Exchanges and Medicaid Expansion Move Health Care in the Wrong Direction

The Supreme Court’s recent ruling that the Patient Protection and Affordable Care Act (PPACA) is constitutional resolved one narrow area of uncertainty surrounding the law. The upcoming U.S. election season as well as the various reactions of the states to implementation of new federal policy leave the future of health care at the national level unstable.

It would be prudent for Rhode Island to consider its options as a sovereign state, rather than merely charging forward with reforms as concocted in Washington, D.C. A policy brief that I’ve written for the RI Center for Freedom & Prosperity finds there to be seven critical flaws — risks to Rhode Islanders — that justify reconsidering the planned implementation of the new Medicaid expansion and state health benefits exchange:

  • The Medicaid expansion will cost approximately $452.3 million per year, with Rhode Island taxpayers directly responsible for $58.9 million of that. After an introductory period, the federal government will pay for 90% of new enrollees under expanded eligibility.  But a “woodwork” effect will attract thousands of new enrollees who would already have been eligible, with federal assistance around 53%. New administrative costs also must be factored in.
  • Premium subsidies under the exchange must be provided for families with household income up to four times the poverty level. Most Rhode Island taxpayers are also U.S. taxpayers and will be asked to help pay for health insurance for others whose income is up to $92,200 for a family of four (more for larger families).  At the state level, local funds will have to defray any costs that Rhode Island’s many mandates add to premiums for such households.
  • Operation of the exchange may add the equivalent of 3% of health insurance premiums, whether by direct fees or indirect taxes. Beginning in 2015, the state of Rhode Island will be fully responsible for funding its health benefit exchange, adding millions in administrative costs to the state’s health care system.
  • Businesses with 50 or more employees will have to pay thousands of dollars in penalties if any of their employees receive subsidies through the state-initiated exchange, and “community rating” standards through the exchange can rope in even large companies. Such penalties may amount to more than the expense of hiring one or more new employees.
  • State officials are already envisioning the exchanges as what might be termed a dependency portal. Using information entered into the exchange to determine health program eligibility, the exchange will alert users to a menu of other benefits for which they qualify, expanding the “woodwork” effect to an unknowable degree.
  • Expanding Medicaid and exchanges will enable bureaucrats to avoid the legislative process when imposing mandates and regulations and will funnel information about two critically private matters — health and finances — through a single government location.

Despite this all, experience in Massachusetts suggests that costs may go up and access to actual health care services may decrease for those who are currently covered.

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