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Medicaid Expansion: Expensive, Unreasonable Risk

By Governor Pete Ricketts
January 26, 2016

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“There is no such thing as a free lunch,” said Milton Friedman, winner of the 1976 Nobel Prize in Economic Sciences.  The advisor to President Ronald Reagan and British Prime Minister Margaret Thatcher also said, “Nothing is so permanent as a temporary government program.”  Both of these observations are grounded in truth and both apply to continuing efforts to expand Medicaid in Nebraska.

Medicaid is a joint federal and state program designed to be a safety net for the poorest and sickest citizens.  Nobody wants to restrict access to healthcare, but we do want to halt the unnecessary expansion of the program which will shift Medicaid’s focus away from its core mission and expose our state’s budget to unreasonable risk.

Our Unicameral has wisely rejected Medicaid expansion three times in three years.  Now, special interest groups and a few senators are pushing for Nebraska to expand Medicaid expansion by using taxpayer dollars to buy private insurance.  While this is a new plan, it’s the same story: Medicaid expansion is an expensive and an unreasonable risk to Nebraska taxpayers.

Expanding Medicaid would increase the income limit for eligibility and add primarily able-bodied adults to the program with the federal government promising to match at least 90 percent of the cost.  Currently, the federal government generally matches just over 50 percent of Medicaid costs for low-income individuals and families, including pregnant women, children, the elderly, and people with disabilities.  States, including Nebraska, have an existing commitment to fund the remaining share to serve the core population of vulnerable citizens.

Research shows that numerous healthcare providers don’t take Medicaid patients because Medicaid only reimburses about half of what private insurance does.  If we approve Medicaid expansion, it will make it more difficult for the children, elderly, and people with disabilities to get access to providers, posing a threat to the original intent of Medicaid.  Current Medicaid enrollees will have to compete with tens of thousands of new enrollees for the limited number of providers who take additional Medicaid patients. 

This year’s Medicaid expansion proposal, modeled after Arkansas, is an even bigger financial risk to Nebraska’s budget than previously rejected ideas.  After just six months, the Arkansas expansion was $137 million, or 61 percent, over budget.  One of the reasons was because more people signed up than projected.  State officials in Arkansas predicted a maximum of 215,000 able-bodied adults would enroll in Medicaid, but after a year and a half that number had surged to almost 300,000.  After the surge, more than 40 percent of Arkansas citizens were on Medicaid, making Arkansas one of the most Medicaid-dependent states in the nation.

Furthermore, purchasing private insurance with federal dollars costs around $1,700 more per person each year than traditional Medicaid in Arkansas.  The U.S. Government Accountability Office found that the Arkansas expansion will cost taxpayers $778 million more in the first three years than basic Medicaid expansion would have.

In Nebraska, Medicaid has grown from 2.9 percent to almost 20 percent of our state budget.  A study paid for by the State of Nebraska in 2015 found that expanding Medicaid under this plan using private insurance would cost 94 percent more than traditional Medicaid. 

Supporters of expansion tout federal funding as a reason to expand Medicaid in Nebraska.  Doing so would create a massive new entitlement dependent on unreliable federal funding.  The federal government has a history of breaking their commitment to states.  For example, the federal government originally promised to pay 40 percent of the cost of expanding special education, and now they pay less than 20 percent.

This proposal for expanding Medicaid is bad for Nebraska.  Every year, the state has to balance our budget, which means we can’t spend money we don’t have.  This Medicaid expansion proposal will shift the focus away from our most vulnerable populations and expose our state to additional risk, which creates barriers to tax relief, infrastructure investment, and expanded educational opportunities—all of which would create true economic opportunities for people in need. 

Several Nebraska State Senators recently attended a press conference opposing Medicaid expansion.  These senators include: Bloomfield, Brasch, Craighead, Friesen, Fox, Hilkemann, Hughes, Kintner, Kolterman, Kuehn, Lindstrom, Murante, Riepe, Schnoor, and Williams.  Others said they wanted to join, but were unable to because of scheduling conflicts.  Please consider calling to thank your senator for protecting our budget against the risk of expanding Medicaid, or to encourage them to reject Medicaid expansion again.  Senators are listening, so please share your thoughts.  You can find information to contact your senator at www.NebraskaLegislature.gov.

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