Florida Charts a Path for Medicaid Reform

By Tyler Hartsfield and Grace-Marie Turner

The Florida Legislature continues to receive pressure to accept ObamaCare’s Medicaid expansion, which would offer Florida about $51 billion in federal funds over ten years and force an additional 1.1 million Floridians into Medicaid coverage.

But the state legislature is hesitant to expand a Medicaid program that is already overburdened and has poor health outcomes. We document the many studies that show patients on Medicaid have the worst health outcomes — worse than those with private insurance and, in some cases, worse than those with no insurance at all.[i],[ii] It would be irresponsible to spend billions of taxpayer dollars on a health program that may not even improve health outcomes.

In addition to concern about Medicaid’s effectiveness, Florida legislators must consider the harm that expansion would do to those who are already on the program. Medicaid was created to provide coverage for the poorest and most vulnerable Americans.  Yet because of its persistent funding shortfalls, Medicaid enrollees experience significant problems accessing quality care.  Adding more than one million more people to the program will severely stress the provider community and only exacerbate access problems.

The legislature is rightly skeptical that the federal government will be able to cover 100% of the cost of expansion for the first three years. Considering the administration’s history of keeping its promises, skepticism is prudent.[iii]  There is no guarantee these high federal matching rates will continue.  In outlying years, the federal government surely will attempt to reduce entitlement spending by reducing its matching payment for the expansion. Indeed, President Obama proposed doing just that in his fiscal-year 2013 budget, which would have cut Medicaid spending by $100 billion over ten years.[iv]  HHS Secretary Kathleen Sebelius’ verbal assurances that the match won’t be reduced have no force of law and cannot influence future congressional policy.

“Every serious bipartisan budget discussion in recent years has envisioned reductions in future federal Medicaid outlays,” Medicare Public Trustee Charles Blahous writes.[v]  The federal government is considering a new blended Medicaid match rate that is likely to encompass Medicaid, the Children’s Health Insurance Program, and the new ObamaCare Medicaid expansion population. States will find their costs overall for these entitlement programs will rise.

Account programs:  Instead of expanding Medicaid, Florida should look to help its most vulnerable residents by pursuing a solution that offers patients real access to better health care. Free-market, patient-centered proposals and programs are under development in a number of states across the country.

Florida actually is a leader that other states are tracking.  House Speaker Will Weatherford and Representative Richard Corcoran have introduced Florida Health Choices Plus, a state-funded program that gives low-income Floridians the opportunity to purchase private health insurance.[vi] Their plan promotes independence with reasonable work requirements.  It also puts patients in charge of their own health spending by requiring a small individual contribution each month to receive an annual $2,000 taxpayer-financed CARE Account contribution that may be used towards the purchase of a health insurance plan. And the plan will save Florida taxpayers money. If the ACA’s Medicaid expansion were fully implemented, it would cost state taxpayers $1.3 billion a year, yet the Health Choices Plus plan is estimated to only cost $237 million, assuming 80 percent of eligible Floridians sign up.

In Michigan, State Senator Patrick Colbeck has introduced the Patient-Centered Care Solution, which requires all health insurance, including Medicaid, to be provided by privately-administered qualified health plans.[vii] The plan utilizes direct primary care services combined with high-deductible insurance plans financed by health savings accounts that are jointly subsidized by the state and eligible enrollees. The accounts are associated with high-deductible insurance plans that offer vulnerable consumers protection from catastrophic health costs, while the health savings accounts give consumers resources to see the physician or other medical provider of their choice for routine medical care.

One of the most important components of both the Florida Health Choices Plus plan and Michigan’s Patient-Centered Care Solution is that they allow low-income consumers to keep their health insurance plan as their income increases. Consumers may pick a plan that they can keep as they continue to work and earn more money.  Traditional Medicaid enrollees have no ownership over their health insurance; earning one dollar too much means they get thrown out of Medicaid.

Waiver programs:  Neither the Florida nor Michigan plans requires the use of federal Medicaid expansion money. There are some states, such as Indiana and Arkansas, who have chosen to pursue waivers that allow them to use federal funds to finance new programs instead of expanding traditional Medicaid.

Indiana began enrolling adults in its Healthy Indiana Plan in 2008, and Arkansas passed in 2013 the Arkansas Private Option.[viii] One key difference between these two states is that the Indiana plan does not use Medicaid expansion money, while the Arkansas Private Option does.

But Arkansas’ plan is just Medicaid expansion under a different name.[ix] The Private Option operates under the title reserved for Medicaid of the Social Security Act, and it “must comply with ‘all requirements of the Medicaid program’ that are laid out by law, regulation or policy.” Private option enrollees pay copays equal to Medicaid rates and pay no deductibles. These enrollees can pick plans on the exchanges, but when they seek Medicaid services that their plan doesn’t cover, Medicaid’s traditional fee-for-service model kicks in. The Arkansas model fails to encourage consumer responsibility, it fails to give patients control over their health insurance, and it fails to encourage independence from costly and inefficient government programs.

Under the Healthy Indiana Plan, Medicaid funds are used to finance a traditional health spending account, coupled with a high-deductible insurance plan to cover large medical expenses. The plan requires individuals to make modest contributions to the account on a sliding income scale while assuring that they have coverage for major medical expenses such as hospitalization and cancer treatment. The popular Healthy Indiana Plan helps vulnerable consumers gain access to quality health care while saving taxpayers and recipients money.

But Indiana’s waiver for Healthy Indiana is set to expire at the end of 2014, and the federal government is pressuring Indiana to shut down the program and expand traditional Medicaid. Governor Mike Pence wants to use the ACA expansion funds to expand the Healthy Indiana Program, but has so far run into federal opposition.[x]  He knows that any Medicaid expansion that accepts federal funds will inevitably be followed with oppressive and expensive federal mandates and requirements.

Florida has been and will be a leader in demonstrating the importance of studying who needs help in purchasing health insurance and developing programs that are targeted and tailored to their needs without getting state taxpayers on the hook for the uncontrollable costs of expansion.

The most important thing that Florida and other states can do is to demand that they gain more control over Medicaid programs that are exploding their state budgets.  Expanding Medicaid without significant changes to the law will not help Medicaid recipients or taxpayers.

Florida has taken the lead in giving Medicaid recipients the option to purchase private plans from among competing providers, and it can show the way in resisting Medicaid expansion and doing reform the right way.

Published in The Journal of the James Madison Institute, Winter-Spring 2014

[i] Turner, Grace-Marie and Roy, Avik, “Why states should not expand Medicaid,” Galen Institute and Manhattan Institute, May 1, 2013 <http://www.galen.org/assets/StatesshouldblockMedicaidexpansion.pdf>

[ii] Baicker, Katherine et al., “The Oregon Experiment – The Effects of Medicaid on Clinical Outcomes,” The New England Journal of Medicine, May 2, 2013 <http://www.nejm.org/doi/full/10.1056/NEJMsa1212321#t=abstract>

[iii] The administration’s promise, “If you like your health plan, you can keep it,” was called the “Lie of the Year” by Politifact, December 12, 2013 <http://www.politifact.com/truth-o-meter/article/2013/dec/12/lie-year-if-you-like-your-health-care-plan-keep-it/>

[iv] Roy, Avik, “Governors’ Worst Nightmare: Obama Proposed Shifting Costs of Obamacare’s Medicaid Expansion to the States,” Forbes, July 19, 2012 <http://www.forbes.com/sites/theapothecary/2012/07/19/governors-worst-nightmare-obama-proposed-shifting-costs-of-obamacares-medicaid-expansion-to-the-states/>

[v] Blahous, Charles, “Expanding Medicaid: The Conflicting Incentives Facing States,” Mercatus Center, George Mason University, March 5, 2013 <http://mercatus.org/expert_commentary/expanding-medicaid-conflicting-incentives-facing-states>

[vi] “Florida Health Choices Plus,” Florida House Majority Office, April 2013 <http://www.myfloridahouse.gov/Handlers/LeagisDocumentRetriever.ashx?Leaf=housecontent/HouseMajorityOffice/Lists/Other%20Items/Attachments/6/Florida_Heath_Choices_Plus.pdf&Area=House

[vii] State Senator Patrick Colbeck, “Patient-Centered Care Solution,” October 21, 2013 <http://www.senatorpatrickcolbeck.com/wp-content/uploads/2013/07/Patient-Centered-Care-Solution.pdf>

[viii] Healthy Indiana Plan <http://www.in.gov/fssa/hip/>

[ix] Ingram, Jonathan, “The Empty Promises of Arkansas’ Medicaid Private Option,” Foundation for Government Accountability, January 17, 2014 <http://uncoverobamacare.com/wp-content/uploads/2014/01/UO-The-Empty-Promises-of-Arkansas-Medicaid-Private-Option.pdf>

[x] Wall, J.K., “Obama team willing to ‘Republicanize’ Medicaid, but maybe not enough for Indiana,” Indianapolis Business Journal, December 12, 2013 <http://www.ibj.com/the-dose-2013-12-12-obama-willing-to-republicanize-medicaid-but-maybe-not-enough-for-indiana/PARAMS/post/45064>


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