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A Prescription Nebraska Can’t Afford

By Governor Pete Ricketts
February 19, 2016

 

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Efforts are underway to expand Medicaid in Nebraska again.  To date, the Legislature has wisely rejected three previous attempts.  Expanding Medicaid under the federal Affordable Care Act, also known as Obamacare, would cost almost $1 billion for Nebraska taxpayers.  Last week, Senator John McCollister of Omaha brought before the Health and Human Services committee LB1032, which would require Nebraska to significantly expand eligibility for Medicaid.  

To determine the cost of this proposal, the Nebraska Department of Health and Human Services (DHHS) commissioned an actuarial analysis of LB1032.  The analysis found this expansion would add nearly 126,000 people to Medicaid or state support by June 2019, including over 60,000 individuals who already have private insurance today.  This represents a 50 percent enrollment growth in the program.  A similar plan in Arkansas has resulted in 40 percent of their state population now being on Medicaid.

As outlined in the bill, not only would expanding Medicaid require nearly $1 billion in new state spending in its first 10 years, but those costs could quickly rise to over $600 million a year in Nebraska state general funds if Congress ever required the state to fund the program at its traditional Medicaid matching rate.  Supporters of the bill claim the legislation requires automatic termination of the program should that ever occur.  In the past, however, termination of a state-managed entitlement program has resulted in lawsuits and court-ordered reinstatement of state benefits.  On two occasions in the early 2000s, the state reduced eligibility for Medicaid in the face of significant budget challenges.  These actions resulted in lawsuits that required the state to continue providing services, and the State of Nebraska ultimately reinstated Medicaid for some individuals.

The increased government spending for this expansion of an entitlement program will impact generations of Nebraska taxpayers.  Today, every American shares in a national debt of over $19 trillion—amounting to nearly $60,000 per person.  Our country has an unfortunate history of borrowing from our children to fulfill the promises we do not have the resources to pay for today.  We don’t do that in Nebraska.

This growth in spending would also threaten our ability to meet the commitments to our current Medicaid enrollees, which primarily include children, pregnant women, elderly, and people with disabilities.  The current effort to expand Medicaid would require the state to buy private health insurance for the vast majority of the newly eligible individuals, which promises better access through broader networks and higher reimbursement than Medicaid.  Because of better reimbursement rates, there is a built-in incentive for care providers to serve these able-bodied enrollees rather than our truly vulnerable Nebraskans who rely on Medicaid.  The state should not prioritize the needs of able-bodied working-age adults over our truly vulnerable, Medicaid-dependent populations.

Supporters of LB1032 claim this is a conservative, or private-market, version of Medicaid expansion.  The reality is that this approach will prove costly to taxpayers.  The Government Accountability Office has already raised serious concerns over a similar program in Arkansas, estimating that it will cost over $778 million more than projected in its first few years.  Projections are proving true: The Arkansas plan was $137 million, or 61 percent, over budget in its first six months.  Additionally, Iowa has already abandoned a similar plan.  Taking a gamble on this unproven model isn’t worth the risk for Nebraska taxpayers.  It’s an especially risky gamble when you consider that Medicaid spending in Nebraska has already doubled since 2000—from $983 million to over $2 billion today or from about 12 percent of our budget to nearly 20 percent.

As I’ve travelled the state I have heard a clear and consistent message: our citizens need tax relief.  They are demanding we exercise the highest possible restraint in growing the size and cost of government.  We cannot be lured into committing future generations to the cost of expanding Medicaid in return for a fleeting promise of “free” federal money.  I urge you to contact your senator and thank them for protecting us from this unreasonable risk or express your concerns that Medicaid expansion is something that Nebraska cannot afford.  You can find their contact information by visiting www.NebraskaLegislature.gov.

 

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