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Medicaid expansion is likely forever

Medicaid expansion is likely forever

Fred Birnbaum
February 18, 2015
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February 18, 2015

Idaho Department of Health and Welfare Director Richard Armstrong believes the Gem State can back out of Medicaid expansion if things go awry in the future.

That suggestion is likely wrong, a little reckless and could end up costing taxpayers dearly.

Earlier this month, Armstrong pitched Medicaid expansion to senators and representatives, suggesting expansion, an option under Obamacare, would save Idaho $173 million through the next decade. That statement depends on the federal government keeping the match rate for new enrollees—estimated at more than 103,000—at 90 percent, with Idaho picking up the rest.

If the feds don’t stay true to their word, Armstrong said, “Idaho can opt out at any time.” His plan, yet to gain traction in the Capitol, contains a trigger clause to allow Idaho to leave expansion should the match rate drop.

Has Armstrong really covered his bets? He predicates savings on the federal government not changing its rate, but if those in the Beltway cannot keep the promised match, Idaho can opt-out, right? That’s probably wrong.

Expansion advocates continue ignoring statutes and case law concerning Idaho leaving expansion.

In the Obamacare case, NFIB v. Sebelius, the U.S. Supreme Court explained the federal government cannot condition the first dollar of existing Medicaid coverage upon a state's decision whether to opt into expansion; however, the court did not say that those constraints would not apply after a state chose to enlarge the program.

The upshot of all this is if Idaho came back to court demanding that the federal government uphold its previous bargain, it would not be surprising for the court to respond, "We warned you." Under this scenario, the court would presumably look to the federal statute at issue as a binding contract, and would base its analysis on § 1396 of the Social Security Act. That section, which remains fully in force, gives the secretary of Health and Human Services the discretion to withhold all Medicaid funding if a state fails to comply with federal requirements.

Therefore, if Idaho tried to exit expansion after the federal government failed to meet its commitments, there is a substantial possibility a court could find Health and Human Services has the authority to condition first-dollar federal Medicaid spending on the state's continuation in the expanded program.

To put it bluntly: under this scenario, expansion is forever. Healthy Idaho boosters can repeatedly point to sunset or triggers in Armstrong’s plan, but they have misunderstood how state legislation works if they think it trumps federal law and Supreme Court precedent.

Unfortunately, the argument of Medicaid expansion advocates—that Idaho can easily exit expansion whenever it wants to—is so casual as to be reckless. Predicting how courts will respond to novel legal questions is an inherently uncertain business; the Supreme Court's guidance in this area, however, suggests that ignoring the possibility of permanent, locked-in expansion is a mistaken approach.

The most significant danger facing Idaho if it expands Medicaid is not just that the meager savings predicted by Armstrong will not materialize, but that the federal match rate will drop and Idaho will not be able to back out of expansion without jeopardizing all Medicaid funding.

That threat is worth more than $1.3 billion this year, the amount the federal government pays toward Idaho’s Medicaid program.

Risking all Medicaid funding by adding able-bodied, working adults to the program could leave taxpayers with two poor choices: end Medicaid, or pitch in millions more to cover program costs, which would mean cuts to other programs at the very least.

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