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Medicaid Reform Could Benefit All of Us

Commentary

Medicaid reform and expansion, in front of the General Assembly this year, could in the long run provide benefits to all Virginians while also relieving pressure from human service programs run by local governments.

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Cook

Medicaid is a joint Federal/State program that pays for medical care for the poor. Each state determines its own eligibility rules and the Federal government picks up about 50 percent of the cost. Virginia’s eligibility rules are some of the most restrictive in the nation. Non-disabled, childless adults are not covered at all, while parents are only covered if they make under $6,915 a year, which is just 30 percent of the poverty level for a family of four. Disabled individuals who make under $8,900 per year are eligible as well.

Those who are ineligible and unable to get insurance (either due to unemployment or jobs without coverage, or who can’t afford or otherwise get coverage under a private plan) tend not to receive preventive care at all and often use emergency rooms as their general practitioner. Many end up receiving government benefits, usually through programs run by local government. Hospitals provide expanded “charitable” treatment as well. In fiscal year 2011, Reston Hospital provided $34.8 million worth of uncompensated health care, and northern Virginia’s non-profit Inova Health Care System provided $174 million. Make no mistake—hospitals must recoup these costs, and that means you and I pay more. Medicaid expansion would reduce these pass-through costs by providing regular coverage.

The Affordable Care Act (commonly referred to as “Obamacare”) offers states the option of expanding Medicaid to cover people earning up to 138 percent of the poverty level (about $32,000 for a family of four), with the Federal government paying 100 percent of the cost for three years, and 90 percent thereafter. Some Obamacare opponents oppose Medicaid expansion because they oppose anything connected to Obamacare. While I disagree with many aspects of Obamacare, Virginia’s need for Medicaid reform predates its passage. Further, we will all pay the many new taxes imposed by Obamacare even if we reject the benefits of Medicaid expansion. Virginia’s 10 percent share of expansion would cost about $100 million per year, much less than just Inova’s current uncompensated care expense.

Medicaid expansion is not without its downsides. Medicaid is already breaking states’ budgets and without further cost control measures, an expanded version could be even more costly. States also worry that the cash-starved Federal government could reduce its commitment later. Governor McDonnell and dozens of other governors are seeking Federal flexibility to engage in cost control measures. They also sought Obama Administration permission to expand to only 100 percent of poverty, but were turned down.

Medicaid reform is complex, but the need is clear and the benefits would run to all who use the health system. The Federal government needs to give states flexibility to reform the system. Virginia needs to take a step forward and expand. All of us will see the benefit through healthier neighbors, reduced pass-through costs for uncompensated care and reduced impact on other locally funded human service programs.