Data grows confirming wisdom of LA Obamacare opt-out

As the federal government continues to delay the deadline for states to choose whether to participate in health care exchanges and waits on states to decide whether expand Medicaid coverage in order to entice more states to accept these things, Louisiana continues to look wise in not wavering from its decision to pursue neither.

The refusal to set up exchanges is a no-brainer. The federal government’s decision to impose a 3.5 percent surcharge on coverage sold through the exchanges indicates that states would expect similar costs to them that will go only higher in time. One ballpark estimate puts the per enrollee cost at $97, but Maryland’s looks to come in at over $200, and the federal government will pay for these costs only through 2015. With the probability that the whole unworkable law will unravel in the future, why should Louisiana commit itself now to extra costs requiring extra revenue when state exchanges hardly can deviate from regulations that would run federal exchanges anyway?

While some quarters complain about the expansion rejection aspect, which has no legal deadline for acceptance, the wisdom expressed by the likes of Gov. Bobby Jindal and Rep. Bill Cassidy for rejection continues unchallenged and, if anything, grows more compelling as time passes. The law allows premium support for non-disabled adults, such as single earner of income between $11,200 and $15,400 annually, through the exchanges. But for those individuals below that figure states would have to follow the fee-for-service model if they accept the expansion, which is paid for entirely by the federal government for the first three years but then tapers to 90 percent.

In that lie several ticking time bombs that could increase state costs dramatically, the least of which is natural rises in medical costs. There exist not just the administrative costs, which historically equal 5 percent of the benefits paid and are not part of the federal government match, adding perhaps as much as cost as (when the state has no match) $20 million annually, but also independently of the expansion also must swallow swelling roles because of broadening eligibility requirement changes beyond those of expansion for new qualifiers below $11,200. Also, the reduction of disproportionate share Medicaid payments to hospitals will hit Louisiana harder than any other state until it can wind its way out state operation of charity hospitals. Finally, as cost estimates continue to spiral upward for all of the changes made, not just including costs of the expansion, the fear grows that the federal government will renege on its 90 percent match and go to a blended rate or lower rate (on all other aspects of regular Medicaid, it pays just 50 percent).

Thus, when even the most optimistic estimates using charitable, if questionable, assumptions show the state would have to spend at least $1.2 billion over 10 years on just on its match, administrative and costs to other aspects of the law aside, it’s clear this is quite a burden on a state that has faced budgetary pressures from the Pres. Barack Obama economy. And it would spill over into price pressure on private markets as well because of the exodus of lower-income covered people, leaving choices of poorer services or higher rates or a combination of both. But perhaps these costs and externalities could dealt with through innovative programs, such as the Bayou Health program the state’s Department of Health and Hospitals is rolling out that features premium support for existing Medicaid recipients.

However, as Sec. Bruce Greenstein points out, the Obama Administration, despite plenty of lip service to the idea, steadfastly refuses to show any meaningful flexibility on administration, either in terms of moving away from the inefficient fee-for-service model (and its worse outcomes) like Bayou Health does or in letting states put together partial implementation of the expansion’s dictates. It’s all-or-nothing tactic is designed to bully states into acceptance in order to strengthen its political claims about having done something to reduce the number of uninsured and to reduce insurance costs to lower-income individuals, so no change should be expected.

The Jindal Administration recognizes only system reform, not adding to it, will provide for more efficient and effective health care provision. Doubling down on the opposite serves no useful purpose.