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Will Opting Out of Medicaid Expansion and State Exchanges Cause ObamaCare to Fail?

Many states including North Carolina have opted out of Medicaid expansion and state exchanges due to unknown expenses of ObamaCare.

The crux of the problem is no one really knows how much ObamaCare will cost. At a conference last week on “What ObamaCare and Medicaid mean to you,” offered by the John Locke Foundation, the evidence of the unsustainability of North Carolina’s present health care system coupled with ObamaCare mandates for individuals may prove to be the Affordable Care Act’s undoing.

Someone in the audience asked how ObamaCare would affect hospitals. Cody Hand, Vice President Deputy General Counsel of the North Carolina Hospital Association said, “My first answer is ‘Who Knows?’ We know as much as you guys [referring to policy analysts from JLF].” He also clarified to Watchdog Wire NC, “because of the Affordable Care Act we will lose over $7 billion dollars due to Medicaid and Medicare.”

If you don’t know what something will cost, how can you possibly budget for it? Add to this the administration’s constant breaking of the law’s own rules through special interest waivers, and outright illegalities by the IRS, and you have a very bad law that few want.

The Affordable Care Act has put states in a vise grip. By pressurizing states to cover more people with promises of partial funding of already skyrocketing Medicaid costs, and by offering subsidies to those between 100% and 400% of the federal poverty level (FPL), the federal government has left states with little recourse other than to overhaul their existing systems.

North Carolina is one of 21 states that opted not to expand its Medicaid rolls and one of 34 states not setting up a state health insurance exchange. The governor has appointed a commission to research innovative ways to help insure people that will be fiscally responsible; as well as providing for the most vulnerable among us.

Through the ACA, the Obama administration has portrayed fiscally responsible states like North Carolina as mean ogres who don’t care about the poor. Owen Covington from Triangle Business Journal writes about a recent report from the Commonwealth Fund. He quotes its president, Dr. David Blumenthal: “It’s clear that by declining to expand Medicaid, states will be putting their most vulnerable residents in jeopardy…I am optimistic that many states will change course and accept the Medicaid expansion.”

It’s not the states that have put its most vulnerable people at risk; it’s Obamacare that has handed the states an impossible situation. The question remains, if ObamaCare collapses under the weight of its own flaws, what will take its place?

Highlights from the JLF Conference on September 12, 2013:

Becki Gray 1From Becki Gray, JLF vice president for outreach:

Facts and figures:

• 1 in 9 in NC on Medicaid

• 51% of births covered by Medicaid

• 2/3 of Medicaid funding comes from federal government

• $3 billion—NC share of Medicaid funding of total $14 billion

• Medicaid is 15% of NC budget projected to rise to 17.18% in two years

• Medicaid is entitlement program–it must be funded before any other publicly funded sectors like teachers and law enforcement.

According to Gray, the federal government “did not anticipate that the Supreme Court could not mandate the states expand their Medicaid rolls. Nor did they anticipate, even with the federal government’s offer to pay 100% of the costs [for Medicaid expansion] for a year that fewer than half the states in the country would decide to expand their Medicaid programs.”

Also, she said “Medicaid is the anchor of the whole Obamacare program. Is this the anchor that’s going to save us or is this the anchor that’s going to sink the ship?”

Katherine Restrepo 1From Katherine Restrepo, JLF health and human services policy analyst:

Blue Cross and Blue Shield of NC just released report on insurance premiums to be offered on the federal health exchange.

• One third of consumer premiums will spike under the ACA…two-thirds of consumers will see little change in rates they already pay (which were already too high; isn’t that why the administration came up with a so-called affordable plan?).

• Some people could potentially see an 80% increase in premiums.

• The highest risk consumers can’t pay more than three times the premiums as the lowest risk consumers. Thus, young healthy individuals will be heavily subsidizing the sickest people.

• IRS illegally proceeding to distribute subsidies.

Here’s how Restrepo explains the injustice:

“In order to pass ACA in the final Senate bill, states had to make concessions. If states opted to create their own exchange, they would get federal subsidies. If states opted to let the federal government run their exchanges, they would receive NO federal subsidies.”

There are three key sections of the bill: 1311 establishes state exchanges; 1321 establishes federal exchange; 1401 establishes premium assistance through subsidies.

Sections 1311 and 1401 are tied together to show how to funnel subsidies through state exchanges. However, there is no parallel language to tie Section 1321 into a way to funnel subsidies through the federal exchange. Thus, the federal subsidy to states’ exchanges, according to Max Baucus one of the originators of the bill, “was an incentive for states to comply with the law.”

In “May 2012, the IRS changed things. They put out a final regulation that subsidies can only, will be reallocated in both state and federal health insurance exchanges. This would go against Obama’s original intention of providing coverage and make it affordable for everybody.

“However, this move by the IRS is both illegal and unconstitutional because only the IRS can interpret legislation if Congress asks it to because all powers are inherent within Congress.

“Congress remains silent on this issue; the IRS has exceeded their taxation powers, so they’re illegally distributing billions of dollars of subsidies…the IRS has no right to act upon this.

“This unauthorized change has actually produced two lawsuits that are currently pending at the federal district level…one of them just received motion to proceed.”

“If these lawsuits are recognized, then North Carolina and 34 other states who don’t have state exchanges, will no longer be eligible for subsidies…this will cause our federal exchange to become unaffordable.

“These subsidies are the beating heart of Obamacare’s health exchanges.”



Categories: Budget and Finance, Healthcare, Must Read, News, Policy, Uncategorized
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