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MichiganVotes: House GOP Medicaid Expansion Plan Faces Hurdles

Michigan House Republicans unveiled legislation Thursday that would expand Medicaid, but the measure includes conditions the federal government might reject. 

Medicaid expansion is the No 1 issue states are facing regarding Obamacare this year. President Barack Obama's administration wants states to expand Medicaid, which would lock them into participating in Obamacare.

Under the House Republican plan, Michigan would go along with Medicaid expansion only if the federal government pays for 100 percent of it and allows the state to implement major reforms to the program.

Key elements of House Bill 4714 are "cancellation clauses" under which the program would be automatically ended if the federal government failed to live up to its promises. If that occurred, further legislation would be required for the state to continue participation.

"We have taken the best items from the best performing plans around the country, and added some of our own reforms to make this the most efficient and responsible plan out there," said Rep. Matt Lori, R-Constantine, the sponsor of the legislation. "This plan puts healthcare into the hands of Michigan residents, not bureaucrats in Washington, D.C."

As drafted, the measure would offer the Obama administration a conditional deal. The Obama administration would get the expansion of Medicaid it wants in exchange for allowing Michigan to develop a system that provides enrollees with more personal control over health-care options.

If the plan was adopted and the federal government accepted it, the state would get the federal dollars offered to states for expanding Medicaid.

It is estimated that the influx of federal dollars Michigan would get for expanding Medicaid could save the state about $200 million in the upcoming fiscal year alone. However, many believe that in the long run the costs of the program would shift to the state, and ultimately more than cancel out any short term gains. 

The House GOP plan was drafted in a manner that would leave an escape hatch for ending the expanded Medicaid program. If the federal government reneged on any aspects of the bargain, Michigan would cancel the deal.

Rep. Al Pscholka, R-Stevensville, said the drafters of the House Republican plan were well aware that the federal government could balk at agreeing to the waivers Michigan would request as part of the price for expanding Medicaid.

"They might try to string us along," Rep. Pscholka said. "But, under this plan, if the federal government fails to say 'yes' or 'no,' there will be no expansion."

Relying on future legislatures to allow any program to end once it has started is often problematic. However, the cancellation clauses in House Bill 4714 would make the conditions for reversing the expansion a matter of law.

Jack McHugh, senior legislative analyst with the Mackinac Center for Public Policy, said a more immediate concern might be the possibility that the legislation could get watered down.

"House Republicans will be under tremendous special interest pressure to either water down the proposed reform conditions into meaningless pabulum the Obama administration would accept, or else make the expansion contingent on merely requesting federal permission for them, rather than receiving permission," McHugh said. "If Republicans cave, it would probably come as a last minute 'substitute' inserting one of those two options.

"Most Republicans would vote against a watered down version, while the Democrats would provide the margin for passage," McHugh continued. "The Republicans who voted no could all claim they were powerless to prevent House Speaker Jase Bolger from allowing the vote to take place. However, in election year 2014, the only message they could take to the Obamacare hating conservative base would be one of apology and failure."

Reforms in the bill include:

- Requiring low-income, nondisabled adults to pay up to a 5 percent of their income on health care with a sliding scale, and require them to start paying monthly premiums.

- Create health savings accounts for recipients and let them choose whether to be under the traditional Medicaid system or buy their own coverage on an exchange, which would at least offer them a semblance of free market choices.

- Lower premiums and co-pays if nondisabled adults do things like quit smoking or lose weight and follow their doctor's orders. Put a 48-month cap on Medicaid coverage for able-bodied adults.

In addition, the plan would require the federal government to continue funding 100 percent of Michigan's Medicaid program, even after the initial three years, or the state would end the program. This is a deviation from the Obama administration's current offer to states, which is that it would pay 90 percent after the first three years.

If the Obama administration rejected the plan, state lawmakers could go back to the drawing board to try to devise a new plan.

However, the Michigan House Republican plan falls short of the target that states should aim for in their responses to Obamacare, said Christina Corieri, healthcare policy analyst for the Goldwater Institute in Arizona.

"The Michigan idea of making expansion contingent upon specific reforms is an interesting one, placing the onus on U.S. Secretary of Health and Human Services Secretary Kathleen Sebelius to allow the state to make reforms as a condition of expansion," Corieri said. "Even with the reforms in the Michigan proposal, the expansion would still be expensive and add millions in costs to both the state and federal government, but reforms such as time limits, co-pays, and others would make the cost of expansion somewhat less expensive.

"The growing costs of Medicaid are putting pressure on state budgets across the country, and an ever increasing number of regulations from Washington hamper state efforts to bring costs under control," Corieri added. "These proposed reforms, while a small step in the right direction, will not solve the problem. The answer is real Medicaid reform, which allows each state to design its own program free from dictates from D.C., and states should demand such real reform before they consider expanding."

Under House Bill 4714, Medicaid expansion would cover low income residents with incomes up to 133 percent of the poverty level. This is a holdover from Gov. Rick Snyder's plan. However, there is some expectation that this threshold might be lowered by lawmakers as the bill moves through the legislative process.

Michigan House Democratic Leader Tim Greimel, D-Auburn Hills, has referred to the plan as "heartless."

"Medical conditions like diabetes, multiple sclerosis and emphysema don't magically disappear after four years, but the 'help' being offered by Republicans does," Rep. Greimel said in a statement. "And when an adult earns just $15,281 a year — 133 percent of the federal poverty level — they need every dollar to go toward paying rent, buying groceries and utilities. They can't afford to pay 5 percent of their income for a mediocre health plan. The Republican plan is shameful. We can do better than this."

The 48-month cap in House Bill 4714 only pertains to able-bodied adults. In fact, that's the group that the Medicaid expansion is really all about.

"Democrats badly want the expansion but will never vote for the bill in its current form," McHugh said. "But they would have no reason to oppose the types of watered down versions referenced above."

Meanwhile, Gov. Snyder's reaction to the plan was, at best, lukewarm.

Gov. Snyder spokeswoman Sara Wurfel was quoted in news accounts as saying the administration would have to assess the bill's "unintended consequences and ramifications."

Wurfel was also quoted as saying Gov. Snyder is concerned about the 48-month cap and the fact that the plan doesn't include the savings account aspect that his plan had in it.

Gov. Snyder's Medicaid expansion plan is not popular with GOP legislators.

The Senate is expected to unveil its plan on the Medicaid expansion issue soon.

(Editor's note: The statement that the House GOP Medicaid expansion plan would require the federal government to pay 100 percent of the cost even after the first three years is based on the description of the plan given at the House GOP press conference.)

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.