Let me use numbers from the Congressional Budget Office to illustrate. On average, the federal cost to subsidize people on the exchange will be 50 percent higher than the federal cost to cover them through Medicaid.[4] So if by agreeing to the Medicaid expansion a state gains two below-poverty Medicaid beneficiaries for every above-poverty who ends up on Medicaid instead of the exchange, it will “break even” as far as maximizing federal dollars goes.  But in states that already have expanded Medicaid (prior to Obamacare) to close to poverty, it is easily possible that there will be a much higher ratio of near-poor would-be Medicaid eligible than would-be eligibles with incomes below poverty. In such cases, states will gain more federally-induced new jobs by not agreeing to expansion than if they did.

For the average state, failure to account for the exchange subsidies means that estimated job gains from Medicaid expansion are overstated by approximately 25 percent.[5]  Failure to account for job losses associated with taxes required to cover state matching funds for the expansion means that job gains are overstated by another 14 percent.[6]  In short, using the methodology of studies such as those done in Florida, claims of Medicaid job gains are overstated by nearly two-fifths for the average state and may be overstated by considerably more than that for particular states considering expansion.

Thus, policymakers and informed citizens always need to be on alert for exaggerated claims regarding the benefits of Medicaid expansion. For the nation as a whole, the jobs picture is unequivocally worsened, not improved, by the massive expansion of Medicaid. For individual states, the conclusion is less clear. But even states that appear to be gaining jobs on balance need to remember that these benefits are gained at the expense of poorer health among the near-poor who will be forced away from private coverage through exchanges onto the rolls of Medicaid.

This is an odious choice for governors to have to face. But it was a choice carefully crafted by Obamacare’s designers so that states would dance to Uncle Sam’s tune. And it’s merely the tip of the iceberg when it comes to using the full force of the federal government to get patients, providers, health plans and others to do its bidding. It’s hard to believe that the Framers risked their lives, fortunes and sacred honor to create a federal government with this much power. But this is where we are as a nation until and unless voters choose another direction.

Footnotes

[1] Unlike the decision whether to run a state health exchange (whose final deadline was February 15), there is no deadline per se on state decisions whether to adopt the Medicaid expansion. As Governor Scott’s recent reversal attests, there is nothing that precludes a state that has decided against expansion from reversing its position down the road.

[2] In my book on The American Health Economy Illustrated, I show that average annual compensation per full-time-equivalent worker in ambulatory health services and the hospital industry (the sectors likely to benefit most from Obamacare) is higher than for private sector workers (see figures 11.2a and 11.2b).

[3] I’ve struggled to come up with the right analogy for what is going on. The state is powerless to prevent the federal government from emptying the pockets of its citizens to bankroll the expansion. (A state that accedes to expansion admittedly will increase the total amount of dollars required by Uncle Sam. But most of the revenues and economic damage resulting from those higher taxes will be imposed outside that state’s own borders.) Uncle Sam is effectively saying to the states “I already have your money. You can get some of it back if you agree to expand. Otherwise, we’ll be happy to spend it on other states willing to play by our rules.”
“Theft” seems too strong a word to use—even though a majority of Americans, especially in Red states, opposed Obamacare before and after its enactment—since Uncle Sam is, in effect, offering a “rebate” to victims willing to go along with the new rules of the game. There’s all flavors of extortion, ranging from “blackmail” (but in this instance Uncle Sam is not threatening to reveal damaging information) to “shakedown” (although again, Uncle Sam is not threatening to do damage to states unwilling to comply). “Ransom” comes closer to the mark, except that in this instance, the victims can never be made whole (in contrast to a true ransom situation in which any amount paid in ransom to recover something taken hypothetically might also itself be recovered if law enforcement efforts are successful).

However one characterizes the situation, it is coercive. States are not behaving voluntarily in an arms-length relationship with Uncle Sam on a level playing field. Instead, Uncle Sam has rigged the rules to ensure an outcome much more to the liking of Obamacare’s designers than that of the general public.

[4] In dollar terms, the CBO estimates that the average exchange subsidy for the near-poor who otherwise would qualify for Medicaid were a state to decide to accept the expansion would be $9,000. The average federal Medicaid savings for such individuals would be $6,000.
[5] For the nation as a whole, the Urban Institute calculates that states would receive 5.1 times as much federal funding if all of them agreed to the Medicaid expansion than if all of them did not. However, that is an average which would vary considerably by state, depending on how generous its Medicaid eligibility standards were prior to the enactment of the ACA.

[6] The Florida study focused on 2016, when the federal government will still be covering 100% of the cost of the expansion. But by 2020, states will be responsible for matching costs of 10 percent of expansion benefits and for all years states are responsible for 50 percent of any additional administrative costs related to expansion. Medicaid administrative costs average 5 percent of spending. Thus, states will be responsible for about 12.5 percent of Medicaid costs over the long run, meaning that 1/8 of any estimated federally-induced job gains would be offset by corresponding job losses arising from state taxes required for the Medicaid match. This means that job gains are overstated by 14.2 percent (12.5/87.5 = 14.2%).

source: http://www.forbes.com