News Story

Wisconsin's Alternative Medicaid Plan

Gov. Snyder favors expansion; Wisconsin governor says not so fast

Gov. Rick Snyder has been at odds with some in his party about how to best implement Obamacare mandates.

Last year, he wanted to set up a state exchange, but the Legislature wouldn't go along. Now he wants to expand Medicaid eligibility to 133 percent of the federal poverty line (about $11,500 for a single person, and about $23,500 for a family of four) but he's facing some obstacles with that, too.

He could look to Wisconsin for an alternative way to handle the issue.

"The Obama administration is trying to put states in a box," J.P. Wieske, legislative liaison for the Wisconsin Office of the Commissioner of Insurance, told Michigan Capitol Confidential. "The Supreme Court ruling said the federal government can't force states to expand Medicaid. That's not what Obama wanted, but that's how the Court ruled."

The Obama administration has called on the states to expand Medicaid to those earning up to 138 percent of the federal poverty line. To try an entice states to join, the president's plan calls for more than 90 percent of the funding for the expansions to come from Washington, D.C.

States have been given few options regarding Obamacare. At first glance they seem to have one choice with the Medicaid expansion — either go along with Obamacare or lose out on hundreds of millions in federal dollars. It is estimated that boosting Michigan's eligibility would add 320,000 state residents to Medicaid in the first year and more than 470,000 by 2021.

The federal government would cover 100 percent of the costs initially and then offload about 10 percent to Michigan. The state currently has about 1.9 million people covered by Medicaid.

Wisconsin Gov. Scott Walker however, seems to have found some wiggle room. Gov. Walker is recommending that Wisconsin reject Medicaid expansion. Instead, he wants to try to maximize the use of the Obamacare exchanges, which offer a degree of market-based health coverage.

"He's not relying on the federal match," Wieske said. "We know how accepting money from the federal government works. It comes with strings. Later when you want to cut $1 million, you look at the effect on what you've been getting from them (the feds) and you're really cutting $10 million."

Under Walker's plan, Medicaid in Wisconsin would cover adult residents with incomes at 100 percent of the federal poverty level and below. This is a reduction from the current threshold of 200 percent. It would result in roughly 87,000 Wisconsin adults who currently are on Medicaid switching over to the exchange. For children, the disabled and the elderly, the Wisconsin Medicaid plan would remain unchanged.

One of the big problems with Medicaid is that the funding for it is shaky. In fact, most argue that Medicaid already is underfunded. Longer term, the Medicaid funding picture seems even less secure, especially considering the nation's $16 trillion debt.

"Whether he (Walker) thinks it (Obamacare) is a good idea or a bad one, the question is: 'Will the money be there?' " Wieske said. "From my perspective, I'm not even necessarily convinced the federal 90 percent match they promised will be there over the long haul."

And, considering the challenges involved with even starting to implement Obamacare, is it even likely that the exchanges will be up and running by the Oct.1 deadline?

Wieske said he thinks they will be running, but only in an initial form.

Opponents of the Medicaid expansion argue that Medicaid provides the worst health outcomes of any insurance plan in the nation — and in some situations they say it could even be worse than having no insurance at all. That's because government pays doctors and hospitals less than what other insurers pay. This creates higher costs for everyone else.

The low Medicaid reimbursement rates have actually led to some doctors refusing to treat Medicaid patients, or making themselves virtually unavailable to them.

"There are some doctors who don't want to accept Medicaid patients," Wieske said. "It's not hard to do. They either not accept Medicaid or locate away from mass transit lines."

Under Walker's plan, every Wisconsin resident with an income above the poverty line would have access to higher quality private sector coverage. It’s also believed the plan might encourage some residents with incomes slightly above the poverty line to at least attempt to get a job.

Because the subsidies in the exchanges are on a sliding scale, there should be fewer disincentives for trying to re-enter the workforce than the case would be under Medicaid, where such attempts include the fear of losing coverage.

"The governor would like to see more people moving away from government dependence," Wieske said. "He'd rather see them move toward self-sufficiency."

Gov. Snyder is taking a different approach.

"There are very distinct differences between Wisconsin and Michigan,” said Kurt Weiss, a spokesman for Gov. Snyder. "Gov. Snyder and Budget Director Nixon were very clear in the budget presentation that expansion makes sense for Michigan, given the rules that have been handed down from the federal government. Increasing the eligibility for Medicaid recipients to 133 percent of the FPL (federal poverty level) in Michigan will provide health care for more than 440,000 uninsured Michigan citizens, reduce employer health care costs, increase economic activity in the state, reduce prison recidivism and decrease the state’s long-term health care liabilities.

"By creating a health savings fund, as proposed by the governor, which deposits 50 percent of the revenue from expansion into a special health care savings account, there are no future costs to the state until 2035," Weiss continued. "So, while this may not have been how the governor or the budget director would have designed it, this is the best decision for Michigan given what the federal government has put in place."

Weiss said the situations in Michigan and Wisconsin are different and therefore not eay to compare.

"Wisconsin is in a much different place than Michigan, with a far broader program," he said. “Wisconsin has had a much more liberal Medicaid eligibility policy than Michigan in the past. For example, where we cover a limited number of childless adults up to 35 percent of FPL (federal poverty level), they cover a greater number up to 200 percent. While Gov. Snyder and Gov. Walker are working to achieve a similar goal (coverage in a fiscally responsible manner), Michigan does not currently serve the large numbers of childless adults that Wisconsin has been serving.

"While we don’t have all the specifics about Wisconsin, reports indicated that Wisconsin would have had to increase their Medicaid spending, while Gov. Snyder's proposal wisely saves and invests for the future so there is no net cost over the next 21 years and $206 million in general fund savings in 2014," Weiss said. "Each state has different circumstances, and has to look at their specific situation and program to determine what makes sense. Michigan did just that, and we are proposing a fiscally responsible approach to Medicaid expansion — saving state resources, minimizing premium increases for private plans, reducing the risk of federal tax penalties to our hard working business owners, and providing health insurance coverage to those most in need."

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.