Medicaid expansion, insurance mandates expected to bust Louisiana’s budget

A dispute over the merits and potential defects of health care exchange systems continued to rage last week at the American Legislative Exchange Council’s (ALEC) annual meeting in New Orleans as state officials expressed concern over ObamaCare’s Medicaid mandates.

While it may be politically appealing to resist setting up an exchange system, governors and legislators who adopt this policy stance would actually open the way to greater federal interference, Edmund Haislmaier, the Heritage Foundation’s Senior Research Fellow of Health Policy Studies, explained in a panel discussion.

“We are arguing over strategy and the utility of a hammer,” Haislmaier observed. “There is no special magic to this tool and there is nothing especially threatening either. It depends how you use the exchanges. They can be used as a tool to empower consumers and to move the needle more in the direction of meaningful reform.”

Haislmaier also said free market groups “left an opening for the other side” because they did not move aggressively over the past few years to alter the status quo with policies that would empower patients with more choice and autonomy. If properly configured, exchanges can be used as part of an overall strategy to resist ObamaCare and to shield states from some of its worst effects, he suggested.

“This is going to be an unrelenting fight [against ObamaCare],” he said. “It is going to be house by house, floor by floor, room by room combat. There will be numerous place and lines of attack where we can undermine this law.”

But conservatives who are supportive of exchanges should take note of the opinion from federal Judge Roger Vinson of the Northern District of Florida, Michael Cannon, the Cato Institute’s director of health policy studies, advises.  In response to 26 states that brought the suit, Vinson concluded that Congress exceeded its authority in passing the Patient Protection and Affordable Care Act (PPACA). But he also warned that many of those same plaintiffs are undermining their own case by implementing the law, even while they argue it is unconstitutional.

In his response to the Obama Administration’s “motion to clarify,” Vinson stuck to his original decision but agreed to stay (temporarily set aside) the ruling pending an appeal in part because some states have proceeded with exchanges and other implementation measures, Cannon told audience members.

“States are not required to create exchanges under ObamaCare,” he said. “But if they are implemented voluntarily this will undermine the legal case to repeal the law. The law asks the states to do the heavy lifting of creating these bureaucracies, offers them considerable sums of money, and as a fallback position allows the federal government to create an exchange if a state declines to do so.”

Even if exchanges are started with free-market motives, they will eventually morph into vehicles for ObamaCare, Cannon said. Moreover, he noted, they would have the added effect of giving bipartisan cover to the law.

Cannon also said state officials who have argued against the constitutionality of the new law have a special responsibility to resist implementation because they are essentially violating their oath of office by accepting federal funds and accommodating new bureaucracies.

Rep. Noble Ellington (R-Winnsboro), the national chair of ALEC, said in an interview that he did not have a firm opinion on the exchange system, but that he welcomes the debate.  He also expressed concern about the impact federal mandates and stipulations attached to President Obama’s health care law will have on Louisiana and other states.

“Washington [D.C.] is trying to take control of everything and that’s not healthy for anyone,” he said. “We are already in the middle of a recession as it is, and if ObamaCare does kick in it will mean less jobs, less business activity and less opportunity.”

ALEC has been successful because it has fostered strong relationships between state officials who have been on the receiving end of new directives from the federal government, Ellington continued. There is, for example, widespread concern among his colleagues that rising Medicaid costs will place additional burdens on state budgets that are already strained, he observed.

Under ObamaCare, states are required to extend their Medicaid programs to anyone earning up to 133 percent of the federal poverty level come 2014. This comes out to about $30,000 for a family of four. In addition to the Medicaid expansion, PPACA also creates an individual health insurance mandate, which will further encourage those who were already eligible for benefits prior to the new legislation to now enroll, according to ALEC. The federal subsidies included as part of the new health care law will not cover the entire cost of the Medicaid expansion.

“States will be affected the most by ObamaCare’s budget-busting Medicaid expansion, forced collaboration on federally-dictated health insurance exchanges, the unconstitutional individual mandate, and the federal takeover of state health insurance regulation,”  Christie Herrera, ALEC’s health and human services task force director, said. “That’s why 28 states have stepped forward to challenge this law and reclaim state sovereignty.”

Medicaid currently accounts for about 17 percent of all state-level spending, according to Louisiana’s Department of Health and Hospitals has produced a report that shows implementation of ObamaCare will cost Louisiana in excess of $7 billion over a 10-year period. Between now and 2014, Louisiana health officials also expect Medicaid enrollment to grow by more than 50 percent.

Two years ago Gov. Bobby Jindal initiated a plan aimed at reducing Medicaid costs by transitioning over to Coordinated Care Networks (CCNs). The idea is to allow enrollees to choose their own plans and providers, which in turn would alleviate Medicaid spending by increasing competition. Moreover, the networks would emphasize preventive care as a way of heading off alleviating future costs.

The Cato Institute has criticized the plan for increasing eligibility to the entitlement program and for failing to embrace genuine free market reforms.

State lawmakers are opposed on procedural grounds.

They claim Jindal bypassed the legislative branch by inserting the program’s authorization into an amendment in state budget legislation. The House unanimously passed a resolution that would end the program by 2014 unless it gains approval from the state legislature.

Meanwhile, a new study that explores the financial impact of shifting Medicaid recipients into HMOs and other forms of managed care concludes that impact on spending has been marginal at best and that there is very little savings.

Cannon, the Cato analyst, has said that the managed care programs help demonstrate how little control states actually have over Medicaid programs. But by refusing to implement their own exchange system, state lawmakers could be playing into the hands of Obama Administration officials with regard to Medicaid, Haislmaier has argued. Whoever controls the exchange system “becomes the de facto gatekeeper for both the state’s Medicaid program and the new federal subsidy program,” he wrote. Haislmaier favors a “defensive approach” that allows for states to shape exchanges and “maximize” local control of Medicaid programs.

The “State Legislators Guide to Repealing ObamaCare” ALEC released earlier this year includes several recommendations crafted with an eye toward delaying and ultimately blocking the federal legislation.  The Guide includes a description of ALEC’s “Freedom of Choice in Health Care Act, which provides for a “state-level defense against ObamaCare’s excessive federal power.” It also advises state lawmakers to enact a moratorium on ObamaCare rulemaking and to decline federal grant money that come with “federal strings.”

“States should let the federal government spend the time, money, and political capital required for implementation,” Herrera said.  “I don’t think that states will be able to escape federal rules if they decide to get involved.  Barring congressional repeal or a Supreme Court decision, this law will go forward as enacted — so state legislators would be wise to step back and let the federal government take ownership over the consequences.”

Kevin Mooney is an investigative reporter with the Pelican Institute for Public Policy. He can be reached at and you can follow him on Twitter.