Reporter: “Should Kynect be dismantled?”

Sen. Mitch McConnell (R-Ky.): “I think that’s unconnected to my comments about the overall question here.

–exchange at a news conference, May 23, 2014

This column has been updated

The Kentucky health insurance exchange created as a result of the Affordable Care Act appears to be a successful orphan. State officials say that nearly 82,000 Kentuckians signed up through the exchange for private insurance and nearly 331,000 qualified for Medicaid coverage. That suggests that about 10 percent of the residents of the state received insurance through the ACA. While residents of the increasingly red state appear to dislike most things associated with President Obama, polls indicate support for the Kentucky exchange when pollsters call it “Kynect,” not Obamacare.

But, in the state’s high-profile Senate race, both Republican incumbent Mitch McConnell and Democratic challenger Alison Lundergan Grimes have dodged questions about the health-care law, with Lundergran Grimes refusing to say whether she would have voted for Obamacare and McConnell making contradictory statements about retaining the Kentucky exchange. McConnell is not alone in his predicament. As the Affordable Care Act has increasingly becomes settled law, many Republican lawmakers have struggled with a pure “repeal” stance.

McConnell’s comments at a news conference last week were interpreted by the Associated Press as meaning that the fate of the state exchange was “unconnected” to McConnell’s hopes of repealing the law and starting over with health-insurance reform. But that makes little sense, and led to a scathing editorial in the Lexington Herald-Leader on Wednesday.

In an exchange of e-mails with The Fact Checker over the past few days, McConnell campaign manager Jesse Benton sought to explain McConnell’s comments. Though many readers requested a fact check of McConnell’s statement, it seemed too obscure for a full vetting. Thus, rather than a traditional fact check, we will offer readers a flavor of these exchanges.

The Facts

The Fact Checker has not been able to find a transcript of the news conference, but having looked at various versions of the reporting, it appears that McConnell made his comment as he tried to dodge questions concerning the fate of the Kentucky exchange.

Instead, he tried to offer a vision of the health reform he would have offered if the health-care law did not exist: “What I would have done instead is first of all tear down the walls, the 50 separate silos in which health insurance is controlled, and pit all the health insurance companies against each other in a national competitive market. Competition almost always works to keep prices down and quality up.”

Note that tearing down “50 separate silos” is the exact opposite of preserving a Kentucky exchange that appears to be working for the state. Moreover, it leaves unanswered the fate of the more than 300,000 Kentuckians who did not sign up for private health insurance through the exchange, but rather signed up for Medicaid, the federal-state program for lower-income Americans.

Benton initially provided this response to The Fact Checker’s questions:

“Healthcare exchanges existed and operated in other states like Massachusetts and Utah prior to Obamacare mandates or subsidies. The federal start-up and operational funding for exchanges under Obamacare expires at the end of 2014 regardless of what happens to the federal law.  When Obamacare is repealed, Kentucky can choose to continue Kynect or alter it in a way that makes the best sense for Kentuckians.
“Sen. McConnell offered several alternatives in the same press conference to deal with the shortcomings of the pre-Obamacare healthcare delivery system that would help reduce the number of uninsured and control costs for all without compromising care of those who were satisfied with their coverage, but again, that is a separate question from whether Kentucky would continue to operate Kynect when Obamacare is repealed.
“Medicaid existed before Obamacare and will continue to exist after repeal. Kynect is not Medicaid. It is a state administered exchange that provides a marketplace for private insurance plans.  While some 300,000 Kentuckians discovered they were eligible for Medicaid through Kynect, they do not purchase private insurance through the exchange; they are enrolled in the state-administered program.”

At this point, it is worth noting that the Kentucky exchange was created with federal grants provided through the health-care law.  Gwenda Bond, spokeswoman for the Kentucky Cabinet for Health and Family Services, said the grants totaled $252 million.

“Subsidies through the exchange to help cover the cost of private health insurance and the Medicaid expansion are both part of the ACA, and critical to the long-term health of our population and its access to affordable health care options,” Bond added. She said the state is considering an assessment on insurers to provide long-term funding after 2014.

An essential part of Obamacare—and by extension the Kentucky exchange—is the individual mandate to buy insurance. Indeed, Kentucky in the early 1990s had a fairly instructive experience with trying to guarantee coverage without an individual mandate. Forty-five out of 47 insurance providers fled the market as losses mounted; consumer choice shriveled and all but the sickest individuals stopped buying insurance, according to a state report that outlined the disaster.

Jon Gruber, the MIT professor who advised on both Mitt Romney’s insurance plan in Massachusetts and the Affordable Care Act, said Benton’s statement “makes no sense.”

“The Massachusetts exchange did not exist before our version of Obamacare, then Romneycare.  Indeed, there is essentially only one example in the entire nation of a well functioning exchange before Romney/Obamacare: the small business exchange in Connecticut,” Gruber said.  “Every other attempt to do this failed miserably, in particular in California.”  He said that “basically exchanges don’t work without mandates and subsidies–without those, there isn’t enough demand and too much adverse selection.”

“With all due respect to Mr. Gruber, Utah’s exchange had been working for some time pre-Obamacare without an individual mandate,” Benton responded. (Gruber counters that the Utah exchange was very small and thus is not a good example; Benton argues “it may be more modest compared to Kynect, but it was bigger without Obamacare than Alaska, Oregon and I’ll bet several other states and that was without wall to wall earned media and a multi-million dollar government ad campaign encouraging sign-ups.”)

Benton added that the core of McConnell’s remarks concerned a pre-Obamacare world. “Mitch has long preached that a surgical approach — Association health plans, formation of high-risk pools, expanded HSA’s [health savings accounts], malpractice liability reform and allowing intra-state health plans — would have done much to address the problem of the uninsured without taking an axe to the whole system.”

The Fact Checker expressed puzzlement about what would happen to the 300,000 people who joined the Medicaid rolls in Kentucky if the Affordable Care Act was repealed. “The ACA greatly expanded Medicaid—and provided the money to do it,” we noted. Reading between the lines, it appeared that McConnell was saying he would support the funding for the expansion of Medicaid even if Obamacare is repealed, and we asked if that was correct.

Benton responded: “Medicaid existed before Obamacare and will exist if we are able to repeal it. Obamacare loosened eligibility requirements for Medicaid recipients, and in the process, helped find many who were already eligible but not enrolled.  These people would remain eligible even after a repeal.  The federal government does allow states flexibility in setting requirements and Kentucky could be able to keep many of the newly enrolled in the program if we decided to.”

Other Kentuckians, he suggested, “would move back to HSA’s and other higher deductible plans they had pre-Obamacare to receive a higher quality of care.” (Note: Kentucky officials have indicated about 75 percent of the newly insured in both Medicaid and the exchange did not previously have insurance.)

Benton noted that “the federal government currently pays for the full cost (quickly falling to 90 percent) of Medicaid expansion as opposed to the standard 70 percent, but ultimately, it is all coming from taxpayers.”

The Bottom Line

McConnell appears to have accepted the Medicaid expansion that has been so embraced by his state’s residents, while drawing a distinction with the Obamacare health plans sold on the statewide exchange. Given that three out of four of the newly insured in Kentucky ended up on Medicaid, that probably makes political sense—and also is newsworthy.

But the history of individual state exchanges shows it is not credible for McConnell to suggest that the state exchange would survive without the broad health-care system constructed by the Affordable Care Act, such as an individual mandate and subsidies to buy insurance. Given the popularity of the state exchange, McConnell appears to want to offer out hope it would continue even in the unlikely case the law was actually repealed. That’s likely not a tenable position, and we will pay close attention to McConnell’s phrasing on this issue in the future. The senator is clearly trying to straddle a political fence; when doing so, it’s easy to lose your balance.

Update: The McConnell campaign sent out a letter on Thursday, signed by Benton, saying that “a vote for Grimes is a vote for Obamacare,” while “McConnell has promised to repeal every part of this disastrous law.” So we once again asked Benton what this meant, as the statement appeared in conflict with the suggestion that the Medicaid expansion could be retained.

So we sent another query to Benton, saying it sounds like he “supports rolling back the funding for the Medicaid expansion that is going to cover hundreds of thousands in Kentucky.”  He responded that “McConnell has always supported full repeal and replacement of Obamacare.” He added: “Upon full repeal, the Commonwealth of Kentucky can choose to keep expanded Medicaid at up to 133 percent of cost if they choose to.” (The law allowed eligibility at 138 percent of the federal poverty line.)

As Charles Gaba has pointed out, this would be extraordinarily expensive for the state of Kentucky, since in the pre-Obamacare system, the federal government just paid 70 percent of the cost, not the 100 percent that it initially pays. Gaba wrote: “According to the Kaiser Family Foundation, Medicaid costs a total of around $5,900 per person in Kentucky. 30% of that is $1,770. Multiply that by 330,000 and the state of Kentucky would have to pony up $584 million per year to keep all those people on the program.” He then noted that some of these people would have qualified under the old rules, so the actual cost would be  lower. But we are still talking about $350 million or so, depending on how the numbers are calculated.

So now we are left with a strange, even nonsensical situation. McConnell appears to be arguing that Kentucky can keep the parts of the law that residents apparently like, such as an individual health exchange and a costly expansion of the Medicaid program, even while dismantling the federal program that provides Kentucky with the program in the first place. That makes no sense.

Update, May 30: Don Stewart, McConnell’s Senate spokesman, provided the following explanation of McConnell’s position:

“Obamacare should be repealed. There were public AND private exchanges before Obamacare and can be after Obamacare. Medicaid existed and elected state officials made decisions about their populations before Obamacare, and can after Obamacare.”

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