Last week, Alaska Governor Bill Walker announced that he will bypass the legislative process and implement Obamacare’s Medicaid expansion by executive fiat.
Walker’s announcement should be no surprise to Obamacare proponents – after all, President Obama has maltreated his executive authority dozens of times to amend his signature law. But expansion may come as a shock to Alaska’s legislative leadership, who last month brokered an informal arrangement with the governor to put Medicaid expansion on hold until 2016.
The press conference Walker held last week was heavy on promises, but light on specifics. To hear the Walker administration tell it, Obamacare’s Medicaid expansion would be an economic elixir for a state budget hit hard by declining oil prices. It would help failing hospitals become whole again, a sentiment echoed by the long line of high-paid Alaska hospital CEOs brought in to praise the decision.
But Bill Walker is no magician and Medicaid expansion is far from magic.
Alaska Gov. Bill Walker speaks at a news conference in Anchorage, Alaska, Thursday, July 16, 2015. Walker announced he intended to accept federal money to expand Medicaid coverage in the state. (AP Photo/Mark Thiessen)
Gov. Walker’s Obamacare Expansion Will Shrink Alaska’s Economy
Despite promises that Medicaid expansion will jumpstart the Alaskan economy, the governor’s Obamacare plan will actually discourage work and shrink the economy.
Much of the Walker administration’s rosy claims about Medicaid expansion and the economy come from an unyielding belief in the “multiplier effect.” In short, Walker believes that Medicaid expansion money is created out of thin air and every new dollar of government spending will create income for some people – in this case, hospitals and doctors who see Medicaid patients – and that income will be spent in local communities, generating jobs, sales tax revenue, and other economic activity.
But there is no magic pot of Obamacare money and the Walker administration is only looking at one side of the ledger. In fact, when the Congressional Budget Office looked at all aspects of Obamacare and its Medicaid expansion, it found that it would actually reduce economic growth.
Alaska’s Medicaid Expansion Will Discourage Work
Gov. Walker’s Obamacare Medicaid expansion will create a massive new tax cliff, where earning a single extra dollar means that Medicaid expansion enrollees could face hundreds or even thousands of dollars of extra costs if they try and move off the program.
That new welfare cliff is sure to depress employment. Peer-reviewed research of previous Medicaid expansions to able-bodied adults shows that expanding Medicaid will diminish work, dampen earnings, reduce labor-force participation and hurt the economy. Those conclusions are supported by the independent Congressional Budget Office, which confirms that Obamacare will cause millions of working-age adults to drop out of the labor force or reduce their hours, ultimately reducing economic output.
In Alaska, nearly 4,000 able-bodied adults could drop out of the labor force entirely, with many more reducing hours to avoid the welfare cliff.
Walker’s Obamacare Medicaid Expansion Will Cost More Than Promised
Alaska policymakers can also expect Gov. Walker’s Obamacare expansion to cost far more than projected.
First, the Walker administration appears to be greatly underestimating potential enrollment, masking the true cost to taxpayers. His administration is predicting just 20,000 able-bodied adults will sign up for Medicaid expansion next year, far below the 41,000 expected by the Lewin Group.
Worse yet, it’s even lower than enrollment projected by the Urban Institute, which has consistently underestimated Medicaid expansion enrollment in other states.
In Washington state, for example, actual enrollment was more than double what the Urban Institute projected.
On Sunday, the Associated Press released a damaging review of more than a dozen states that signed up for Obamacare’s Medicaid expansion. In those states, enrollment has surged way beyond projections and lawmakers warn that added costs could mean less money available for education, pensions and other critical services.
A separate analysis of 17 Medicaid expansion states found actual enrollment exceeded states’ official projections by an average of 91 percent in 2014.
Worse yet, enrollment also exceeded states’ maximum enrollment projections in all 17 states. In several states, enrollment even exceeded the entire projected eligible population. Given the assumptions in Gov. Walker’s cost estimates, Alaska budgeters can expect a similar fate.
Gov. Walker is also predicting far lower costs to actually cover able-bodied adults than other consultants or that experience would suggest reasonable. The Lewin Group, for example, predicted these adults would cost $9,708 to cover in 2016. But Gov. Walker is promising to cover them for just $7,250.
Walker’s estimates assume that the cost to cover childless adults under Obamacare’s Medicaid expansion is similar to the cost of covering low-income parents currently in the Medicaid program. But just this month, the Obama Administration released areport showing that costs to cover these newly eligible adults are far more than expected.
This confirms earlier research commissioned by CMS, finding that childless adults under Medicaid expansion could cost up to 60 percent more than low-income parents in Medicaid today. Other Medicaid expansion states have underestimated coverage costs, and the results have proven disastrous.
Problem #1 for Walker: Obamacare’s Medicaid Expansion Is a New Program
Gov. Walker claims he can expand Medicaid under Obamacare because of a quirk in Alaska law. Walker claims that he can legally accept federal funds without legislative approval, but only if the federal funds are used for an existing program and if no additional state general funds are required.
In NFIB v. Sebelius, 26 states – including Alaska – argued that Obamacare was unduly coercive because it required states to either implement Obamacare’s Medicaid expansion or else lose all federal funding for the existing Medicaid program.
But, as the Supreme Court of the United States held in NFIB, Obamacare’s Medicaid expansion is not simply expansion of an existing program. It’s the creation of an entirely new program. The Court deliberately drew a bright line between the existing Medicaid program and the “new program” offered to the states under Obamacare. Unfortunately, Gov. Walker is ignoring this fact in his quest for unilateral Medicaid expansion.
Problem #2 for Walker: Alaska Will Likely Have to Spend More to Pay for Expansion
Gov. Walker claims that he won’t require general funds to expand Medicaid in 2016, because the federal government will cover the benefit costs of expansion and he can cover administrative costs by siphoning $1.6 million from the Alaska Mental Health Trust Authority.
But will $1.6 million really cover all of Alaska’s costs to administer Obamacare’s Medicaid expansion? It’s not likely.
Gov. Walker estimates that administrative costs will amount to just 2 percent of the total cost of Medicaid expansion, or roughly $158 per enrollee. Historically, administrative costs have averaged more than 8 percent in Alaska. According to Gov. Walker’s own Office of Management and Budget, taxpayers are spending $696 per enrollee on administrative costs for those on Medicaid today.
Gov. Walker appears to be deliberately underestimating Medicaid expansion enrollment, benefit costs, and administrative costs so he can bypass the legislature and unilaterally expand Medicaid.
There simply will not be enough money in Alaska’s Mental Health Trust Authority to pay for Medicaid expansion without going back to the legislature for more money.
Alaska’s Legislature Should Block Gov. Walker’s Unilateral Obamacare Expansion
State lawmakers already passed a budget that prohibited the governor from acting unilaterally. The legislature controls the power of the purse and legislators know that accepting Obamacare expansion today means spending cuts, higher taxes or even tapping into the Permanent Fund to pay for skyrocketing costs down the road.
The governor cannot and should not make this decision on his own. It’s time for lawmakers to remind Governor Walker that Alaska has more than one branch of government and stop him from abusing his executive authority with a unilateral Obamacare expansion.
Legislators were right to turn down Obamacare’s Medicaid expansion. Now they must prepare to do whatever it takes to block Gov. Walker from implementing a policy they rejected.
By Josh Archambault and Christie Herrera-Mr. Archambault and Ms. Herrera are Senior Fellows at the Foundation for Government Accountability.
TWITTER: For more health care policy news and analysis follow me at @josharchambault