April 8, 2020
By Naomi Lopez

As members of Congress look towards the next coronavirus rescue package, some are eyeing a sweetener to encourage non-Medicaid expansion states to expand. U.S. Senator Doug Jones, who is leading the latest Medicaid expansion effort in Congress, is proposing that the federal government pick up almost the entire expansion tab for states that have not yet expanded.

Thirty-seven states and the District of Columbia have already expanded the program. Under the Affordable Care Act (ACA), states may choose to expand Medicaid eligibility to those falling under 138 percent of the federal poverty level. Currently, the federal government pays roughly between 50 and 75 cents for every dollar the state pays in Medicaid spending for the most vulnerable populations. For the newly eligible individuals under the expansion, which includes those who are healthy enough to work and don’t have young children, the federal government now pays 90 percent of the tab.

Under the discussed proposal, the federal government would pay almost the entire tab for the state for the expansion population, as was done when the ACA was first implemented, for a period of three years before ratcheting down to the current federal 90 percent match. But this is a dangerous approach for the most vulnerable, especially in this time of fiscal uncertainty for states.

The Medicaid expansion’s funding formula prioritizes healthy adults above the neediest patients. This is especially true in times of budget shortfalls, as most every state is now facing.

That is because a state seeking to rein in Medicaid spending would need to cut, on average, more than $2 in Medicaid spending on the traditional Medicaid population to save $1 of state spending. Because the federal government is picking up most of the Medicaid spending for the expansion population, a state would need to cut up to $10 in Medicaid spending to save $1 in state spending—almost assuring services for the most vulnerable Medicaid populations will be first in line for budget cuts.

There is no doubt that we need serious solutions for healthcare. But throwing more money at a program in the middle of what will be state budget crises across the country is not the answer. One step in the right direction is the White House plan to use part of a $100 billion hospital rescue fund that was part of the stimulus package to cover medical expenses for COVID-19 patients.

Those who are supporting Medicaid expansion should instead shift their attention to reforms that can deliver on improving patient health and controlling healthcare costs. Otherwise, it will be little more than another expensive scheme at the expense of true reform efforts to ensure patient access to high-quality care for those who need it most and protect taxpayer funds.

Naomi Lopez is the Director of Healthcare Policy at the Goldwater Institute.

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