“Under Obamacare, when you turn Medicaid over to the states, what you’re saying to them is the money will be available up front for the expansion for a few years, then the money will go away but you get stuck with the unfunded liability.”
— Sen. Marco Rubio (R-Fla.), interview on CBS’s “Face the Nation,” Jan. 12, 2014
Sen. Rubio made this comment while defending a proposal to “streamline most of our existing federal anti-poverty funding into one single agency,” which would distribute funds as cash grants to states for their own “creative initiatives that address the factors behind inequality of opportunity.”
Rubio was asked what would happen if states simply opted out of providing programs for the poor, as nearly half the states have done with the Medicaid expansion envisioned in the Affordable Care Act, a.k.a. Obamacare. Rubio countered that his plan would be funded. “It wouldn’t be something where states are told you get the money for a few years, then we’ll back away,” he said.
Is this really how the Medicaid expansion is funded? A bait and switch?
Medicaid is a health-care program for low-income people. When the Supreme Court in 2012 upheld the overall constitutionality of the ACA, it also dealt a blow to one key part — a planned expansion of the Medicaid program to individuals with incomes of up to 138 percent of the federal poverty level (about $15,850). The Court, in a 7-2 ruling, said the government could not force states to accept the expansion and instead each state would have a choice.
So far, 25 states and the District of Columbia have expanded Medicaid, while four more are considering it. (That list does not include Virginia, where the new governor, Terry McAuliffe, has said he wants to push for it.)
Currently, the cost of Medicaid is split at least 50-50 between the states and the federal government. There is a complicated formula that can alter the so-called federal matching percentage, but every state essentially gets back at least $1 for every $2 it spends on the program.
Under the health-care law, the federal government will pay 100 percent of the cost of expansion in 2014, 2015 and 2016. Then the federal match is pared back to 95 percent in 2017, 94 percent in 2018, 93 percent in 2019 and then 90 percent in 2020 and beyond. It would stay at the 90 percent level unless the lawmakers change or repeal the legislation.
So, rather than getting $1 back for every $2 spent, states would get $9 back for every $10 spent. (This is a simplified version of a complex formula. The Kaiser Family Foundation in 2013 issued a report with all of the details.)
So, only in a very narrow sense does the money “go away.” The match declines a bit, and certainly Congress could change its mind, but at the moment this looks like a better deal than the current system.
Here’s how one Republican governor, John Kasich of Ohio, described in an interview why he decided to accept the expansion: “13 billion of our own dollars back here to treat and solve Ohio’s problem. It’s our money, let’s bring it home.”
Former Virginia attorney general Ken Cuccinelli, who opposes the expansion, acknowledged in an opinion article on Jan. 8: “Under the current cost-sharing arrangement for Medicaid, the federal government pays approximately 50 percent of Virginia’s Medicaid costs, and the state pays the other 50 percent…. Under the expansion, the federal government would pay 100 percent of the cost of the expansion through 2016, with its share reducing to 90 percent thereafter.” (Cuccinelli opposes expansion in part because he believes it will increase fraud, but that’s a separate issue.)
So what is Rubio talking about? Did he misspeak and mean to focus on just on the short-term reduction from a rather high federal match? That’s unclear. “I don’t really have anything to add to what the senator said,” said spokesman Alex Conant.
Michael Tanner of the Cato Institute, an Obamacare critic, has argued that the federal match is “too good to be true.” He believes that publicity about the law will bring people out of the “woodwork” who had been previously eligible but had never signed up for the law. Those people would not be covered under the 90-10 match but the older 50-50 formula, thus increasing costs for states.
Tanner also believes that Congress will one day fiddle with the Medicaid formula, leaving states holding the bag. But that’s speculation — not a guaranteed “unfunded mandate,” as Rubio claimed.
The Pinocchio Test
Rubio has little basis to make such a sweeping statement. Some money does “go away” under the law, but at least 90 percent of the cost of the expansion will be covered by the federal government. That ratio is still better than the current formula, which is why some of Rubio’s fellow Republicans describe it as found money.
Of course, Congress may one day change the law. But the same could be said about Rubio’s plan for cash grants, if his plan was ever enacted.
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