If a deal sounds too good to be true, it usually is. Perhaps Gov. Rick Scott should have kept that in mind before deciding to accept federal funds to expand the state's Medicaid program in conjunction with the Patient Protection and Affordable Care Act, aka Obamacare.
Obamacare originally required every state to expand eligibility for Medicaid to 138 percent of the poverty line, or roughly $32,500 per year for a family of four. Not surprisingly, many states balked, and last summer the Supreme Court ruled 7-2 that the federal government could not force states to expand their programs. In fact, Florida was a party to that lawsuit.
So to incentivize states to go along, the federal government is dangling "free" money in front of them. For the first three years, the federal government promises to pay 100 percent of the cost of expansion. This will gradually decline to 95 percent in 2017, 94 percent in 2018, 93 percent in 2019 and 90 percent in 2020. Given that the federal government provides only 58 percent of the funding for Florida's current Medicaid program, this sounded like too good a deal for Gov. Scott to resist.
He was wrong.
First, there is no such thing as free money. Even with the federal government picking up 90 percent of the cost, Florida taxpayers are not off the hook. Ten percent of a very big number is still a very big number. In fact, it is estimated that once full federal funding expires and Florida is required to pick up part of the cost, the Medicaid expansion will cost the state's taxpayers $5.36 billion.
However, those estimates significantly underestimate the cost to Florida because they ignore a second category of recipients likely to be added to the Medicaid rolls: what the Robert Wood Johnson Foundation has dubbed "the woodwork effect."
As the Medicaid expansion moves forward, thousands of Floridians will discover they are eligible and be more likely to sign up. In fact, it has been estimated that 357,000 people, roughly 22 percent of 1.63 million new Medicaid recipients enrolled under the expansion, would be "coming out of the woodwork." This group is not eligible for the 90/10 match, but is covered under the old formula, with Florida responsible for slightly more than 40 percent of the cost.
While there have been no reliable estimates for Florida of the additional cost from "woodwork" recipients, studies in other states show the cost to state taxpayers doubling. This comes at a time when Medicaid already consumes 30 percent of Florida's budget, more than education or transportation.
Of course, any estimate of state costs assumes that the federal government will keep its end of the bargain. But with Washington facing an ongoing debt crisis, Medicaid funding will almost certainly be on the table. Indeed, as part of the fiscal cliff negotiations in December, the Obama administration reportedly offered to change the 90/10 match for Medicaid expansion. While the administration eventually backed off that offer, it shows just how tenuous federal funding promises really are.
Scott claims to have solved this problem through a provision that sunsets the expansion in three years, meaning that the state can back out if the feds fail to keep their end of the bargain. But it is difficult to undo benefits once they are given. Scott himself rendered the three-year sunset essentially meaningless, saying, "I want to be clear that we will not simply deny new Medicaid recipients health insurance three years from now."
The governor's turnaround will essentially create a Florida where more than one in five residents will be on Medicaid, a massive increase in dependency and government control over health care. Studies show that patients on Medicaid consistently have far worse outcomes than those with private insurance. Why then would we want to entice thousands of Florida residents off private payment and into a low-quality government program?
Fortunately, the final decision lies not with Gov. Scott but with Florida legislators. The governor may have decided to chase after the fool's gold of federal funding, but legislators can still defend Florida taxpayers by saying "No."