NTF Issue paper: legwatch86.doc. 1-16.

BACKGROUND. Several senators again have introduced a bill, LB 1032, to expand Medicaid health care coverage to uninsured healthy adults, tweaking a plan still based on Obama Care. Similar bills failed during the last 3 legislative sessions. State Sen. John McCollister and 15 co-sponsors want to use Medicaid money through a federal waiver to buy private insurance for their estimate of 77,000 uninsured who now do not qualify for Medicaid or Obama Care.

LB 1032 IS UNSOUND. NE Medicaid would buy private health insurance for those who earn up to 133% of the federal poverty level. These subsidized vouchers actually are more expensive than regular Medicaid payments. The bill would pay the employee share of premiums offered by employer health insurance, plus co-pays and deductibles, discriminating against other employees who must pay their total share. Vouchered employees would receive the same coverage as their fellow employees but at their fellow-employee tax-paid expense. Such a situation would kill incentives for LB 1032 employees to seek promotions with better pay. Enrollees supposedly would pay 2% of their income for this coverage, though Medicaid has a sorry record of enforcing its co-pay rules. It is ridiculous to assume that the state successfully will use the legal process to collect owed monthly premiums. The state currently loses millions annually by failing to collect overpayments and fraudulent payments.

BAD PRECEDENT. LB 1032 patterns after an Arkansas plan that was more expensive than expected and has enrolled many more than anticipated, as citizens dropped their private insurance and sometimes lowered their income to become eligible for expanded Medicaid. Experiments in both Arkansas and Iowa miserably failed at inducing eligibles to transition to private health insurance through these vouchers. Instead, the program created a new welfare entitlement for adults who preferred to remain low income. Arkansas legislators abandoned this program, spending additional tax dollars to notify enrollees. Iowa legislators acted similarly in 2015. The Arkansas plan ran 51% over budget, costing $80 million extra state dollars. This boondoggle eventually cost $800 million more than regular Obama Care Medicaid expansion.1 So many more residents flocked to this generous program, 39% more than anticipated, that this state has more citizens on Medicaid than most others. Arkansas offered several health plans having different prices and coverage, so naturally, most recipients chose the more expensive plans with greater coverage, as they themselves paid little but created a greater taxpayer burden. Nebraskans who can save money by dropping their private insurance and slimming their savings somewhat similarly would apply, crowding aside the very needy desperate for assistance.

MANY NEGATIVES. Bill proponents have shown no proof that LB 1032 would increase economic and employment growth, unless they count additional public employees needed to administer their program. Statistics from the U.S. Labor Dept. show that, for the last 5 years, average job growth is lower in states that expanded Obama Medicaid. Proponents also claim that this program will benefit declining rural NE hospitals, yet most eligible users live in dense metropolitan areas, so rural hospitals would still see the same share of uninsured patients. A Moody’s Investors Services report found no great difference in improved finances among hospitals in Medicaid expansion states compared to non-expansion states. Defenders shy away from admitting the connection to Obama Care, yet the private health insurance plans they offer to recipients are sold on Obama health care exchanges. In 2015, the state HHS dept. hired Milliman Co. to analyze the impact of using these exchanges, and the company determined that using them to deliver Medicaid benefits would increase individual costs by 94% by 2017. By 2021, the cost difference between bestowing benefits through exchanges and through regular Medicaid would reach 150%. Worse, proponents did not factor in how much the premiums will rise in future years for the plans selected; premiums in other states have spiraled upward. Much worse, bill sponsors cannot tell us how many companies will compete for these newly-insured. Iowa found only 2 companies, both of which dropped their clients like hot potatoes, one company showing a net operating loss of $163 million in 2014, caused by its participation in Medicaid expansion. This company soon went broke, leaving millions in premium payments for Iowa taxpayers. The second insurer refused to accept new enrollees. Bill sponsors publicize 77,000 as the projected number of new NE enrollees, but Milliman estimated that the number would reach 127,000. Other states have seen their numbers exceed their projections by over 60%. When higher than expected costs arise, state taxpayers pay more. Able-bodied adults who can seek work become prioritized over the physically and mentally impaired and children. The feds reimburse NE for 51% of the cost to provide Medicaid to those really in need but cover 95% of the cost to provide services to healthy adults.

DISINCENTIVE TO WORK. Every healthy adult who earns below 138% of the federal poverty level would become eligible, their total personal costs only $812 annually. An incentive to work only part-time or remain dependent upon welfare instead of opting for regular Obama Care and having to pay about $2,000 more yearly. The National Bureau of Economic Research discovered that past Medicaid expansions to healthy adults reduced employment and lowered salaries. In states that expanded Medicaid like LB 1032, employment rose by 1.85% since Dec. 2013 compared with 2.04% in states refusing to expand.

DISTRUST THE FEDS. This bill is unsound, because it risks the state budget long-term, if the federal government reneges on its promise to pay the bulk of the costs, $2.1 billion over 5 years. Federal funds, subsidies, and tax credits supposedly would pay 100% of the cost for covering additional Medicaid recipients through 2016, then decline to 90% by 2022 and remain at that level. The feds, however, once promised to pay partial costs for No Child Left Behind but reneged, leaving Nebraska taxpayers the unfortunate duty of paying the total costs. If the feds renege on this new pledge, citing spending restrictions, state senators never would dump thousands of residents off the Medicaid system, thus yoking taxpayers with millions in annual bills.

ALIENS INCLUDED. This legislation does not expressly prohibit coverage for illegal aliens and their families, who already burden other parts of our state welfare system like pre-natal care.

EFFECT ON BUSINESS. When people drop their private insurance, insurers suffer financial losses and raise premiums for their remaining customers. LB 1032 options would convince employers to encourage some employees to join the plan, so that they would not have to pay so much in insurance premiums. Current Medicaid reimbursements for physicians are 40c on the dollar, 70c on the dollar for hospitals, hardly an incentive for medical professionals to accept additional Medicaid patients.

LB 1032 SUPPORTERS. Supporters include the usual suspects, like liberal Omaha businessman Mike Yanney and the Appleseed Center.

THE NTF VIEW. Medical assistance to welfare recipients, a growing expenditure, is not cost-efficient now. Adding new categories of recipients under Obama Care will not guarantee cost efficiency. The bill does not cite definitive costs for desired programs. Obama Care has caused anarchy in the medical health care system nationwide; therefore, there is no valid reason to link our Medicaid system to it. Nebraskans already spend millions on Medicaid and other medical benefit programs. Medicaid eligibles increased by 11% from FY 2010 to FY 2015 (est.). The average monthly cost for children services rose by 27% in 2013, care for the aged up 8%.2 No cost controls apparent. The state should reform and streamline existing Medicaid services before planning additional ones. Evaluate the current Medicaid program to ensure current deserving beneficiaries receive the care to which they are entitled before adding thousands of new clients consuming millions of taxpayer dollars. LB 1032 does not have a credible incentive for moving the new Medicaid clients into the private marketplace. There is an assumption but no guarantee that a large number of additional health care providers will abandon their present doctor-patient models and agree to incorporation into this plan with its model and regulations void of accompanying evidence or proof of success. The state has no framework in place to implement both a current and new payment model.

CONSERVATIVE ALTERNATIVES. NTF suggests a number of alternatives for state senators that would accomplish most of the objectives that this bill intends to accomplish.
* Allow untaxed state health savings accounts.
* Permit groups of citizens to pool together to buy insurance policies.
* Permit small businesses to pool together to obtain lower insurance rates for their employees.
* Offer tax credits to the poor to purchase health insurance.
* Allow wellness tax credits of $500 or more to individuals and employees who follow a specific wellness regimen.
* Reform our state legal system to reduce medical malpractice liability, offering as one defense a professional following “best practices.”
* Permit medical licenses to apply across state lines, so that medical professionals could work remotely from another state.
* Allow the chronically-uninsurable to gain access to coverage in a high-risk state or multi-state pool.
* Safeguard individuals with pre-existing medical conditions from discrimination in purchasing health insurance by bolstering a state high-risk pool.
* Lobby Congress to allow purchase of policies across state lines.
* The state could establish an information center where citizens could find information on health insurance alternatives.
* The Inter-Mountain health care system in Utah offers private alternatives in several states that are less costly than Medicaid programs.
These proposals would offer individuals, not government, control over their insurance and increase competition among insurance companies to drive down costs. For example, Medicare Part D. One NTF member, after shopping around, selected a private supplemental insurance plan to cover his prescription drugs and saved $10 per month, or $120 per year.
These options would encourage personal responsibility, benefit employers who want to offer employee insurance, and focus on prevention and wellness, health promotion, healthy behaviors, competition, consumer choice, and cost reduction in the private marketplace. Moreover, these solutions would not make more Nebraskans dependent upon government.

TAKE ACTION NOW. As total state Medicaid spending rises and federal funding drops, the resulting deficit will require tax increases and/or less money for education, highways, or the prison system. Lobby your state senator today to vote NO on LB 1032 and suggest conservative alternatives. Email for state senator contact information and to join our NTF Legislature Watch Project.

Research, analysis, and documentation for this issue paper done by Nebraska Taxpayers for Freedom. This material copyrighted by Nebraska Taxpayers for Freedom, with express prior permission granted for its use by other groups in the Nebraska Conservative Coalition Network. 1-16. C

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