he U.S. Supreme Court's recent ruling on the Patient Protection and Affordable Care Act, sometimes called Obamacare, brings to mind Apollo 13 astronaut John Swigert's understated line: "Houston, we have a problem." Only now it's Harrisburg, Trenton, and the nation's 48 other state capitals that have a problem: They must figure out the best political and economic fix to cope with this novel ruling.
In an unanticipated and surprising twist, the justices ruled that the federal government can't force states to massively expand Medicaid, the joint federal-state public insurance program for the poor. That expansion was the centerpiece of a law designed to expand health coverage to uninsured Americans earning up to 133 percent of the federal poverty line, or $30,657 for a family of four.
Now, without a clear path forward, the nation's 50 governors are stuck at a fork in the road. They must decide whether to reject the plan or to expand Medicaid at the very time their states are struggling to maintain services to the most at-risk populations. It's not an easy decision, and the consequences could have long-term effects on programs designed to help children, the elderly, and mentally and physically disabled individuals.
Some states have already decided. Florida, Louisiana, South Carolina, Texas and several other states with Republican governors have rejected expansion. New York, California and other Democrat-led states have embraced the expansion.
Neither Governor Tom Corbett nor Chris Christie has made their decision yet. Their cautious approach is wise. Just as passage of the Patient Protection and Affordable Care Act was a historic moment for our nation, so will be the governors' decisions for their states. Each understands that the social, financial and political ramifications will be substantial, and neither wants to reduce services to the elderly, children, or the disabled, which is guaranteed if Medicaid is expanded without additional tax revenues.
Here's why: Medicaid remains one of the biggest fiscal challenges in every state budget. In Pennsylvania, which already spends a larger percentage of its state budget on Medicaid than 48 other states, the program consumes nearly one-third of all state spending, and costs are guaranteed to rise even without expansion.
While the federal government has promised to pay the full cost of the new Medicaid expansion from 2014 to 2016 for those between 100 and 133 percent of the poverty level, this federal support will be ratcheted back year by year, and the costs to states will grow until they become financially staggering. Even with considerable federal support, according to the non-partisan Kaiser Commission on Medicaid and the Uninsured, Pennsylvania will conservatively spend $721 million for newly-eligible enrollees over the next six years.
While the future costs for newly eligible individuals are a concern, an even bigger problem is the costs we're not ready for today. More than 2.2 million Pennsylvanians and 1.3 million New Jersey residents currently rely on Medicaid for their health care needs. Yet, not all eligible residents enroll in the program.
So, if a state agrees to expand its Medicaid program, aggressive outreach and enrollment campaigns led by stakeholders, community organizations, and some providers will result in an immediate swelling of Medicaid rolls -- not only by newly eligible enrollees targeted under the law, but also by those who have long qualified for the program but simply never enrolled. Policy wonks call this latter group the "woodworking" effect.
This "woodworking" effect means Pennsylvania and New Jersey will have to deal with new enrollees that will immediately bring enormous costs because the day they go on Medicaid, the federal government will pay only about half the costs for this group.
The Kaiser Commission estimates that even without everyone who is currently eligible signing up for Medicaid, Pennsylvania's "woodwork" expenditure will reach $1.3 billion because of anticipated outreach efforts. In New Jersey, the Commission estimates the cost as $656 million.
In the most widely cited example of this problem, neighboring Ohio estimates it will cost their taxpayers $940 million during 2014 and 2015 alone to provide care for the 392,500 residents who already qualify for Medicaid and will come out of the "woodwork" to enroll when the health insurance mandate takes effect. The Ohio numbers should be a lesson for Pennsylvania and other states.
Before any decision on expansion is made in Pennsylvania or New Jersey, we must have an accurate accounting of the true costs for these "woodworking" individuals whose care we'll need to subsidize heavily and separately from the Patient Protection and Affordable Care Act. We can be certain that both Governors' budget offices are running their computers and crunching the numbers. Based on the assumptions used by Kaiser, I believe they will find the Kaiser estimates are on the low side.
This is the critical point. State budgets in all areas are tighter than ever before. In fact, Medicaid reimbursements for much-needed services to children, for homebound elderly and seniors in nursing homes, and to the disabled already are woefully inadequate. If more people join Medicaid, then state spending for current recipients will inevitably decrease, waiting lists for services will increase and the frayed social safety net will tear apart. And that's not healthy for either the recipients or their providers of care.
Governor Corbett in his inaugural budget address framed the blueprint he'll use for funding programs during his tenure: Fund the "must haves," not the "nice-to-haves." Don't expand programs or entitlements unless you can afford them now and in the future; and don't roll the dice with taxpayer dollars expecting that the federal government will bail you out. He was right then and he is right today.
The terrible irony of the Patient Protection and Affordable Care Act is that in its zeal to provide health care to millions of uninsured Americans, it actually puts some of our most vulnerable residents at risk --- and that is the Hobson's choice facing both Governors Corbett and Christie. Without new tax revenues, there simply are no new dollars to expand Medicaid.
Universal health care is a noble cause, and it's one we must continue working toward. But the "all at once" Patient Protection and Affordable Care Act may simply be too much, too soon.
That's why Governors Corbett and Christie are right to take it slow and look at all their options. The Supreme Court's ruling gives states more flexibility over expansion plans, meaning they may be able to design a program that works best for them without fear of reprisal from the federal government. The best choice may be to start small and move millimeter by millimeter as the economy recovers.
Not only would this enable our state to control costs, preserve current programs and still offer more care to those in need, but it also would allow us to track and understand the true costs of health care expansion so we can plan appropriately for the future.