all individuals making below 138% of the federal poverty level—approximately $30,000 for a family of four. To finance this costly expansion, proponents Read more

The Arkansas Scheme to Expand Medicaid

By: Nicole Kaeding
In February, Governor Beebe of Arkansas met with Health and Human Services Secretary Sebelius to discuss a new plan to expand Medicaid. Under Beebe’s plan, Arkansas would expand Medicaid to cover all individuals below 138% of the federal poverty level, but the individuals would be put into President Obama’s health insurance exchanges, not the traditional Medicaid system. Conservatives are rushing to support the Governor’s plan talking about “choice” and “competition.” Unfortunately, Beebe’s plan is another bad alternative to Medicaid expansion.
Beebe’s plan would expand Medicaid eligibility from 17% of the federal poverty level to 138% of the federal poverty level—approximately $31,000 for a family of four. Instead of receiving their insurance through the traditional, flawed Medicaid system, recipients would receive premium support–paid for by state and federal taxpayers–to buy insurance through a health insurance exchange.
The Arkansas Scheme is just expansion by another name. It doesn’t matter if Medicaid is expanded under its traditional program or through a premium support model; 225,000 new Arkansans will be dependent on government for their health insurance. No matter how you spin it, it’s expansion, not reform.
Supporters are arguing that this scheme would allow Arkansas to better serve its Medicaid population by providing them with a better insurance product. Study after study has shown that Medicaid is indeed worse than private insurance in terms of health outcomes. Many things work together to make Medicaid an inferior insurance product, namely governmental involvement and bureaucratic restrictions. By allowing enrollees to purchase private insurance, supporters argue, enrollees will be better-off by the choices available to them.
But supporters ignore a very important aspect. The insurance plans available for purchase in 2014 through President Obama’s health insurance exchanges aren’t the same as private insurance available today. Plans sold via the exchange are known in health care policy world as “qualified health plans.” QHPs will be subject to the hundreds of pages of regulations from the Obama Administration dictating all aspects of the plans such as mandating coverage in ten broad categories of treatment. These coverage areas apply regardless of whether the insured needs them. For instance, all plans must cover pediatric dental care whether or not a child is part of the policy—a mandate that only raises the costs for individuals. Only the plans that meet the whims of state and federal regulators will be available for new Medicaid enrollees; some “choice.”
Medicaid expansion under the Arkansas plan is more expensive for taxpayers. According to the Congressional Budget Office, private insurance costs 50% more per enrollee than Medicaid. Adding people through the Arkansas model will inflate the already high costs of Medicaid for taxpayers. Arkansas seems to be little concerned with this aspect as the federal government will be paying 100% of the costs for the first three years and up to 90% thereafter, but federal taxpayers should sure care.
Instead, supporters in AR are touting analysis from a group of actuaries saying that this model of expansion won’t be any more expensive than traditional expansion. First, that ignores that the total costs for state and federal taxpayers will be almost $15 billion more over the next ten years than not expanding. But importantly, the actuaries’ assumptions are dubious at best calling into question the idea that private-insurance expansion would somehow be cheaper. Their assumptions basically say that buying a more expensive insurance policy somehow saves the state money.
Finally, the Arkansas scheme is being sold as a flexible alternative to traditional Medicaid expansion. The plan details numerous waivers that Arkansas will ask HHS for federal approval. That highlights the key point to this debate. Medicaid is a joint-run state and federal program where the federal government has always been in control. States function just as the administrator of the program. Any and all changes that AR wants to make to its Medicaid system must be approved by HHS. That’s not flexibility; that’s begging for permission.
This model is spreading like wildfire. Numerous states including Ohio, Tennessee, Florida are discussing a similar expansion with HHS. What is bad for Arkansas is bad for these states as well.
Expanding Medicaid, through a private insurance or a traditional expansion, isn’t the right policy for Arkansas. Increasing costs for state and federal taxpayers and encouraging even more government dependency isn’t reform. Instead of running to HHS to soak up “free” federal money, Arkansas should reject this flawed expansion scheme.

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Employer Mandates and Medicaid Expansion

By: Nicole Kaeding
Advocates of Medicaid expansion are pushing a new argument to coerce states into acting. They claim that unless a state expands its employers will be subjected to increased tax penalties. Like so many things being said across the country regarding Medicaid, these statements are a misunderstanding of the complicated and complex health care law.
This argument is obviously flawed for several reasons.

First, as Michael Cannon of the Cato Institute and Jonathan Adler of Case Western Reserve University have ably argued, this employer penalty tax will only hit businesses in states that have state-based exchanges; federal or partnership exchanges don’t trigger the tax. The IRS guidance on this issue is in direct conflict with the clear text of the President’s health care law. The state of Oklahoma is challenging the IRS’ flawed guidance. But none of the states that are currently on the fence about expansion have state-based exchanges: Arkansas (partnership), Texas (federal), Florida, (federal), Ohio (federal), Pennsylvania (federal), Arizona (federal), etc. Arguing that the employer mandate taxes will apply in these states is outright false.

Second, if the tax does end up applying to businesses in states with federal and partnership exchanges, the tax would only apply to businesses when their employees purchase insurance through the exchange and only if the employer-sponsored insurance is unaffordable. Even some supporters of the President’s law admit that many people between 100-138% FPL will instead opt to pay the individual mandate penalty, only $95 in 2014, instead of spending the time, effort and money to purchase insurance on a health insurance exchange—even with the federal tax subsidy. Additionally, individuals between 100-138% FPL could have employer-sponsored insurance options available to them as well. So even if the tax does apply, it will be insignificant, not the $1.3 billion floating through the media.

Third, it’s very difficult for a full-time employee to make only 100-138% FPL. For an individual, this is only $11,490 to $15,282 a year. A full-time, minimum wage job pays over $15,000 annually. The vast majority of people in this income range are part-time employees meaning they are exempt from the employer mandate provisions. Additionally, this will lessen their aggregation toward the 50 full-time equivalents necessary to trigger the business tax, even with the lower 30-hour definition of full-time work.

Supporters of the President’s health care law are worried that states won’t be willing participants in the flawed expansion of the broken, costly Medicaid expansion, so now they are resulting to false statements and arguments to scare states into acting. Perhaps they aren’t being disingenuous and just don’t understand their beloved, complicated regulatory nightmare. Regardless of the their reasons for false statements, states should ignore the arguments and instead look at the facts.

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Medicaid Alternatives

As Medicaid dominates state legislative sessions, conservatives are looking for alternative ways to reform and improve the broken Medicaid system.

This policy paper from Americans for Prosperity highlights three key reforms for states to pursue.

 

 

Medicaid Alternatives

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Provider Taxes: The Medicaid Funding Scam

Medicaid is a complex and burdensome system, covering 55 million low-income individuals, and costing taxpayers $400 billion per year. Watch the video below to find out how states work with providers to fleece federal taxpayers by using “provider taxes” as an excuse to increase funding.

Click here to read more.

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Hospital Lobby’s Very Good Deal

The hospital lobby is out in force urging states to expand their Medicaid programs. Their faulty claims are spurring Republicans governors to embrace the giant expansion of the broken, costly Medicaid program. This week, Governor Kasich of Ohio and Governor Snyder of Michigan became the fifth and sixth Republican governors to announce their desires to further embrace consolidated federal health care through the expansion. But why would hospitals who are focused on delivering high-quality health care to their patients embrace such a bad idea? The answer: Protecting their bottom-line.

The controversy revolves around a complicated provision of federal health care law known as disproportionate share (DSH). The federal government requires hospitals to treat all emergent health care conditions regardless of the patient’s ability to pay. Congress realized this mandate imposed costs on hospitals and decided to reimburse hospitals that treat a large share of uncompensated care cases. These hospitals tend to be in very rural or very urban areas of the country where more individuals are uninsured.

These DSH payments are sent to hospitals through the normal Medicaid payment process; the hospitals receive a higher reimbursement than their counterparts. In 2012, Medicaid DSH payments totaled $11.3 billion.

Under the President’s health care law, Medicaid would be expanded to include all individuals under 138% of the federal poverty level, dramatically reducing the incidence of uncompensated care. So, the hospitals didn’t object during the health care law’s debate when Congress included DSH cuts that totaled $14 billion from 2014 to 2020.

After the Supreme Court’s June 2012 ruling, the situation changed because the Court held that states could not be forced to expand Medicaid—the expansion will be voluntary.

Hospitals are scrambling. Without the Medicaid expansion and with cuts to DSH payments, hospitals will have less money to treat the uncompensated care cases—or so they say. In most states, DSH payments represent less than 3% of all Medicaid expenditures.

Now hospital groups are lobbying states hard to convince them to expand Medicaid while ignoring study after study that shows how Medicaid fails to deliver on its promises. Health care outcomes for Medicaid patients lag other types of insurance and more than 30% of doctors refuse to accept new Medicaid patients—ironically, putting even more strain on emergency rooms. Medicaid is also extremely expensive for states and the federal government to run and manage costing taxpayers hundreds of billions every year.

The hospitals are trying to lobby their way out of the bad deal they cut. In Arizona, they lobbied Governor Brewer to abuse the provider tax system to fund the Medicaid expansion. The hospitals agreed to be taxed 6% in exchange for access to billions of state and federal funding—a scheme akin to a veritable gold mine.

Too bad, the rest of us lose. The hospitals and their lobbyists untangled their bad deal by driving up costs for other patients and taxpayers. Sadly, Governor Brewer and the state are complicit in the farce. Brewer echoes the hospitals’ talking points by claiming that this deal will save state taxpayers million every year even though spending will go up dramatically.

Hospital groups in Georgia, Oklahoma and South Carolina are pursuing similar strategies trying to copy the “success” of their Arizonan counterparts.

These backroom deals are exactly why the American public distains the President’s health care law. Instead of giving in to insiders like the President did, governors and legislators should reject the crony calls from hospital groups trying to scheme taxpayers to pad their bottom lines.

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Medicaid Provider Taxes: A “Charade”

Medicaid is dominating state budget battles this year. States must decide whether to expand their Medicaid programs to include all individuals making below 138% of the federal poverty level—approximately $30,000 for a family of four. To finance this costly expansion, proponents are relying on gaming the Medicaid system through a highly technical provision known as “provider taxes.”

 

Medicaid is a joint state-federal program where the federal government pays between 50 percent and 73 percent of all expenses. Provider taxes manipulate this system by maximizing federal contributions while minimizing state contributions.

 

Here is how the scenario works: Imagine a state that receives a 50 percent match from the federal government and reimburses a hospital $100 for a procedure. The state would pay $50 and the federal government would pay $50. Now, the state increases the reimbursement to the hospital to $106 and inserts a provider tax on the hospital at 6% (the maximum tax rate allowed). The federal and state government are now paying $53 for the same procedure, but the state gets $6 in tax revenue. The state is in essence paying $47, the hospital receives the same $100 and federal taxpayers lost $3. It’s a scam and federal taxpayers are the ones getting hurt. Now imagine this being played out thousands of times a year in a state.

 

Sadly, abusing the system like this is completely legal. Forty-nine states and the District of Columbia (Alaska is the only exception) use these provider taxes to milk federal taxpayers out of billions of dollars every year.

 

Politicians across the political spectrum in Washington realize just how badly provider taxes manipulate the system. The President’s last two budgets included provisions that would have eliminated these taxes. In November, Senator Dick Durbin (D-IL) called provider taxes a “charade.” Senator Bob Corker (R-TN) previously introduced legislation to phase-out these harmful taxes.

 

As states grapple with whether to expand their Medicaid systems, proponents of expansion are pushing provider taxes as a “simple” way for states to finance the increased expenditures. This is the exact strategy adopted by Governor Jan Brewer in Arizona. Governor Brewer’s plan calls for a 6% tax on all hospitals in the state of Arizona. A similar idea is being pushed by providers in South Carolina to encourage Governor Haley to support expansion.

 

If the last month is any indication, Medicaid will continue to dominate states’ 2013 legislative sessions. Special-interest groups will devise schemes to game this legal, but disingenuous, system to bleed federal taxpayers for unlimited funds. Governors and legislators would be best to ignore these efforts.

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Welcome to ObamaCare Part XIV: Medicaid Admits Lower Payments Equals Less Care

By: Nicole Kaeding

Yesterday, the Center for Medicare and Medicaid Services (CMS) released a new regulation with a long, technical title “Payments for Services Furnished by Certain Primary Care Physicians.” But what is noteworthy about this regulation isn’t the title–it’s the contents. This regulation is an explicit endorsement of what Americans for Prosperityhas been saying for a long time: Lower Medicaid payments to providers means less care for Medicaid payments.

Medicaid is a joint federal-state health insurance program for low income individuals, the disabled and pregnant women. The program covers almost 50 million Americans.

Medicaid is a broken, costly system due to its unusual structure. The federal government splits the cost of Medicaid with each state through a matching formula. The federal government pays on average 57 cents of every dollar spent on Medicaid. In exchange, the federal government puts numerous restrictions on states on who must be covered and how the program must be run.

This complex, ineffective setup means that states have their hands tied in running the program. As a result, states are forced to slash payments to providers, doctors and hospitals, to control for the rapid growth in Medicaid.  Medicaid pays about 55% of what private insurance does; Medicare pays 75%. When payments to doctors are reduced, doctors decide not to accept Medicaid patients. A recent study in the journal Health Affairs estimates that 30% of doctors do not accept new Medicaid patients. In some states, the numbers is much higher—it’s 60% in New Jersey.

When fewer doctors accept Medicaid patients, health outcomes suffer. Individuals are unable to find doctors to treat conditions and maintain adequate care. Unfortunately, Medicaid patients are experiencing this firsthand. Health outcomes for Medicaid patients are worse than those of Medicare and privately-insured patients. In some studies, health outcomes for patients with no insurance are better than those with Medicaid.

And sadly, the President’s health care law will make this situation even worse. Medicaid is the largest vehicle for expanded care under the law. Eleven million more Americans will be covered by Medicaid.

So now, CMS is trying to bribe doctors into complying in this unworkable framework. This new regulation issued yesterday provides primary-care physicians with higher payments for treating Medicaid patients. CMS hopes that by paying doctors more they won’t refuse to cover these 11 million people who are being promised insurance and will flood the market in 2014.

But what happens after 2014? The money runs out. Doctors will face the same reimbursement rates they currently receive, and the system will be strained millions more enrolled. Two years of higher payments won’t solve this problem.

The President and CMS continue down the path. Instead of reforming this broken, costly system, they hope that by spending more money they will solve the problem. Welcome to ObamaCare.

Check out previous posts in the “Welcome to ObamaCare” series by clicking below.

Part II-Obama Taxing Benefits Costs Companies Millions

Part III-CMS Finally Admits ObamaCare “Cost Savings” are Phony

Part IV-Can You Really “Keep Your Plan” If You Like It?

Part V-Businesses Feeling the Impact, Asking for Waivers

Part VI-Proposed Regulations Exchange a Good Idea for a Bad One

Part VII – Acting up in CLASS

Part VIII – Don’t Let a Simple Thing Like Funding Stop You

Part IX-Exchange Flexibility? What Flexibility?

Part X- You Know What We Meant

Part XI- HHS Spends Wildly

Part XII-One of the Largest Tax Increases in History

Part XIII-Essential Health Benefits, Another Costly Mandate

 

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Medicaid: To Expand or Not to Expand

With last Thursday’s ruling on the constitutionality of the President’s health care law, the Court delivered a hidden victory to supporters of limited government and principled federalism. For the first time in modern American history, the Court ruled that there is a limit to Congress’s power in compelling state action. Congress’s attempt to vastly expand Medicaid, and financially punish states for not complying, was ruled a coercive use of congressional authority. Now States must decide whether to implement this failed expansion.

Medicaid is a jointly run state-federal program providing insurance to three main groups: low-income individuals, the disabled and pregnant women. The federal government picks up the bulk of the costs with its share ranging from 50 to 73 cents on the dollar.

Under the President’s health care law, Medicaid eligibility would vastly expand to all individuals below 133% of the federal poverty level—approximately $30,000 for a family of four.  An estimated 17 million people will join Medicaid starting in 2014. In order to encourage states to participate in this expansion, the federal government will pick up 100% of all expenses for the first three years, with the rate falling to 90% in 2020. Before the Court’s decision, if a state refused to comply with the expansion, that state lost all of its Medicaid funding, including for the groups previously covered. The Supreme Court ruled that punishment was so severe that it essentially left the States with no meaningful choice on whether to comply, and was thus coercive.

What should a state do? The answer is quite simple: States should refuse to expand their Medicaid population. 

First, a move to expand the Medicaid population is a move to support the President’s law.  Even though the law is constitutional, that does not make it good policy.  States should join together and force the federal government to reform.  States all ready hate the current Medicaid system due to the numerous regulations and red-tape from Washington, D.C. States function as de-facto administrators of the federal government’s failed health care policies.  Just last year, legislators in Washington State and Texas, two states on opposite ends of the political spectrum, moved to free themselves from Washington, D.C.’s stranglehold. States have a choice and should exercise it.  As Chief Justice Roberts wrote in one portion of the decision: “The States are separate and independent sovereignsSometimes they have to act like it.”

Second, states can’t afford the Medicaid expansion.  Even though the federal government will pick up costs for the first several years, states will be stuck with an ever increasing share of the cost.  From 2014 to 2019, conservative estimates put the states’ cost of expansion at $21 billion.  States like Texas will need to pay more than $2.6 billion as almost 1.8 million individuals are added to its Medicaid rolls. It’s tempting to take the federal money that’s lying in front of you, but it’s simply too good to be true. The President actually hinted earlier this year that the federal government gravy train on Medicaid will be ending shortly. Expanding Medicaid will lead to more government spending and tax increases.

Finally, states must remember that Medicaid is a broken health care system.  Its provider payments are all ready too low causing poor health outcomes.  A recent study found that uninsured individuals have better health outcomes than Medicaid recipients.  In fact, more than 28% of doctors surveyed refuse to accept new Medicaid patients. Why would states want to force individuals into a failed health care system?

Even after only a few days, states thankfully are realizing how bad of a deal this Medicaid expansion is.  Both Governors Rick Scott of Florida and Nikki Haley of South Carolina confirm their states will not participate in this unworkable structure.

The Supreme Court gave States a say for the first time. It is up to them to decide whether or not they want to expand their Medicaid program.  States should unite together and tell the federal government no to a broken and costly system.

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Medicaid Infographic: Broken, Costly and Expanding

 

The Supreme Court ruled that the President’s health care law unconstitutionally tried to force states to expand their Medicaid programs. Each state is now faced with a choice, will they expand a broken health insurance scheme that is crippling states budgets, delivering substandard care and driving doctors away from accepting new patients?

 

Check out the infographic below for the startling numbers:

 

 

Medicaid Infographic

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Conservatives in Congress Unite Against Exchanges

In the wake the Supreme Court’s decision to uphold most of the President’s takeover of nation’s health care system, a group of 73 senators and representatives have signed onto a letter urging governors not to implement the law’s health insurance exchanges. 

These exchanges are the central way that the federal government will exact control over the state health insurance markets.  And although federal HHS is trying desperately to have the exchanges viewed as providing flexibility, state legislators and governors across the country are rebelling at the prospects of being nothing more than an administrative arm of the federal government.  AFP has been an active and vocal opponent of the exchanges.

Senators on the letter include:

DeMint, Lee, Johnson (WI), Coburn, Graham, Vitter, Paul, Cornyn, Sessions, Rubio, Toomey and Shelby

While representatives include:

Bachmann, Jordan, Paul, Roe, Wilson, Duncan, Akin, Hensarling, Garrett, Mulvaney, Walsh, Walberg, Stearns, Ross, Gowdy, Emerson, Franks, Buchson, Rokita, Broun, Boustany, Huelskamp, Scalise, Amash, Olson, Canseco, Price, Blackburn,  King (IA), Adams, DesJarlais, Landry, Gingrey, Lankford, Miller (FL), Guthrie, Manzullo, Bono Mack, Ellmers, Pitts, Benishek, Calvert, McClintock, Jenkins, Gohmert, Flores, Bilbray, Ryan, Sensenbrenner, Buerkle, Denham, Lungren, Harris, West, Long, Westmoreland, Fleischmann, Aderholt, Poe, Labrador, Neugebauer

Here’s the text of the letter:

National Governors Association
Hall of States
444 N. Capitol St., Ste. 267
Washington D.C. 20001-1512

Dear Governors:

The Supreme Court has ruled significant parts of the Medicaid expansion of the President’s health care law unconstitutional as well as ruling that the individual mandate violated the Commerce Clause and will therefore be implemented as a punitive tax on the middle class. This presents us with a critical choice: Do we allow this reprehensible law to move forward or do we fully repeal it and start over with commonsense solutions? The American people have made it clear that they want us to throw this law out in its entirety.

As members of the U.S. Congress, we are dedicated to the full repeal of this government takeover of healthcare and we ask you to join us to oppose its implementation.

Most importantly, we encourage you to oppose any creation of a state health care exchange mandated under the President’s discredited health care law.

These expensive, complex, and intrusive exchanges impose a threat to the financial stability of our already-fragile state economies with no certainty of a limit to total enrollment numbers. Resisting the implementation of exchanges is good for hiring and investment. The law’s employer mandate assesses penalties – up to $3,000 per employee – only to businesses who don’t satisfy federally-approved health insurance standards and whose employees receive “premium assistance” through the exchanges. The clear language of the statute only permits federal premium assistance to citizens of states who create a state-based exchange. However, the IRS recently finalized a regulation that contradicts the law by allowing the federal government to provide premium assistance to citizens in those states that have not created exchanges. The IRS had no authority to finalize such a regulation. By refusing to create an exchange, you will assist us in Congress to repeal this violation which will help lower the costs of doing business in your state, relative to other states that keep these financially draining exchanges in place.

State-run exchanges are subject to all of the same coverage mandates and rules as the federally-run exchange. Clearing the hurdles of crafting an exchange that complies with the 600 plus pages of federal exchange regulations will only result in wasted state resources and higher premiums for your constituents.

Implementation of this law is not inevitable and considering more than half of the American people oppose the law, it is improbable. Join us in resisting a centralized government approach to health care reform and instead focus on solutions that make health care more affordable and accessible for every American. Let’s work to create a health care system of, for, and by the people, not government or special interests.

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