Bloomberg News

Medicaid Expansion’s Costs to States Leave Governors Undecided

July 16, 2012

Supreme Court Casts Divide Among U.S. Governors Over Healt

Texas Governor Rick Perry, whose state has the most residents without health insurance, said he won’t expand Medicaid. Photo: Mandel Ngan/AFP via Getty Images

Governors who haven’t decided whether to expand Medicaid to more low-income Americans, a key provision of President Barack Obama’s health-care overhaul, said the program may wring too much money from their states.

Republican governors said at a conference in Williamsburg, Virginia, over the weekend that they will wait to see whether their party’s presumptive presidential nominee, Mitt Romney, wins election in November and overturns the health-care law. Democrats who haven’t taken a position said they’re weighing the costs and benefits.

The majority of U.S. governors haven’t committed to expanding Medicaid, an option created by a U.S. Supreme Court ruling last month. About 17 million Americans would be eligible to receive Medicaid benefits under the expansion, with costs mostly paid by the federal government.

“We’re not going to spend any money, we’re not going to exert any taxpayer money or resources on a system that very well could be on a path to being repealed,” Wisconsin Governor Scott Walker, a Republican, told reporters at the National Governors Association meeting. “It’s premature to spend any time even thinking about it until after the election.”

The issue has injected governors into an election-year debate over Obama’s health-care overhaul, the biggest change to the U.S. health system since Medicaid and Medicare, which covers the elderly, were established in 1965.

Majority Undecided

Governors of at least six states -- all Republicans -- have objected to the Medicaid expansion and at least 26 say they’re undecided, according to interviews and public statements.

The Supreme Court said the federal government couldn’t force states to broaden Medicaid, a joint federal-state program.

The Patient Protection and Affordable Care Act allows for Medicaid to be opened to everyone with incomes up to 133 percent of the poverty line, or about $25,400 for a family of three. If states don’t expand the program, millions of Americans struggling near poverty would still be without health care coverage when the law takes hold, unable to either qualify for Medicaid or the subsidies given to those with higher incomes to buy insurance.

Pennsylvania Governor Tom Corbett, a Republican who has yet to decide, said he must balance the needs of the poor against the pressure on a state budget already squeezed by other expenses, such as the rising cost of pensions for public employees.

State Obligations

“I am always worried about the people, but we have to worry about the state economy as a whole and what it will do to the state budget,” he said in an interview.

Virginia Governor Robert McDonnell, a Republican, said he has unanswered questions about the state’s obligations if it accepts Medicaid funding. He also said he is leery of committing to the expansion unless the Medicaid program is overhauled.

“Until we get more answers and more certainty, I don’t have enough answers to tell you whether it’s a good idea for my state,” McDonnell told reporters.

Three Democrats -- governors John Hickenlooper of Colorado, Jay Nixon of Missouri and Steve Beshear of Kentucky -- said in interviews over the weekend that they’re still considering whether expanding the program is in the best interests of their states.

“I don’t have a problem philosophically with it,” Beshear said in an interview. “I’ve just got to make sure we can afford it.”

He added: “I owe it to the taxpayers of Kentucky to make sure I make a fiscally responsible decision. So I am going to take my time to do it.”

‘Complicated Issues’

Nixon said he is working with lawmakers to determine how to proceed.

“These are complicated issues dealing with billions of dollars and hundreds of thousands of people,” Nixon said in an interview.

Governor Martin O’Malley of Maryland, head of the Democratic Governors Association, said in an interview that the some Democrats’ reluctance to embrace the Medicaid expansion reflects a need to build consensus with Republicans in their states.

O’Malley, who plans to expand Medicaid, said the program would benefit his state financially and create jobs.

Even though the federal government would pay most of the costs -- 100 percent until 2017, with states’ share rising to a maximum of 10 percent after that -- governors said they couldn’t be certain that U.S. lawmakers would abide by that agreement.

Federal Costs

Under the law, the U.S. would pay about $931 billion through 2022, and the states would pay $73 billion, according to the Center on Budget and Policy Priorities, a Washington-based group that examines the effects of government policy on the poor.

Corbett joined other Republicans in expressing concern that Congress might push more costs to states as the federal government faces pressure to curb the rising national debt.

“They hit hard times then it starts going down,” Corbett said, referring to the federal government’s contribution. “So that’s not an inducement to me at all. They make it sound like it’s free money, but it’s not.”

Governors said they also want more information about their ability to withdraw from the expansion if the terms change.

State Recovery

States are recovering financially from the toll of the 18- month recession, which battered tax collections when the economy slumped and led more unemployed residents to seek Medicaid benefits. Medicaid has been the fastest-growing part of state budgets over the past decade, expanding twice as much as spending on education, according to the National Governors Association.

Even if the federal government pays 90 percent of the cost, Alabama Governor Robert Bentley, a Republican who hasn’t decided about expanding Medicaid, said his state may not be able to afford it.

“We don’t know that we can add more people to the system, even at 10 percent,” Bentley said.

The discussion of Obama’s health-care plan added a partisan cast to a governors meeting typically focused on shared concerns.

At a news conference, Vermont Governor Peter Shumlin, a Democrat, criticized Republicans who say they are going to wait until after the election to make a decision.

“It’s not only irresponsible, it’s disingenuous,” he told reporters.

Asked about Democrats who hadn’t made a decision, Shumlin said his comments apply to every governor.

“Either you believe and you take it or you don’t and you won’t,” he said.

To contact the reporters on this story: William Selway in Williamsburg, Virginia at wselway@bloomberg.net; Esme E. Deprez in Williamsburg, Virginia at edeprez@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net


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