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Virginia Prepares To Check In To Medicaid’s Hotel California

If Terry McAuliffe does force through an expansion of Medicaid, Virginia may never be able to escape the consequences.

If there is one thing that everyone can agree on when it comes to Obamacare, it’s that no one really knows enough about it. Even nearly four years after the bill was passed, we still don’t know what’s in it. So why is newly-minted Virginia Governor Terry McAuliffe in such a rush to expand Medicaid in the Old Dominion?

Only one week after claiming he was a born-again bipartisan, McAuliffe quickly turned, demanding to take back the reins on Medicaid expansion from the commission that has been looking into the issue for the past year.

The Medicaid Innovation and Reform Commission (MIRC) is actually bipartisan, made up of members from the House of Delegates and the state Senate, along with the secretary of Health and Human Resources, Bill Hazel, who is a holdover from former governor Bob McDonnell’s administration. In last year’s session, the state legislature tasked the commission with instituting several reforms to Medicaid in Virginia. These reforms had to happen before the state would even consider expansion. A good deal of those changes are already in place, while others are being implemented this year.

The MIRC held several meetings in 2013, asking for input from state officials, outside experts, and even allowed public comment. By the end of last year, even the commission members who had been leaning towards expansion were hesitant to adopt the program. There are myriad reasons to sidestep Medicaid expansion as it is ordered under the Affordable Care Act (ACA), so they have reason to pause. Studies show that Medicaid does not significantly improve the health of recipients and expanding it to the newly-eligible population results in higher than expected costs, takes away resources from the neediest recipients, and actually does little to increase insurance coverage.

Rather than allow the MIRC the necessary time to reach a conclusion, Gov. McAuliffe has now presented the commission with an ultimatum: expand Medicaid by March, or I’ll do it for you. New cost estimates, which were conveniently released this week in the wake of McAuliffe’s new tone, seem to lend support to speedy adoption. Never mind that these estimates fly in the face of the history of Medicaid expansion in states such as Oregon–where emergency room usage increased–and Arizona–where costs skyrocketed to 400 percent higher than predicted.

The additional problem with the sudden hurry to adopt Medicaid expansion is not only the all-but-certain cost explosion, but also the reality that the decision will be a permanent one.

This may seem odd, even for those carefully following the issue since the United States Supreme Court came down with the National Federation of Independent Business v. Sebelius decision in June 2012. In that case, the Court infamously upheld the mandate that all Americans must have health insurance, a surprising victory for the ACA in what initially seemed to be certain defeat.

Even more surprising was what the Supreme Court said about Medicaid expansion. As written, the ACA said that Medicaid expansion was not an option for the states, unless the states were willing to forego all Medicaid funding. In an astounding 7-2 split spread over several opinions, the Court allowed states to reject Medicaid expansion without losing current Medicaid funding from the feds.

Under the Spending Power, Congress has been permitted to “encourage” states to accept the federal government’s policy preferences. The most relatable case in this area is South Dakota v. Dole (1986), when the Court said that Congress was allowed to withhold five percent of a state’s federal highway funds if it did not increase its drinking age to 21 years old. The money was not only related to the purpose of the highway funding, but was low enough to be considered mere “encouragement” and not “coercion.”

The ACA case set limits on the Dole precedent. Refusing this new Medicaid policy, the majority said, would not only preclude a state from the newly-available grants, but would strip it of previously-promised funding. The average state spends 20 percent of its budget on Medicaid. The federal government picks up the tab for at least half of that amount, but can even go as high as 83 percent. Chief Justice Roberts called forced Medicaid expansion “a gun to the head.” Expansion “accomplishes a shift in kind, not merely degree.” The ACA’s Medicaid expansion constituted a change to the program that states could not have accepted when they agreed to opt in to the program decades ago.

This explains the existence of the Medicaid expansion split in the states, and the debate that remains in Virginia. But it isn’t the whole story.

The Supreme Court gave states an out based on the unforeseeability of Medicaid expansion. Now that the federal government has put its cards on the table and states are fully aware of Congress’s intent, that excuse is no longer valid. If a state commits to Medicaid expansion, it can no longer claim to be surprised by any “degree” changes, including lowering funding levels and eligibility alterations.

Meanwhile, at the MIRC meetings in 2013, members wondered aloud if the state could try out Medicaid expansion for a while and then decide to drop out if costs were out of control. That is, Virginia’s politicians want to know if they can take the money and run. The MIRC chairman, a Republican, mistakenly believes that is true.

In reality, when it comes to Medicaid expansion, you can check out anytime you like, but you can never leave.

There is still far too much uncertainty involved in Medicaid expansion–and the little that we do know spells trouble. Virginia should avoid the rush to permanently expand an expensive program that so terribly fails those it is designed to help. If it does expand Medicaid, the Commonwealth may never be able to escape the consequences.

Joe Luppino-Esposito is the Editor and Counsel at State Budget Solutions, a national nonprofit organization dedicated to fiscal responsibility. Joe is a licensed attorney in Virginia and Washington, DC.

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