Medicaid Expansion Not Healthy for Utah

Many expect the Governor to call a special session this year to re-consider a proposal for Medicaid expansion under the Affordable Care Act. We caution the Governor and Legislature against Medicaid expansion. Providing health insurance is not the responsibility of the government and such redistributive policies violate the property rights of everyone as it requires either raising taxes or incurring debt to finance such expenditures.

During the legislative session earlier this year we issued a warning in our public comment on the Governor’s “Healthy Utah” Medicaid expansion plan. Our view was that expanding Medicaid on the promise of generous federal matching funds was unwise because such promises were unlikely to be kept. We were proven right last week when Congressman Tom Price, Chairman of the House Budget Committee, unveiled the House budget plan which aims to balance federal spending in nine years. A key element of the budget plan is repealing Medicaid expansion under the Affordable Care Act, thereby eliminating these generous federal match rates altogether.

Representative Price replaced Paul Ryan as committee chairman this year and has advocated for cutting the federal match rate for Medicaid expansion in order to balance the budget since at least 2013. Such cuts would eliminate the promised 90 to 100 percent match for expansion while leaving the current rates for traditional Medicaid in place. The current federal match rate for Medicaid in Utah is 70 percent.

This new budget proposal aims to reform Medicaid entirely by replacing it with a block grant model where states will have flexibility in how they want to provide care for the needy. The House budget proposal underscores the seriousness of our federal fiscal situation and the commitment to deep cuts from Congress in order to balance the budget. It also means that Utah cannot count on the rosy promises of a perpetual 90 percent match under the Affordable Care Act. Without such a generous match, the projected cost to the state of Utah for Medicaid expansion under “Healthy Utah” could easily triple.

While Representative Price was still the vice chairman of the budget committee in 2013, he warned states against expanding. “I think they join at their own peril. There’s no guarantee that that money’s going to be there,” Price said. Paul Ryan, then chair of the committee, also spoke openly about the future of such generous federal match rates and their plan to roll back such unsustainable promises. “The notion that the federal government is going to keep matching Medicaid spending at this level is a notion that is just a faulty premise. It’s going to get cut,” Ryan said.

Moreover, reductions in this match rate are not merely Republican ideas. President Obama actually proposed reducing the 90 percent match rate to a blended rate with the current rates under traditional Medicaid as a cost-cutting measure during budget negotiations in 2011. Whether the House budget passes this year and repeals Medicaid expansion entirely or some alternative reduction in Medicaid matching occurs, one thing is certain—generous federal Medicaid expansion money is not a guarantee. Our public comment reflected this reality and our warning is that Utah should not follow other states in pursuit of generous federal funds that do not exist.

Proponents of Medicaid expansion also talk about federal money being “left on the table” and being given to other Medicaid expansion states. This is not an accurate picture of how federal funds are allocated. A recent report by the Congressional Research Service explained that “if a state doesn’t implement the ACA Medicaid expansion, the federal funds that would have been used for that state’s expansion are not being sent to another state…there is not a set amount of federal funding for Medicaid. Each state gets the federal funding necessary for their Medicaid program.”

The CBO reported that those funds are merely not spent. When over 20 percent of federal spending is debt anyway, reductions in spending directly reduce deficits. This is also consistent with the another point we made during committee hearings—that the money spent today on Medicaid expansion is borrowed from future generations. The CBO reported last year that expansion of federal health care programs would lead to “federal spending for the government’s major health care programs rising sharply to a total of 14 percent of GDP by 2039—twice the 7 percent average seen over the past 40 years.” When nearly 20 cents of every federal dollar spent is borrowed, the burden of these programs on the next generation will be catastrophic.

The same CBO report found that the long term effects of continued federal borrowing would “draw capital away from private investment,” resulting in lower output and incomes as well as shackling future policymakers’ ability to use tax and spending policies to respond to unexpected challenges or crisis.

The clamor for Healthy Utah is surprising considering Governor Herbert’s statements in the past on federal spending. The Governor spoke out against the level of unsustainable federal spending a few years ago while at a meeting of the National Governors Association. The Governor is also one of five governors to sign the “Cut, Cap and Balance” pledge to reign in federal spending. Herbert also co-authored an editorial with Senator Mike Lee on balancing the federal budget. By resisting Medicaid expansion, Utah is doing its part to reduce unsustainable federal spending—a level of which is bankrupting future generations.

Despite the Governor’s previous statements, it appears the political pressure to expand the role of the government in providing health insurance has proven too difficult for him to resist. It remains to be seen whether the legislature will cave to his high pressure campaign to expand Medicaid in Utah.

We warn that such a course of action is wrong philosophically, is fiscally unsustainable, is bad for the economy—especially when factoring in unseen consequences not included in the projections of most professional economists, and is detrimental to the next generation. Legislators would be wise to remain firm in their opposition to Medicaid expansion in Utah.