The Truth About Obamacare & Medicaid Expansion in SC

Yesterday the media circulated an article entitled, SC will pay high price for Medicaid decision based on a report by RAND Corp. The premise of the article was misleading because the Medicaid decision does not come with “free” expansion, but comes with a high price tag for South Carolinians in the long run. A price tag we cannot afford.

The first three years of Medicaid that is funded by the federal government is a mere carrot to lure states into the exchanges. What the RAND report doesn’t make clear is how South Carolina will pay for the required state match and the state administration costs of $635 million in 2017?

The RAND Corp. report does admit however, that paying for the costs after 2016 will be “hard to bear” for states with constrained budgets.

According to their own report, “after 2016, states will need to cover a portion of the Medicaid costs for the newly eligible. Although these amounts will be small relative to states’ current share of Medicaid costs, they could be substantial in absolute terms. Considering constrained state budgets, even the small increase in payments that states will make beginning after 2016 could be hard for them to bear.”

One of RAND Corp.’s justifications for Medicaid expansion is their assumption that states will save the uncompensated care costs.

Rand Corp. states, “State policy makers should be aware that if they do not expand Medicaid, fewer people will have health insurance, and state and local governments will have to bear higher costs for uncompensated care.”

South Carolina Health and Human Services Director Tony Keck told greenvilleonline.com, “the state is already spending many millions on caring for the uninsured in hospitals and public health clinics, and that he doesn’t see how it would pay more if it doesn’t take the Medicaid expansion.”

Therefore, trading a few million for uncompensated care for Medicaid expansion which will cost taxpayers more than $634,800,000 for the next 7 years doesn't make sense.

Furthermore, the report by RAND Corp. highlights the cap of 10 percent in 2020 for benefits of Obamacare, but does not mention the increased costs to administer the expansion of the Medicaid rolls. According to the Heritage Foundation, these rolls are expected to increase by approximately 50 percent in states like Nevada, Oregon, and Texas.

Another false assumption is that the multiplier effect will offset the Medicaid costs with increased tax revenue raised by the new jobs the expansion would bring to the state. However, the problem arises when there is another downturn in the economy. We cannot assume the net revenue will be there in 2017 in order to offset these costs.

The RAND Corp. report begs yet another question, “what actually is Obamacare?” How certain are we that the federal government will pay for the expanded coverage in future years?

According to new HHS reports, Obamacare exchanges now cost $4.4 billion more, doubling its previous cost estimate of $2 billion for the amount it expects to spend to help states set up insurance exchanges, which is a central component of Obamacare. For states who have implemented exchanges, the costs keep rising, but their alleged benefits remain uncertain at best.

According to Investor’s Business Daily, “Barack Obama made one very specific promise to voters: He would cut health insurance premiums for families by $2,500, and do so in his first term. But it turns out that family premiums have increased by more than $3,000 since Obama’s vow. Can we really trust the federal government to follow through with its commitments?

The simple truth is there are so many assumptions and variables that we cannot really know how Medicaid expansion will affect our state budget in the long run.

One thing is for certain, South Carolina cannot afford Medicaid expansion. According to Advisory.com, as of April 25, 2013, the governors of fourteen states—Alabama, Georgia, Idaho, Iowa, Louisiana, Maine, Mississippi, North Carolina, Oklahoma, Pennsylvania, South Carolina, South Dakota, Texas, and Wisconsin—have publicly said that their states will not participate in the expansion of Medicaid, and several other governors have expressed serious reservations about participating.

During the State of the State address, Gov. Haley made it clear that she would not expand Medicaid in South Carolina. “The federal government likes to wave around a nine dollar match like it is some silver bullet, some extraordinary benefit that we cannot pass up. But what good does the nine dollars do us when we can’t come up with the one? That’s not us. That’s not South Carolina,” Gov. Haley said.

At this year’s SCGOP Convention, Gov. Nikki Haley told the delegation that “we will not allow Obamacare to enter into our state.”

It is clear that no matter how you spin it, Obamacare is bad for South Carolina and should be resisted. However, Gov. Haley is under a lot of pressure to expand Medicaid. The outside political forces and the hospital associations want the federal money and socialized medicine. They have the money to sway public opinion and the mainstream media on their side. Yet it is clear to me that Gov. Haley is adamant about not expanding Medicaid in South Carolina and if she caves at this point and breaks her promise it will be political suicide.