Will Health Care Reform Cause Nevada To Drop Out Of Medicaid?

Last month, I noted the possibility that health care reform could give states an incentive to withdraw from Medicaid. Health care reform legislation currently includes approximately $25 billion in unfunded state Medicaid expansions. But many states are in terrible fiscal shape and would have a tough time coming up with the cash to pay for the expansion. Now, the governor of Nevada is saying that his state's response could be to simply drop out of Medicaid—a voluntary program—entirely.

In the latest in a series of conservative policy initiatives released by the Republican governor, Jim Gibbons is considering whether Nevada should drop out of the federal Medicaid program, one of the cornerstone safety net programs that provide health care to the poor, disabled and elderly and that cover thousands of Nevadans.

Health and Human Services Director Mike Willden was asked to "take a serious look" at opting out of the massive federal program this week. Triggering the interest is concern about the health care reform bill being debated in Congress, said Stacy Woodbury, Gibbons' deputy chief of staff.

The state has estimated that the federal requirement to expand Medicaid under the bill will cost Nevada $636 million from 2014 to 2019, when the 100 percent federal subsidy in the health care reform bill expires.

This wouldn't necessarily mean that the poor couldn't get care: Instead of Medicaid, residents would get federal subsidies to buy insurance through the exchanges that the health care bill would set up. Those subsidies would be entirely federally funded, helping to relieve pressure on the state's budget.

Is this a serious proposal or a threat intended to illustrate the potentially dire effects of health care reform on state budgets? It's tough to say. But even if it's a just an illustration, it's a good one.

Still, it's not without risk. Given that Nebraska Sen. Ben Nelson, who cut a sweetheart deal to get federal funds to cover the Medicaid expansion in his state, is pushing to extend Nebraska's deal to all states, it could result in Congress deciding to mitigate state grumbles by ponying up the requisite extra funding for every state.