Rogue States

The revolt against ObamaCare

(Page 3 of 4)

Because federal funding has been pegged to state dollars, cuts—much less large-scale reforms —have been almost impossible. What politician wants to give up two dollars of constituent benefits—especially health benefits—to achieve one dollar in budget cuts?

A massive medical overhaul may have been an opportunity to address Medicaid’s structural problems. Yet rather than reform the struggling program, ObamaCare’s authors decided to double down on it. Starting in 2014, all states will have to expand Medicaid eligibility, allowing into the program any individual who makes less than 133 percent of the federal poverty line. That’s 16 million new enrollees, or half of the total number of newly insured, according to Congressional Budget Office estimates. The largest group will be nonelderly, nondisabled adults without dependent children.

To cajole state lawmakers into expanding a program that was already straining their budgets, ObamaCare’s authors offered them a classic salesman’s deal: no money down and no payments for the first three years. From 2014 through 2016, the federal government will pick up the full cost of the mandatory coverage expansion. For the four years afterward, states will pick up a rising share of the tab, leveling off at 10 percent in 2020. It’s essentially a federal-match teaser rate, designed to grease the wheels for political acceptance by delaying the pain.

Given the fact that even in the long term the federal government will still be covering 90 percent of the total bill, you might think the states would welcome an easy cash infusion. But the burden of Medicaid is already so high, and state budgets—most of which are constrained by balanced budget requirements and thus cannot rely on deficit spending—are in such dismal shape, that any additional expenses represent a significant fiscal burden. Florida, for example, is already spending $18 billion a year on Medicaid. ObamaCare will add another $1 billion to the tab by 2019. In Arizona the program is seen as fiscally toxic. Monica Coury, a senior staffer at the Arizona bureaucracy that oversees the state’s Medicaid program, told The Wall Street Journal in July: “We have federal partners talking about expansion of this program. And at the state level, we’re looking at a program that we can’t sustain.” Overall, paying for the added benefits will cost states $21.5 billion by 2020.

Moreover, like so many sales pitches, this one comes with hidden costs; the initial “free” years aren’t actually free. For starters, the law prohibits states from tightening Medicaid eligibility requirements—a typical way to save money during a budget crunch. ObamaCare also fails to cover the administrative costs associated with implementing and running the Medicaid expansion. Heritage’s Haislmaier and his colleague Brian Blase estimate that the extra overhead alone will add nearly $12 billion to the total tab between 2014 and 2020, putting the total additional state burden up to $33.5 billion over the next decade.

Nor does the law cover the cost of expanding coverage to those who qualified for Medicaid prior to 2014 but failed to sign up. Nationwide, the Kaiser Family Foundation estimates, nearly 11 million individuals are currently eligible for Medicaid but aren’t enrolled. Many of those individuals are likely to claim their new benefits thanks to what health care experts call the “woodwork effect,” in which people who were hiding out from the previous system suddenly appear when new goodies get added. Most benefit programs fail to capture all eligible individuals, but the greater the benefits offered, the more people show up to take them. And given that individuals who remain uninsured face a yearly penalty, the incentive to collect will likely be stronger than usual.

The law also creates the potential for significant future fiscal headaches by funding temporary pay boosts for doctors who see Medicaid patients. In 2013 and 2014, the law jacks up Medicaid reimbursement rates, which typically run far lower than what health care providers normally charge, to match Medicare rates. But temporary funding is rarely temporary, especially when it comes to health care, where both state and federal politicians, not to mention health care providers, are loathe to accept even long-planned cuts. Each year since 2003, for example, Congress has declined to allow legally mandated cuts to doctors’ Medicare payments, choosing to hike spending “temporarily” instead. And in June, several states launched a panicked last-minute lobbying spree when Congress threatened to end a temporary boost in Medicaid funding provided by last year’s stimulus bill. In many states, then, it’s likely that ObamaCare’s two-year Medicaid reimbursement hike will become an ongoing unfunded mandate.

Medicaid Dropouts?

In response to the bill’s passage, twenty states, led by Florida Attorney General Bill McCollum, have filed suit against ObamaCare, charging that both its individual insurance mandate and its mountain-sized Medicaid burden are unconstitutional. And Virginia, which prior to Obama-Care’s passage put a law on its books banning health insurance purchase requirements—one of ObamaCare’s key provisions—has filed a separate suit. If successful, the lawsuits could effectively dismantle ObamaCare, but nearly all constitutional scholars, even those supportive of the states, believe the challenges face long odds.

Another option might be for states to ignore federal insurance market guidelines and develop noncompliant exchanges. The idea would be to set up an insurance market that meets local needs, disregarding Washington’s rules, then dare the administration to tinker with an effective locally designed exchange. Doing so, argue Haislmaier and Blase, would “make it politically more difficult for federal officials to implement provisions of the new federal legislation…that will drive up premiums and reduce coverage choices.”

The problem with this plan is that setting up an effective exchange isn’t as easy as it sounds. Massachusetts built an exchange in 2006. But since then, the state has had to deal with constant premium hikes, provider shortages, and legal battles between insurers and state officials. And even if a state built a better system, there’s no guarantee that the administration wouldn’t simply force state officials to comply with the federal regs. In the end, the existence of a government-designed insurance infrastructure, even one crafted to local specifications, makes it significantly easier for the federal government to assert control.

At any rate, neither of those responses would pay off for years. In the meantime, states will have to consider their own bottom lines. Given the heavy burden that ObamaCare places on many states’ finances, some policy experts now believe that the best way to protect budgets may be to drop out of Medicaid entirely. This step would not only rid states of the duty to expand Medicaid; it would free them from what is now their biggest single budgetary obligation.

Politically, this may be a tough sell, but legally there’s little to stop a state from killing the program. Despite the perception that Medicaid is an established part of the entitlement firmament, the program is technically voluntary. Any state willing to give up the federal contribution could close down its program. And thanks to ObamaCare, if a state dropped out after 2014, its poor residents wouldn’t lose access to health coverage; instead, low-income individuals would qualify for subsidized health insurance through the new exchanges, which would still be set up even if a state stopped participating in Medicaid. Indeed, such a system may prove more beneficial for the poor. Medicaid recipients have some of the worst health outcomes in the country; their cancer survival rates, for example, are no better than those of the uninsured. And because of the program’s low reimbursement rates, many health care providers won’t take Medicaid patients. Subsidized private insurance could expand health care options for low-income individuals, improving their health outcomes. That makes it difficult to argue that dropping out of Medicaid would hurt the poor.

State budgets would almost certainly be healthier if they did, at least when judged as independent entities. According to a 2009 report coauthored by Heritage’s Haislmaier and former Medicaid chief Dennis Smith, the collective savings would add up to $725 billion by 2019, based on extrapolations from historical Medicaid spending data. California would save $13.7 billion in the first year alone. Indeed, nearly every state would benefit: By Haislmaier’s most recent estimates, which rely on a combination of Census data and estimates from the Centers for Medicare and Medicaid Services, which administrates Medicaid, 40 states and the District of Columbia would be better off shifting their Medicaid recipients off of their books and onto subsidized federal insurance rolls. 

“A lot of states might find this very attractive,” says John Goodman, a frequent contributor to the journal Health Affairs and the CEO of the National Center for Policy Analysis, a Texas-based free market think tank. “They get to get rid of a program that was going to cost them lots of money.” But he cautions that if every state did it, the total taxpayer burden associated with ObamaCare would increase significantly, perhaps even double.

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • Pop Culture Pedant||

    Does anyone else gag a little when he sees that picture? It's like the first time I saw a Hustler Magazine centerfold in all its gynecological gore. I knew it was bad for me, but I couldn't look away.

  • ||

    Gynecological gore? Which issue? was it a post birth photo? or do you just not like the pussy?

  • ||

    They got some UGLLLLLY pussy in Hustler.

  • Al Gore||


  • ||

    Pelosi in Hustler? I'm trying to eat lunch here, man!

  • Wegie||

    It's only bad for you, if you marry it!

  • ||

    Nancy Seems to be enjoying herself. Immensely. She must have put fresh batteries in, just for the ceremony.


  • ||

    The guy in the upper right? In the very back?

    He's a replicant.

    They can never get the hair right.

  • Spoonman.||


  • Upgrayyed||

    That's Blagojevich's half brother, Pol Combovabich.

  • ||

    It looks like Patrick Kennedy. I guess he wasnt in a bar or a rehab facility on that particular day.

    What I wanna know is who is the guy to Nancy's right? Wayne Newton?

  • Upgrayyed||

    I think it's Tony Stewart.

  • mr simple||

    Why was Webster at the signing of the bill?

  • Dumpster Baby||

    Nancy decreed it. Don't ask.

  • Sam Kennison||

    I'm just happy she didn't paint him green.

  • ||

    I thought it was Gary Coleman, not Webster.

    More interesting than that is the presence of Colonial President Laura Roslin.

  • mr simple||

    I guess Biden does make a better Mr Drummond than a George.

    The most troubling part is Skeletor sitting on the front row next to Obama.

  • ||

    What chou talkin' 'bout Willis????

  • Ice Nine||

    That photo amounts to a handy thank you note list for the fifty new Republican legislators on November 3.

  • Max||

    These rogue states are happy with Medicare and Medicaid, though, aren't they? There doesn't seem to be a pricipled opposition to big government health programs afoot. Maybe it's just a temporary outbreak of some virus that attcks brain cells.

  • ||

    I certainly wouldn't expect any government to have a principled position on anything. But the article is describing numerous practical difficulties that the states will have with Obamacare. Care to comment on those?

  • Dumpster Baby||

    Trolls: can't live with 'em, can't live without 'em.

  • ||

    I hear ya. But I'm really curious as to what Obama's butt monkeys have to say about this. Do they have anything other than the usual "you just want poor people to get sick and die!" and their favorite "teh racist!"?

  • ||

    Yup. It's the same thing if you didn't want globalization of the U.S military... "You WANT people to suffer and DIE under TERRORISTS?". Political punchlines with no jokes attached. Rip off.

  • Max||

    Most normal people like plenty of things government does and happily pay taxes for the services government provides. So you can shove your anti-government fanaticism back up your fat ass where it came from, you ignorant fuck.

  • sarcasmic||

    If people like you are "normal" then I'm proud to be different.

  • Max||

    Stupider is different, asshole.

  • sarcasmic||

    I find it humorous when idiots such as yourself fail to understand something, and then insist that those who can are the stupid ones.

    You're like the dumb kid in the back of the class who claims that the reason he fails is because the subject matter and instructor are stupid, meanwhile the smart kids get good grades.

  • Spencer Smith||


    Actually, if you are normal, than that would put you somewhere between 80 and 120 iq. So, different would also be smarter- asshole (?)

    Sorry, but I felt I must keep up the fucking trend of name calling.

  • sarcasmic||


  • Spencer Smith||

    What a qualified statement. MOST NORMAL people like PLENTY of things...

    So that means that some normal people (if I were to even believe your premise) do not like these same things. Actually, it would mean that (given that plenty is an ambiguous amount)Most normal people are apathetic about, or are opposed to PLENTY of things the government does.

    What is the matter with this dude's brain?

  • pmains||

    Most normal people oppose ObamaCare.

    And, beyond that, Enjoy Every Sandwich's point was not that all government is bad, but that this particular law is creating very tangible problems. Do you disagree, or is posting here just a compulsion for you?

  • Max||

    No, fuckwit, for the idiot you refer to and his comnrades the government is mostly evil. It isn't just some tagible problems that this partuiclar law creates; it's the whole idea of unversal health care, and you fucking know it.

  • Spencer Smith||

    The whole idea of universal health care is awful because of the tangible problems it poses- ass-face (there, I felt I needed to call you a name so you'd understand).

    It would be great if no one was forced to participate and no one had to pay for it, etc. It would be great if you would pull your head out of Castle Car-a-lot and grow the fuck up.

  • ||

    Actually the government is all evil. Be that as it may, it's the reality of the moment. Their "healthcare" program is are the problems with making it work. You can't just wish the problems away, or make them go away by chanting "Yes We Can!". To be taken even slightly seriously you have to address the problems.

  • sarcasmic||

    Max is does not understand distinctions.

    For example he does not understand the distinctions between no government and limited government, free markets and crony capitalism, income and wealth, influence and control, as well as a host of other important distinctions that make rational thought possible.

  • Jorj X. McKie||

    I'm surprised he hasn't told us all to move to Somalia: the "libertarian paradise". Or maybe he did and I just missed it.

  • mad libertarian guy||

    Surely at some point he has.

  • Fiscal Meth||

    Did someone conduct a survery that only polled normal people? How?

  • Jeffrey B. Kindler||

    I like all the money the government gives my company.

  • ||

    Hahaha, how pathetic. I knew it; ya got nothin'. Otherwise you could address the specific points that the article makes. Even with everybody paying taxes, happily or otherwise, these problems still have to be addressed.

  • ||

    How would you know what normal people like?

  • Red Rocks Rockin||

    "Most normal people like plenty of things government does and happily pay taxes for the services government provides."

    A statement that's refuted every April when millions of Americans take 100% of their available refund and/or Earned Income Credits. You'd think if they loved it so much they wouldn't even consider taking back that interest-free loan they gave Uncle Sugar, or take "earned income" that was earned by someone else.

    I'd especially love to see empirical evidence of all these people who "love" paying their taxes, particularly when the annual home value assessments take place.

  • Max||

    Federal government rule rules!!!

  • ||

    Give me my contributions back (not even asking for interest) for the last 40 years and I'll gladly take care of my old age needs myself. Maybe I'd actually be able to find a doctor (since increasing numbers are going to reject M/care and M/caid patients, whose reimbursements don't even cover the cost of completing the paperwork).

  • Slut Bunwalla||

    "Mr. Obama, will this bill give my mommy health insurance?"

    "No, Jimmy, it won't. But it will force her to buy health insurance from a government-approved provider or pay a tax--I mean, fee. And that's President Obama to you, fatty."

  • ||

    Best comments I've read in a while---only had to change my panties from laughing, unfortunately libertarian ideals apparently lead to incontinence. Sign me up for the revolution anyhoo!

  • sarcasmic||

    Repeal the 17th!

  • ||

    "Tax returns are the most obvious verification method, but tax returns reveal only what someone made last year. They don’t reflect the mid-year shifts that ObamaCare was intended to address, such as job losses that mean people can no longer obtain insurance through their employers and are newly eligible for subsidies. Yet states will have to create systems to account for such changes."
    2 words:
    anal probes

  • guy in the back row||

    I just heard New York State is imposing a 1.1% decrease in all medicaid payments as of 9/16.

    I like the 36 hour notice, it makes it more classy that way.

  • Fuck!||

    The democrats treat taxpayers like many restaurants treat their waitresses. Now matter how bad one waitress might be compared to an excellent waitress they split the tips evenly at the end of the day.

    We should feel lucky progressives allow us to serve them and grateful for the scraps they throw our way to split up amongst our pissant selves. After all aren't taxpayers here to serve the progressive ruling class. It's only fair to the progressives that we split the tips they generously allow us with the other waitresses.

  • ||

    Oh I don't know. I agree we should serve the progressives. Preferably well-done to avoid spreading parasites.

  • Mr. FIFY||

    Fuck!, some liberals get it, and don't view the private sector as one would greet the discovery of a long-dead raccoon under the crawlspace. Unfortunately, the ones in power are too weighted down with those kinds of extremists - and their cousins, the ones who view the private sector with mere disdain and only useful as a source of revenue to fuel their reelection machinery - i.e., welfare and other "entitlement" programs/voter bribery mechanisms.

    Shit, even Fidel is getting the picture now, and here we are trying to follow in the footsteps he just recently described as a huge mistake.

  • ||

    I see Class War rhetoric has made its' way to the mainstream. Robin Hood is not just a cartoon anymore, it's politics baby! Those fucking asshole rich mother fuckers giving people jobs and supplying us with stuff we like to use!!! KILL THE RICH. STOMP OUT THE BANKS!

    Looks like the educated middle class in all of its academic glory has put the gloves on for the ol' helpless proletarian. Smash Capitalism!

    Goodbye Rich man, you hard-working, self-made, risk-taking, job-providing, money-loaning asshole!!

    I think the proles can handle it from here on out.

  • Tony||

    The only class warfare being perpetrated is by the rich against the poor. Period.

  • ||

    Was his name Sherif of Nottingham? Class War is gay dude. Having money kicks ass.... who gives a shit about poor people? Don't tell me that you do. haha.

  • ||

    Its a bad hand we get dealt from either of these two corrupt parties. They've turned the government of the United States into nothing more than the very kind of oppression for which this country was founded to struggle against.

  • ||

    It's the political version of Stephen Hawkin's "Arrow of Time". Corruption is simply a denotion of time moving forward rather than cyclical, stagnant or in reverse. All governments, regardless of their initial intent, and intended goals, will inevitably succumb to totalitarianism and oppression.

  • HistoryTeach||

    I like the articles on this website, but why are the comments so vulgar?

  • ||

    I'm hopeful re the challenges:
    Commerce Clause: If govt can FORCE me to engage in commerce, what CANT it force me to do.
    Mandate is a TAX and Feds have right to levy and collect taxes. The mandate does NOT meet the definition of the 3 types of tax Govt can levy. AND, tax must be for a revenue raising purpose, this "TAX" will be paid to insurance co's as a premium.

  • ||

    ObamaCare desperastely needs to be repealed & replaced! Let's pray that happens.

  • ||


  • ||

    Because it will raise premiums at an even faster rate, because it doesn't deal with tort reform, because it's unconstitutional, because he slammed it down the throat of an unwilling public. is that enough?

  • ||

    So anybody who can't afford health insurance should just die?

  • TwoFingers||

    No, they should just not have health insurance.

  • ||

    Because no one knows what is in it or whether it is even able to be implemented. Because it creats a monumental unfunded mandate. Becasue I said so.

    All of the above!

  • ||

    Very educated. So all government intervention and public services should come to a screaching halt?

  • ||

    F' Obamacare. And I'll say it to his face, too.

  • ||

    Wow, you're a badass. Why don't you throw a shoe at him too.

  • Anonymous||

    Most states already have tort reform. And those people who did not have health insurance would have been treated anyway. And everyone who had health insurance would pay for it through higher premiums. So I say give the Health Care Reform Act a chance. I would go on, but I doubt many of you would believe me. It does not really matter what you believe, though.

  • ||

    We must fight this tooth-and-nail or lose Freedom for good.

  • ||

    One of the best breakdowns and history of this monstrosity I have ever seen. It should be required reading for those wanting to preserve the Republic.

  • Jimmy||

    Good article, but it has a significant flaw. The PPACA does not provide federal subsidies through the exchange for most individuals between 0 - 133% FPL. If states drop Medicaid, most current Medicaid clients will not be eligible for exchange subsidies and would likely become uninsured.

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