by James C. Sherlock

Update Feb 26 at 13:02:  See here for article on potential Medicaid cuts.

Ronald Reagan was wrong, yet somewhere he is smiling.

“No government ever voluntarily reduces itself in size. Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we’ll ever see on this earth!”

Remember Obamacare and its Medicaid expansion?  It was signed in March of 2010.  Fifteen years ago.

Medicare expansion covers adults younger than 65 who earn up to 138% of the federal poverty level. About 636,000 people were covered in 2023 by Virginia’s Medicaid expansion.  

The deal features 90% federal funding.  Below is what Medicaid expansion costs.

A KFF chart below shows reductions of Medicaid population by 2037 if the expansion program were scrapped. Virginia is projected to be near the head of the pack with a 45% reduction.

Conservatives have long been focused on the “adults younger than 65 who earn up to 138% of the federal poverty level” part. Work requirements in Medicaid are part of a broader legislative package of potential changes to Medicaid designed to significantly reduce federal Medicaid spending. But this article will leave that alone for now.

KFF has done an analysis of two scenarios it sees as under consideration in Washington:

“The first assumes that states maintain Medicaid expansion coverage and pick up new expansion costs, resulting in a decrease of 10% (or $626 billion) in federal Medicaid spending and an increase of 17% (or $626 billion) in state Medicaid spending across all states over a 10-year period.

The second scenario assumes that states drop the ACA Medicaid expansion in response to the elimination of the 90% federal match rate. This would result in a 25% (or $1.7 trillion) decrease in federal Medicaid spending and a 5% (or $186 billion) decrease in state Medicaid spending across all states over a 10-year period. This would also cut total Medicaid spending by nearly one-fifth (or $1.9 trillion), and nearly a quarter of all Medicaid enrollees (20 million people) would lose coverage.

Only (the 41) states (and D.C.) that have adopted the Medicaid expansion would see any spending or enrollment impacts under this policy proposal, though changes vary by state.”

The map above indicates that some states never joined the program. So eliminating it is not unimaginable. From the perspective of the non-participating states, their federal dollars and their slice of the debt are paying for services in which they choose not to participate.

But in this article we are not discussing eliminating Medicaid expansion. Or establishing work requirements. Just who pays. It is meant to result in a more focused discussion.

KFF’s scenario 1 changes nothing for beneficiaries, but shifts the costs of expansion from the federal government to the states. 

The only reason the states signed up is that they were bribed to do so. And the bribe itself was based on increasing federal deficits. Which pretty much everyone agrees must come down.

Virginia’s total annual costs, using the figures in the chart above, would be $9.1 billion instead of $0.9 billion. So, a little over an extra $8 billion annually against a FY 2035 budget of roughly $96 billion.

So let’s summarize:

• Some states do not participate.  
• The costs of current expenditures are covered by issuing federal debt.  
• We are discussing moving the expenditures from federal debt to state pay-as-you-go expenditures.  

The eligibility income cap at 138% strongly encourages fraud both in Medicaid participation and tax filings as recipients cross the cap. What we can guarantee is that if Virginia pays the whole bill the Commonwealth will pay far closer attention to eligibility rules than it currently does.

This year’s budget has a language-only provision that will cause Virginia to deal with the loss of federal funding on an emergency basis. Perhaps a special session.

Under current federal deficits and state disagreements on the value of the program, Medicare expansion should be a state cost.  

It may be put to a vote here.