From The Heritage Foundation and Alliance Defense Fund:
Morning Bell: The Obamacare Burden To Your State Budget
Posted November 12th, 2010 at 9:22am in Health Care with 8 comments Print This Post
Facing a $25 billion deficit for their next two-year budget cycle, Texas lawmakers are considering closing the gap by dropping out of Medicaid. “This system is bankrupting our state,” State Representative Warren Chisum told The New York Times. “We need to get out of it. And with the budget shortfall we’re anticipating, we may have to act this year,” he said.
And Texas is not alone. American Legislative Exchange Council director of the health and human services Christie Herrera tells NYT: “States feel like their backs are against the wall, so this is the nuclear option for them. I’m hearing below-the-radar chatter from legislators around the country from states considering this option.”
Medicaid already eats up a huge share of state budgets. In Texas, for example, more than 20 percent of the state budget is spent on Medicaid. The crisis facing states across the country is that Obamacare forces states to massively expand their already burdensome Medicaid rolls. Starting in 2014 states must expand Medicaid to all non-elderly individuals with family incomes below 138 percent of the federal poverty level. At first, Obamacare picks up the first three years of benefit costs for expansion. But in 2017 states begin to shoulder a larger and larger share of these benefit costs, maxing out at 10 percent by 2020.
But that is just the benefit costs. Obamacare does not pay for any of the costs necessary to administer the expansion of the Medicaid rolls, rolls that are expected to increase by approximately 50 percent in states like Nevada, Oregon, and Texas. The Heritage Foundation’s Ed Haislmaier and Brian Blase found that just the administrative costs of the Obamacare Medicaid expansion will cost almost $12 billion by 2020. As Heritage visiting fellow Lanhee Chen details, some states are beginning to add the benefit and administrative costs together, and the picture isn’t pretty:
Texas recently concluded that the Medicaid expansion may add more than 2 million people to the program and cost the state up to $27 billion in a single decade. The Florida Agency for Health Care Administration estimated in April that Obamacare’s Medicaid expansion would require an additional $5.2 billion in spending between 2013 and 2019 and more than $1 billion a year beginning in 2017. In California, the Legislative Analyst’s Office concluded that Obamacare’s Medicaid expansion will likely add annual costs to the state budget in “the low billions of dollars.”
Mississippi, Indiana, and Nebraska each retained Milliman, Inc., a national health care econometrics firm, to perform a fiscal analysis of the Medicaid expansion on their states’ budgets. For Mississippi, Milliman estimates that between 206,000 and 415,000 people will be added to Medicaid, with a 10-year impact on the state budget of between $858 million and $1.66 billion. The seven-year cost of the Medicaid expansion in Indiana is estimated to be between $2.59 billion and $3.11 billion, with 388,000 to 522,000 people joining the state’s Medicaid rolls. Finally, Milliman estimates that Obamacare will result in nearly one of five Nebraskans being covered by Medicaid at a cost of $526 million to $766 million over the next decade.
Obamacare’s unfunded mandates are a fiscal time bomb set to explode state balance sheets across the country starting in 2014. States can prepare for the worst by slashing discretionary spending where possible and lowering existing health care costs by repealing their own burdensome health benefit mandates. But the only real solution is full repeal of Obamacare.
Quick Hits:
•Responding to recommended cuts from President Obama’s fiscal commission, NPR said it’s “imperative” that it receives federal funding.
•President Obama’s economic stimulus waste, fraud, and abuse oversight board will meet at the Ritz-Carlton Hotel in Phoenix later this month.
•Tennessee Governor Phil Bredesen (D) says President Obama should come back to the health care bargaining table with a “mea culpa” if Democrats want to have a meaningful conversation about improving the future of health care.
•Seven of the nation’s 10 richest counties surround Washington, D.C.
•As part of our “Lunch with Heritage” series, Nina Owcharenko, Director of the Center for Health Policy Studies, will answer your questions on what is wrong with Obamacare at noon today.
And this, related, from The New York Times:
Health Rules Are Waived More OftenBy REED ABELSON
Published: November 9, 2010
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LinkedinDiggMixxMySpaceYahoo! BuzzPermalink. As Obama administration officials put into place some of the new rules that go into effect under the federal health care law, they are issuing more waivers to try to prevent some insurers and employers from dropping coverage and also promising to modify other rules because many of the existing policies would not meet new standards.
Last month, federal officials granted dozens of one-year waivers that were aimed at sparing certain employers, including McDonald’s, insurers and unions who offer plans that sharply limit the coverage they provide. These limited-benefit plans, also known as “minimeds,” fail to comply with new rules phasing out limits on how much policies will provide in medical care each year.
Concerned about the potential disruption that would be created by enforcing the new rules, the administration has granted dozens of additional waivers and also made clear that it would modify other rules affecting these policies. Last week, the Department of Health and Human Services issued more guidance, saying it would use a different method of calculating spending for these plans so they would be able to meet new regulations dictating how insurers should use the premium dollars they collect.
While critics say these moves could water down the new law, the administration says it is responding to concerns from employers and others that many workers have no other alternative. The new rules also require that the policies clearly say how much coverage they provide and that they do not satisfy the law’s new standards.
“This new guidance helps improve transparency so that consumers know the value and quality of the plan they have,” said Steve Larsen, the director of oversight in the agency’s office of consumer information and insurance oversight. “In 2014, higher-quality coverage will be offered at an affordable price in the new exchanges. Until then, the annual waiver process preserves limited benefit plans offered by employers, preventing significant premium increase or loss of access.”
But a spokesman for Senator John D. Rockefeller IV, a West Virginia Democrat who favored strict rules on insurance company spending, said he planned to hold a hearing on the issue.
Among the waivers recently granted were for employers like Darden Restaurants, which operates the Red Lobster and Olive Garden restaurants, for 34,000 of its workers. Federal officials have granted 111 waivers to employers, insurers and union plans, who are responsible for covering about 1.2 million people.
Darden said the waiver would allow it to offer employees access to affordable coverage as the health care law is started.
In addition to granting waivers, the administration also said it would establish a different way of calculating the spending for these plans for the first year that “takes into account the special circumstances of minimed plans.”
A version of this article appeared in print on November 10, 2010, on page B2 of the New York edition..
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