A post by Jonathan Ingram, Nic Horton and Josh Archambault— Mr. Ingram is Research Director, Mr. Horton Policy Impact Specialist, and Mr. Archambault a Senior Fellow at the Foundation for Government Accountability.
After months of secretly negotiating a backroom deal with the Obama administration, Governor Gary Herbert (R-UT) has finally released (some of) the details of his Obamacare expansion plan. We’ve not hesitated to share our disappointment over Herbert’s recent actions to bring Obamacare to Utah (which has always seemed out of character for him), but we’ve also met with the governor and his chief of staff privately to share our concerns about this welfare program. Sadly, Gov. Herbert continues to move forward with an Obamacare expansion plan that is bad for taxpayers and the truly needy.
Earlier this morning, Gov. Herbert released more details about his plan to expand Obamacare in Utah. Unfortunately, a careful examination of the plan reveals that Herbert’s rhetoric rings hollow. Several members of the legislature’s Health Reform Task Force expressed deep concerns during the presentation by the Governor’s office.
They’re right to be worried: like any other Obamacare expansion, his plan will create a new entitlement for able-bodied adults, discouraging work and trapping more Utahans in poverty and government dependency.
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Utah Governor Gary Herbert (R) and UDOH Executive Director Dr. David Patton speak about Healthy Utah. (Photo: KCPW)
Just Another Obamacare Expansion
Although the Governor insists his plan is not an expansion of Medicaid under Obamacare, the details of his plan make clear that it is nothing more than an Obamacare expansion in disguise.
Herbert’s plan would deliver the same required benefits as Medicaid and be subject to the same cost-sharing limits as Medicaid. Cost sharing in Healthy Utah would actually be even lower than the nominal levels Medicaid allows. Healthy Utah benefits would be delivered through Obamacare-compliant plans sold on the Obamacare exchange and the state’s Avenue H exchange.
The plan would cover the exact same able-bodied adults as the optional Medicaid eligibility category created by Obamacare. Those enrollees would be legally classified as Medicaid enrollees, making them entitled to all the same rights and protections as any other Medicaid enrollee. The plan would operate under a Medicaid waiver, would need an amended Medicaid state plan to implement and would be funded through the Medicaid program.
Adding bows and ribbons and calling it “Healthy Utah” doesn’t change its fundamental nature as an Obamacare expansion. And Herbert wouldn’t be pursuing this option at all if the Obama administration wasn’t making him empty promises of “free” Obamacare dollars. He’s so anxious to get those dollars that he’s even proposing to expand traditional Medicaid “temporarily,” until his “Healthy Utah” plan wins federal approval and is able to be implemented.
Nothing New To Utah
Gov. Herbert has consistently said that he is “trying to make lemonade” out of Obamacare lemons by crafting a “Utah-specific” plan. Rather than making lemonade, the Governor appears to have been drinking the Obamacare Kool-Aid. The “Utah-specific” plan is nothing more than old policy failures copied-and-pasted from other states.
Herbert’s “Utah-specific” idea of using health plans sold on the Obamacare exchange to provide this new entitlement class with Medicaid benefits is copied from Arkansas and Iowa, where the policy has been a failure. In Arkansas, costs have run over budget every single month and state lawmakers are poised to repeal the plan. In Iowa, state bureaucrats have already asked for more money from Washington and had to move thousands of adults out of the waiver and into traditional Medicaid after half of the participating insurers hiked premiums 20 percent and dropped out of the plan.
His other “Utah-specific” ideas were also recycled from these failed experiments: the idea to impose nominal, non-enforceable “premiums?” Taken from Iowa and Pennsylvania. The idea to have a completely voluntary work assistance program? Taken from Pennsylvania and Indiana. If Utah lawmakers were hoping for a “Utah-specific” plan, they’re sure to be disappointed.
No Work Requirement
We have repeatedly predicted that Gov. Herbert’s final “Healthy Utah” deal would contain no meaningful work requirements, despite the fact that he promised he would never budge on this provision. We didn’t have a crystal ball; we just had the good sense to watch how other Obamacare expansion negotiations have unfolded across the country. So it was no surprise when he quietly announced the previously “non-negotiable” work requirements had been watered down to “work effort” provisions.
Now we learn (and it comes as no surprise) that there is absolutely no work requirement in the final Obamacare “deal” Gov. Herbert has struck with President Obama. Worse yet, there’s not even a requirement for able-bodied adults to engage in “work effort” activities. Instead, the plan simply calls for a voluntary program that allows enrollees to use state services to help find work or improve their skills if they’re interested. Enrollees would face absolutely no Medicaid-related consequences for refusing to participate in the program. They won’t lose eligibility; they won’t pay higher premiums, nor will they be subject to any other related “penalty.”
State bureaucrats are “considering” other options, such as making eligibility for unrelated state-funded welfare programs contingent on participation. However, such a provision would be toothless, as the vast majority of Obamacare expansion enrollees have never qualified for those other types of welfare programs to begin with.
We predicted this exact result when we commented on the plan in October. At the time, the Governor publicly called us liars. But the truth is now plain to see: able-bodied adults won’t be required to work in order to receive welfare under Herbert’s Obamacare expansion plan.
No Premium, No Problem
Gov. Herbert has repeatedly promised that enrollees in his Obamacare expansion plan would have significant “skin in the game” in the form of monthly premiums. But these so-called “premiums” are far less than advertised: individuals enrolled in Healthy Utah who are below the federal poverty level will pay no monthly premium whatsoever, while those above the poverty line will (in theory) pay up to $15 per month.
Gov. Herbert promised these premiums would be the same as on the exchange, but the reality is that they’re significantly lower. For comparison, those same individuals would pay $44 per month for the benchmark plan in the Obamacare exchange. Instead, they’ll pay $15 – if they choose to pay anything at all.
The “required premiums” have become nothing but mere suggestions. Nothing in the plan creates any sort of meaningful penalty for those refusing to pay their monthly premiums. Even if the state gets permission to disenroll those who fail to pay their premiums, these adults will be allowed to re-enroll immediately, as nothing in the plan proposes any sort of lock-out period of other penalty. In fact, some enrollees may even use this strategy to switch plans in the middle of the year if they find that they don’t like the one they picked.
No Meaningful Cost Sharing
Gov. Herbert promised his plan would have stronger cost sharing than traditional Medicaid, but a closer inspection reveals this as just another empty promise. Individuals below 40 percent of the federal poverty level will pay absolutely no cost sharing whatsoever. For those between 40 percent and 100 percent of the federal poverty level, out-of-pocket costs will be capped at $200 per year. For those above the poverty line, out-of-pocket costs will be capped at just $400 per year. In each of these groups, cost sharing is actually significantly lower than traditional Medicaid allows.
One of the strangest promises Gov. Herbert made was his promise that Healthy Utah would charge $50 copayments for all unnecessary emergency room use. That was a strange promise, given the fact that Iowa and Pennsylvania were both denied permission to charge just $10.
Instead of imposing a standard $50 copayment, the Healthy Utah plan would give some enrollees with incomes above the federal poverty line the option to select plans with $50 copayments for non-urgent ER use. Those who pick those plans would get a $5 monthly discount on their monthly premiums, but total out-of-pocket costs for either plan would be the same – at most, $400 per year. So even if individuals opted into that plan, they’d only be subject to the copay a maximum of four times.
Overall, the majority of enrollees wouldn’t even have the option to pick the higher-copay plan and it’s unclear how many people would opt to select the plan with higher copays in exchange for lower premiums, knowing that the premium requirement would be practically unenforceable.
New Welfare Cliff
Gov. Herbert also promised a “smooth transition” between Healthy Utah and the Exchange, but this design actually creates a massive welfare cliff. Able-bodied adults on the Healthy Utah plan would pay at most $120 to $180 per year in premiums. Enrollees who earn an extra dollar and lose their Healthy Utah eligibility would be subject to $531 per year in premiums for the benchmark plan in the Obamacare exchange. Able-bodied adults on the Healthy Utah plan would pay at most $400 in copayments, coinsurance and other out-of-pocket costs.
Moving from Healthy Utah to the Obamacare exchange would increase out-of-pocket costs to $2,250.
Practically speaking, this means an individual who earns a single dollar more than Healthy Utah eligibility limits, and therefore leaves Healthy Utah to enter the Obamacare exchange, could have their premiums and total out-of-pocket costs go up by as much as $2,300. That’s hardly a “smooth transition.”
Brace Yourself For Backpedaling
Even though Gov. Herbert says his expansion plan is a done deal, the truth is that there is much left to negotiate with the Obama administration.
At this point, the Obama administration has simply told the state that the plan is “approvable in concept.” The state will still need to submit a formal waiver request to the federal government, hold public comment periods and negotiate the final terms and conditions of the waiver. Nothing in this “deal” is legally binding at this point, meaning that the federal government can come back later and water down Herbert’s plan even further, after the legislature would have already signed off on the proposal.
The Herbert administration even says it has not yet written a formal waiver request, which could take several months to finish. By only sketching out the broad aspects of the plan, it seems the Governor is hoping for a blank check from the legislature.
This is exactly the scenario that has played out in other states, including Iowa and Indiana, even when the legislature sets pretty clear terms about what they’re approving.
Would Herbert be willing to walk away from the negotiating table if President Obama calls his bluff and tries to water down the proposal even more?
Time To Reject Obamacare Expansion Once And For All
The good news is that Gov. Herbert has absolutely no legal authority to expand Medicaid under Obamacare. Instead, this proposal will go to the legislature next year, which will need to carefully consider the plan (and its policy failures) before taking action. Members of the Health Reform Task Force expressed some pretty serious reservations about Gov. Herbert’s Obamacare expansion plan, warning that the full legislature would need to proceed very cautiously as it reviews the full plan.
Any decision they make to expand Obamacare will have profound impacts on the future state budget, shrink the economy, undermine marriage and negatively affect the state’s unique culture of neighbors helping neighbors. Instead of spending time debating how to tweak Obamacare expansion, lawmakers should reject the expansion outright and continue its efforts to decrease the cost of care, making health care more affordable for everyone.
The federal government has once again demonstrated how disinterested they are in real flexibility for states. Gov. Herbert should keep his word to Utahans and walk away before it’s too late.