August 11, 2017 12:20 PM UTC

Sorting Fact From Fiction: Medicaid Expansion Edition

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• by: Colorado Pols

The Denver Post’s John Ingold has a must-read story up today that debunks many of the false arguments about Medicaid–and in particular the expansion of Medicaid under the 2010 Affordable Care Act–used to justify threats to cut eligibility and reduce the covered population. Medicaid has already become a favorite complaint for Republican 2018 gubernatorial candidates, and the future of the Medicaid expansion population remains unresolved in Washington, D.C.

But is the Medicaid expansion busting Colorado’s budget? For a host of reasons that take time to understand fully, the answer is “not really.”

In addition to being a huge cost to the state, Medicaid is also a huge revenue source — the single largest source of federal funds that Colorado receives every year… [Pols emphasis]

The Affordable Care Act, often called Obamacare, swelled Colorado’s Medicaid rolls dramatically by expanding eligibility to people slightly above the poverty line. More than 400,000 people have signed up through the expansion, and that group now makes up nearly 27 percent of Colorado’s Medicaid population, according to the governor’s Office of State Planning and Budgeting.

But Medicaid’s costs are shared between the state and federal governments. And, for the expansion, the feds offer states a sweetheart deal: They currently cover 95 percent of the costs. In the coming years, that share will drop to 90 percent, meaning Colorado will have to cover 10 percent of costs for the expansion folks.

Colorado pays its share with money from the hospital provider fee, a complicated mechanism by which hospitals pay a fee to the state and the state uses that money to get matching funds from the federal government. But Henry Sobanet, Gov. John Hickenlooper’s budget director, said federal rules prohibit using money from the hospital provider fee to pay for non-Medicaid expenses within the budget — on things such as roads or schools. The state also can’t use provider fee money to pay regular Medicaid expenses for people outside the expansion group.

“We could cancel the expansion, and we wouldn’t save a dollar in the general fund,” Sobanet said.

We strongly encourage everyone to read this story in its entirety, being one of the clearest and fairest looks at Medicaid funding since the passage of the Affordable Care Act we’ve seen in Colorado media. Yes, the state spends more both in absolute terms and as a percentage of the state budget today on Medicaid than we used to. But the overwhelming majority of costs for the Medicaid expansion are paid by the federal government, not the state, and the small percentage that Colorado responsible for is paid through the hospital provider fee enterprise.

The specific funding streas for the Medicaid expansion also mean that cutting eligibility won’t free up money to spend elsewhere. The deal reached this year to convert the hospital provider fee into an independent enterprise, so as to exempt the money from revenue limits under the 1992 Taxpayer Bill of Rights (TABOR), prevented these locked-in funds from forcing cuts in other parts of the budget–but it doesn’t work the same way in reverse. It could be another story if the GOP-controlled Congress succeeds in repealing the ACA, which in most forms would cut the federal funds for Medicaid that this all depends on. But as you know, Congress is having some trouble getting that done right now.

The point to understand as the issue becomes fodder in the Republican gubernatorial primary, in which all candidates are tripping over each other to trash Medicaid along with every other government program, is that cutting Medicaid isn’t the way to provide for the state’s manifold other needs. It’s not practical, since the savings that would be realized are far smaller than one would think at first glance. It’s bad politics, since throwing people off of the coverage rolls results in some of the worst news coverage a politician can possibly inflict on themselves. And above all (depending on your point of view), it’s politically bad because it’s morally a bad thing to do to people–especially for so little actual savings.

Misusing budget figures to point fingers during political campaigns is old hat, like claiming “there is no cut” if the total of a line item increases–without explaining the effect of population growth and inflation on individuals, who face very real reductions even if the “total amount grows.” But as Republicans in Congress just discovered in their failed attempt to repeal Obamacare, Americans on the sharp end of those cuts aren’t so easily fooled.

Hopefully good journalism like John Ingold’s will help Coloradans figure out the score, too.