JLF health care expert pans impact of ‘Obamacare Lite’ on N.C. Medicaid expansion

Katherine Restrepo’s latest Forbes column explains why the proposed American Health Care Act could lead to some bad results for North Carolina taxpayers.

… [T]he intraparty divide over how health reform should take shape remains intense, especially when it comes to restructuring Medicaid, the health insurance program that provides medical assistance at no cost for low-income children, adults, and the disabled.

How do the AHCA’s recommended changes to Medicaid impact North Carolina?

The bill actually entices non-expansion states like North Carolina to expand program eligibility to working childless adults by 2020, which aligns with Governor Roy Cooper’s persistent pleas to do so against a resistant state legislature. In his recent budget proposal for 2017-19 , the first recommended change listed under the Division of Medical Assistance (DMA) section would make room for an additional 624,000 adults.

It’s been consistently reported that expanding Medicaid, Obamacare-style, would cost North Carolina $6 billion over the next ten years. So how exactly will this be paid for, now that expansion states are required to cover 5 percent of the cost in 2017, and 10 percent of costs after 2020? The budget line item description states, “no existing general fund tax dollars are needed to support the expansion.” Rather, the statement goes on to say that, “the non-federal share of expansion costs is provided through provider contributions that fall well under federal limits.” In plain speak, this means that North Carolina hospitals will initially foot the Medicaid bill, and then get their money back. …

… Can one really blame hospitals and other health care facilities for playing this assessment game? Those that are largely dependent on Medicare and Medicaid funds really have no choice but to be active players, given that public health insurance pays well under commercial payer rates. And Cooper isn’t the first governor to pitch using provider assessments as a way to pay for a state’s cost of Obamacare’s Medicaid expansion.

Naturally, many Republicans and Democrats alike see the federal Medicaid match rate as an attractive feature for their state budgets. Others see Medicaid’s financial design as a serious flaw. The assessments paired with the open-ended federal match rate represent just two of many reasons why we spend almost half a trillion dollars on Medicaid nationwide every year. According to the CBO, program expenditures will most likely double each decade at the federal level – regardless of whether states decide to expand their medical assistance eligibility roles.

Over the course of many presidential administrations, lawmakers have debated the idea of having states to be held more accountable for Medicaid spending by transitioning federal Medicaid funds to either block grants or capped funds per enrollee. AHCA goes for the latter, however it would apply neither to all patients nor all Medicaid funding streams. And the federal match rate would still exist on many levels, inclusive of a continued 90:10 federal match to pay for states that have expanded Medicaid and for states that decide to expand before 2020.

So, while it looks like Medicaid’s restructured financial design limits the ability for states to engage in provider assessments, Cooper’s method to pay for a North Carolina expansion still holds.

Mitch Kokai / Senior Political Analyst

Mitch Kokai is senior political analyst for the John Locke Foundation. He joined JLF in December 2005 as director of communications. That followed more than four years as chie...

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