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Crony capitalists line up for ‘perverse’ Medicaid expansion in Virginia

By   /   February 19, 2013  /   News  /   No Comments

OUCH: Attorney General Ken Cuccinelli says Medicaid expansion would cost Virginians hundreds of millions of dollars more each year, even if Washington foots most of the bill.

By Kenric Ward | Watchdog.org Virginia Bureau

FREDERICKSBURG – Business groups that fought Obamacare and reflexively oppose government growth are spinning a new line: Expand Medicaid.

Allied with the White House, chambers of commerce across the commonwealth support adding 300,000 Virginians to the government’s health care program for the poor.

The philosophical flip-flop is driven by the lure of federal dollars. President Obama’s plan would pay states to enroll residents earning up to 133 percent of the poverty level – or $30,657 for a family of four. The current cutoff ranges from 25 percent to 100 percent of poverty.

Medicaid expansion seems like a sweet deal for the commonwealth, at least in the short term.

Lt. Gov. Bill Bolling said last week estimates show Virginians will pay $26 billion in additional taxes and fees to finance the Affordable Care Act between 2014 and 2022.

“If we do not move forward with the proposed (Medicaid) expansion of coverage, Virginians will still be required to pay these taxes and fees, but they will receive no benefits from the program. That hardly seems wise or fair.”

The Virginia Chamber of Commerce and several of its affiliates around the state share Bolling’s sentiments.

So do hospitals and other health care providers that have been absorbing the costs of uninsured care.

With a push from the University of Mary Washington Hospital, the Fredericksburg Chamber of Commerce urged state lawmakers to expand Medicaid.

“We held our nose and said (expansion) was inevitable,” said Adam Fried, a homebuilder and chamber member.

But, on a personal note, he added, “I’m dubious about this working.”

Chris Conover, a senior scholar affiliated with the free-market Mercatus Center in Arlington, calls signing on to a federally funded expansion a “naïve” move that requires “single-sided bookkeeping.”

“Budget discussions in Washington are already talking about taking money out of Medicaid. This involves a politically unsustainable level of taxation,” Conover said from Duke University, where he works at the school’s Center for Health Policy & Inequalities Research.

Conover said rosy short-term fiscal projections wrongly assume that Virginia comes out a winner in the long run. He calls Medicaid expansion “perverse” in the way it ratchets up state spending.

“They forgot that Virginians already ship a whole lot of tax dollars to the feds. These (favorable) studies are not measuring the adverse effect” of higher downstream costs that would have to be borne by the state under an expanded program.

NO DEAL: Shikha Dalmia calls the push for expanding Medicaid an example of “crony capitalism.”

Shikha Dalmia, a senior policy analyst at the libertarian-oriented Reason Foundation, calls Medicaid expansion a vehicle for businesses to offload their rising health insurance costs onto the general public.

“Forcing states to put the short-term health of business ahead of the long-term interest of taxpayers is the very essence of crony capitalism,” Dalmia wrote in the Washington Examiner last week.

An illustration of the public-private alliance: A Chmura Economics & Analytics study funded by the Virginia Hospital and Healthcare Association predicted that Medicaid expansion in the commonwealth would “produce” 30,000 jobs, mainly in the health care field.

While Bolling and the state Senate are ready to join Chamber & Co. on expansion, the Republican-controlled House of Delegates isn’t.

And with just four days remaining in the 2013 legislative session, the House holds the upper hand.

Delegate John O’Bannon, a physician and vice-chair of the House Health, Welfare and Institutions Committee, told Watchdog.org that flexibility via federal waivers is essential to a more efficient Medicaid program.

“If you expand right now, you’ve given away all your negotiating power with the (U.S.) Department of Health and Human Services,” the Richmond Republican said.

Because the 2012 General Assembly passed a two-year budget that runs through June 30, 2014, state House leaders say that adding Medicaid amendments now would not only be unneeded but unwise.

“Medicaid is the fastest growing part of our budget – even before expansion. It’s crowding out education and public safety. Let’s not just grab the money without getting some reforms with it,” O’Bannon said.

Gov. Bob McDonnell agrees.

“The governor believes the entire program needs to be reformed and improved before a costly expansion is considered,” Tucker Martin, McDonnell’s communications director, told the Richmond Times-Dispatch.

From a health perspective, Conover questioned the viability of extending Medicaid coverage above the poverty level.

“Medicaid is inferior to private insurance in terms of access and outcomes. Government programs might save lives below the poverty level, but (expansion) precludes the above-poverty group from the federal health-care exchanges,” said Conover, noting that Washington will contribute more funding to the exchanges – government-run websites for comparing insurance starting in 2014 – than it does to Medicaid.

“The Obama plan pulls the ‘133 percenters’ out of the private-insurance market.”

According to one legislative projection, Virginia could save $150 million over the first seven years of Medicaid expansion but lose $700 million in the following three years.

As an alternative, Conover favors block grants to the states.

“There would be a fixed amount of dollars, and states could decide how to allocate them. This would promote a wise use of resources because every dollar a state spends is a dollar of state money,” he said.

“If you look at it strategically, if enough states just say no to expansion, maybe the feds will have to renegotiate.”

Virginia Attorney General Ken Cuccinelli, the first AG to challenge Obamacare in court, told Watchdog in a statement:

“The proposed Medicaid expansion could swell Virginia’s Medicaid rolls by about 40 percent, which would cost hundreds of millions of dollars more each year by 2019 – even with the federal government paying for most of it – and that amount would continue to rise in 2020 and beyond.

“Virginia doesn’t have money just lying around to pay for these expenses. Are we going to take that money from an already struggling transportation system? Or from our educational system? Or are we going to burden more families with higher taxes?

“While for the first three years the feds promise to cover 100 percent of the costs of the Medicaid expansion and then 90 percent thereafter, let’s remember where these promises of all this money are coming from: the federal government, which is broker than broke.

“Governors and state legislatures are likely to find themselves holding a lot of worthless IOUs for increased Medicaid funding down the road, and the states are going to be stuck with the bill. And whether the states or the feds ‘pay for’ the expansion, ultimately it’s Virginia families who pick up the bill.”

Contact Kenric Ward at [email protected] or at (571) 319-9824. @Kenricward


Kenric Ward was a former San Antonio-based reporter for Watchdog.org.