Doctor Patient

Many states have chosen to take Obamacare’s Medicaid expansion expecting they can get out later if they wish. But that’s not the case.

Some states have said that if the federal government ever reneges on its promise of enhanced funding in the future, they’ll just withdraw from the expansion. But new legal analysis by the Buckeye Institute, an Ohio-based state think tank, shows there are both legal and political reasons why Obamacare’s Medicaid expansion is likely to be permanent.

While many states have already signed up for the expansion using this flawed backup plan, Ohio is still in a heated debate regarding expansion, and this idea is being used to garner support for it. For instance, one proposal would “create a ‘circuit breaker’ that would automatically roll back the expansion if the federal government didn’t stick to its end of the deal.”

Buckeye’s paper lays out the following reasons expansion is likely to be a permanent—once a state agrees to it, there might be no turning back.

Legal Barriers: When a state agrees to adopt Obamacare’s Medicaid expansion, it must amend its state plan, which is a contract between the federal government and each state governing the conditions of its Medicaid program. As the report explains, “Once the state plan has been amended to include the expansion, that agreement becomes part of the legally enforceable state plan contract. A state must be in compliance with its own state plan. The federal government enforces compliance by withholding federal funds. The mere threat of withholding federal dollars can generally ensure compliance.”

Political Barriers: Obamacare expands today’s Medicaid program into a new entitlement that is available to anyone who meets the income eligibility requirements. This will add millions of Americans to Medicaid. Whether or not the federal government follows through on its promises, it will be inherently difficult for any politician to end an existing entitlement program.

False hope for a waiver: Often, states use waivers to test different ideas and innovations within their Medicaid programs. Some states have asserted that they could exercise more state control and flexibility under an Obamacare expansion by getting a waiver for things such as limiting the duration of benefits, work requirements to receive benefits, participating in drug testing programs, or paying minimum co-payments. But again, this is highly unlikely to be the case. First, waivers require approval from the Administration and are temporary. Even states that have used a waiver to implement successful, cost-saving Medicaid reforms, like Rhode Island, might get their waiver renewals denied.

Secondly, waivers are simply a reprieve from the state’s legally binding Medicaid plan. As the authors put it, “Just as it would be imprudent for anyone to enter into a legally enforceable written contract with the expectation that he can later persuade the other party to waive parts of the contract that are no longer preferable, likewise agreeing to expand Medicaid through an amendment to the state plan contract based upon the hopes of procuring future waiver concessions is ill-advised.”

States like Ohio that are still undecided on Medicaid expansion should heed these warnings, as there might be no turning back once they accept Obamacare. The bottom line is that this is a highly uncertain environment, and states need to be very cautious before putting their taxpayers and other budget priorities at risk.