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The Smug Indifference of the Liberal Classes to the Threat of Losing the Medicaid Expansion in Red States

I think this anecdote tells you all you need to know about the liberal reaction to the possibility of several Republican Governors opting out of the Medicaid expansion:

Hours after the Supreme Court upheld President Barack Obama’s health law on Thursday, but made its Medicaid expansion optional, senior White House officials were asked by a reporter how they would entice states to participate.

They laughed. It seemed almost inconceivable to them that states would opt out. After all, the federal government will be paying the entire bill for three years for the expanded health insurance program for the poor, from 2014 to 2017, and then picking up at least 90 percent of the costs after that.

Somehow, the laughter hasn’t worked yet! In fact, ten states have already vowed to opt out of the Medicaid expansion, with more potentially on the way. The fact that these states sued to overturn the entire law should have been a tipoff that they wouldn’t exactly jump at the chance to incorporate one important portion of the law if they were given the opportunity to opt out.

I sure wish that Democrats had a better idea than laughter, but I don’t see it. So far they’re smugly opining that no state in their right mind would give up “free money” to cover their citizens. First of all, it’s not free, or at least not entirely free. Medicaid is typically the largest or second-largest line item in a state budget. States would pay $73 billion between 2014 and 2022 on their share of the expansion, which is next to nothing in the long term. But that’s far bigger than the $0 they would be on the hook for, in the wake of the Supreme Court ruling, if they opt out. And as Matt Salo, executive director of the National Association of Medicaid Directors, says, there are potentially larger costs downstream. The federal government would not pick up the tab for anyone already eligible for Medicaid who comes into the system based on the newfound publicity over the coverage expansion. There are also startup costs like information technology and additional personnel to sign up new eligibles. And there’s the risk of cost-shifting from the feds onto the states in the future. I don’t think any of this should factor into the decision, as the benefits outweigh the costs. But for a government-hating Tea Party Republican? Of course they’ll balk! And they will distort the costs in order to meet their ideological goal.

Which is why this unctuous Ezra Klein op-ed about how the Medicaid expansion will be “too good a deal to pass up” is so completely counter-productive. There are some decent numbers in the piece, but this is one of the central errors:

To get a sense of what an incredibly, astonishingly, unbelievably good deal that is, consider this: The federal government currently pays 57 percent of Medicaid’s costs. States pay the rest. And every state participates.

Who cares? These particular governors, in these particular political situations, with these particular constituents, didn’t make that decision. And it’s far easier to deny prospective benefits to a population than to take benefits away from a group that already has them. There’s no comparison between current Medicaid and this expansion, which in the eyes of the Court amounts to a new program.

Klein is right that red states generally would get a better deal on the expansion than states which already cover generously under Medicaid, because a higher percentage of their citizens would get new coverage at the higher rate. Of course, those red states don’t seem particularly concerned by their lack of coverage of the uninsured right now. It hasn’t affected those Republican governors in any political sense.

So Klein closes with the Green Lantern Theory of Health Care Politics, which suggests that if hospital lobbyists just will the expansion into being, it will happen (I love the Democratic reliance on lobbyists here, by the way):

In the short term, a rising Republican star like Haley might have reason to reject that deal. The Republican base hates the law, and so one way to build a national profile right now is to win the GOP’s ongoing “no, I’m the most anti-Obamacare!” contest.

But that won’t last forever. And governors also have to answer to non-Republican voters who don’t want their state missing out on billions in federal dollars, and to the hospitals in their state who have to treat uninsured patients that end up in their emergency rooms, and the insured voters who end up paying for their uninsured brethren.

Funny, the hospital lobbyists know enough to be extremely worried. They thought the bargain was that they would accept $155 billion in cuts to their payment rates in exchange for the additional customers of the Affordable Care Act. Their concern reflects their knowledge that Republican governors won’t be moved. The hospitals know that they would have to pick up a lot of the costs of uncompensated care, without getting the benefits from the expansion. And they don’t sound confident about their magical powers of persuasion:

“You’re going to have a lot of cuts with no corresponding increase in the number of people that hospitals see that have any sort of coverage,” said Bruce Rueben, the president of the Florida Hospital Association. Florida’s hospitals ate $2.55 billion in unpaid bills left by uninsured people in 2010, according to the association, which supported the health care reform law […]

As in other states, the result in Arizona will be increased pressure on hospitals’ finances, said Peter Wertheim, the vice president for strategic communications at the Arizona Hospital and Healthcare Association. Arizona hospitals provided $4.8 million in uncompensated care in 2011, according to the association, and the Urban Institute says 463,000 state residents would qualify for the Medicaid expansion. In 2010, 1.2 million Arizonans under 65 were uninsured, or 21 percent of its working-age residents, the Kaiser Family Foundation reports.

“If we opt out, we’re still going to have this issue of people going to hospitals without coverage and continuing to add to the uncompensated care,” Wertheim said.

One positive sign was that Rob McKenna, the Washington Attorney General who filed suit against the ACA and who is running for Governor, shifted his position toward favoring the expansion. But Washington is one of the handful of states who already started implementing the expansion early, so that’s not very surprising.

If the prevailing opinion is the Klein-esque “but they’d have to be crazy not to take it” approach, if that’s how the Democrats plan to smugly fight this one, then millions of low-income Americans had better eat right and exercise, because they’re not going to have any health coverage to fall back on.

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David Dayen

David Dayen