State exchange and Medicaid expansion would burden Louisiana taxpayers while offering uncertain benefits

Many of the recent criticisms of Governor Jindal’s decision to not implement provisions of the Affordable Care Act are off-target. Notwithstanding the claims of President Obama and Senator Landrieu, the high cost of putting these provisions in effect and the innumerable strings attached would leave Louisiana less free and less prosperous.

Supporters of the law argue that states should move quickly to create state insurance exchanges in order to ensure a higher level of state control, but this notion is an illusion. The law’s provisions would actually require Louisiana and its citizens to cede decision-making power to the federal government.

The Affordable Care Act does not truly allow states to create and operate their own exchanges; they are still subject to the many mandates and controls issued from the federal government. Washington would still dictate what insurance plans may operate in the exchanges, what benefits these plans must provide, and hand down numerous other price controls and cost limits to the states operating the exchanges.

The Affordable Care Act allows the federal government to commandeer any state-run exchange that falls short of full compliance with these dictates. If Louisiana were to choose to establish an exchange instead of forcing the federal government to step in, the only difference would be that Louisiana taxpayers would have to pay to operate it, something that could cost tens of millions of dollars each year.

More importantly, Louisiana simply cannot afford to implement these provisions. Louisiana’s budget is already in dire straits; this year, state lawmakers had to rely on roughly $270 million in one-time mechanisms to balance the budget, even as they had to make significant cuts elsewhere. In these tight fiscal times, every dollar Louisiana spends setting up an insurance exchange is one dollar less to spend on roads, education and police.

Regarding the Medicaid expansion, while it is true that at first the federal government will pick up the cost for new enrollees made eligible by the expansion, within the decade these federal subsidies phase out. This would leave Louisiana responsible for a significant amount of new spending in the next decade. Medicaid is already one of the biggest drivers of state spending, growing 9% annually from 2007-2010. The Urban Institute projected that Louisiana would be liable for roughly $540 million in additional spending through 2019 for the Medicaid expansion alone. These provisions are unaffordable given the state’s budget situation; the money to pay for them will have to be siphoned off from schools and law enforcement, or extracted from the people of Louisiana in the form of higher taxes.

The law would not be good for the nation as a whole either. While projections of the law’s effect on the federal deficit vary, one thing is certain; the Affordable Care Act will significantly increase government spending and taxes, adding to the ever-increasing burden of government in a time of record debt and a private sector that, despite what the President may say, is still struggling.

With uncertainty over the future of the law heading into the election in November, it makes even less sense to move to implement these provisions now. Governor Jindal should stay the course and refuse to implement these provisions in Louisiana. Meanwhile, legislators should focus on repealing the Affordable Care Act and pursuing free market reforms that will actually reduce costs and expand access to quality care.

Kevin Kane is the president of the Pelican Institute for Public Policy.