Why Opposition to Medicaid Expansion Is Nuts

Josh Barro is the lead writer for the Ticker, Bloomberg View's blog on economics, finance and politics. His primary areas of interest include tax and fiscal policy, state and local government, and planning and land use.
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Philip Klein of the Washington Examiner is outraged that Governor John Kasich has agreed to accept expanded Medicaid in Ohio:

"Whatever justifications Kasich may give, the actual explanation for his embrace of the Medicaid expansion is political cowardice. Chastened by his failed attempt at public sector union reform and Obama's victory in the state, Kasich is up for reelection next year. And he's afraid to stand up to the inevitable onslaught of attacks from Democrats who would charge that he was refusing to accept free money to bring health care to poor Ohioans."

Well, that's an odd way to put it. Yes, if Kasich had declined the Medicaid expansion, Democrats would have "charged" that he was declining free money for poor people's health care, because that'sexactly what he would have been doing. Medicaid expansion is free to state taxpayers in the first few years and then nearly free in subsequent ones. Kasich was afraid to opt out, because doing so would have been harmful to Ohioans. This is an example of the system working like it's supposed to.

A few months back, Peter Suderman of Reason Magazinelaid out a similarly doomed argument for why states should refuse to set up the Affordable Care Act's health-insurance exchanges. He said that, depending on the outcome of pending litigation brought by the state of Oklahoma, individual insurance subsidies may be unavailable in states that decline to set up their own exchanges. In turn, that would mean that employers couldn't be subject to penalties for uninsured employees in those states. Suderman says, "If Oklahoma's suit prevails, states will have a large incentive to opt out of creating exchanges in order to protect employers from the tax penalty."

But the reason employers would be exempt from the tax penalty is that their workers in those states would be unable to receive federal subsidies for health insurance. The policy Suderman is recommending would deprive many lower- and middle-income people of health coverage in order to cut taxes on businesses. This is an especially bad deal, because employer penalties are just one small component of the financing package for the health-care reform; businesses and individuals in these states would still bear most of the costs of financing it without getting its benefits. Like declining to expand Medicaid, purposefully excluding your state from exchange subsidies is terrible policy that will end up being politically untenable.

These recommendations -- decline Medicaid expansion even when there's almost no cost to state taxpayers; purposefully exclude your state's residents from federal insurance subsidies -- are the dying gasps of a political movement that can't understand it was defeated. Reform opponents lost the fight over the program and it will be financed with federal tax dollars. The only avenue of opposition they have left is to urge states to magnanimously decline to accept spending financed with federal taxes they can't avoid.

Well, it's one of the only avenues they have left. They could also urge people who oppose the Affordable Care Act to opt out at the individual level by refusing to accept Medicaid or exchange benefits. After all, the government can only take over your health care if you let it.

Such a campaign would be stupid, but not really any more stupid than the one to get states to opt out. And it wouldn't depend on Kasich agreeing to commit political suicide by gravely misgoverning his state.

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