Will States Lose Medicaid Funds If They Fail to Create an ObamaCare ‘Exchange’?
In recent weeks, officials from two states have claimed that if they do not set up an ObamaCare health insurance “Exchange,” the state will lose federal Medicaid or State Children’s Health Insurance Program funds. Idaho Gov. Butch Otter (R), has since walked back that claim. New Hampshire Commissioner of Health and Human Services Nicholas Toumpas has not.
In a January 19 letter to the New Hampshire House of Representatives, Toumpas writes:
The Patient Protection and Affordable Care Act (“ACA”) mandates that states create a virtual health coverage marketplace called an Exchange. To ensure compliance with this federal mandate the law provides that having an Exchange in place by January 1, 2014, is a condition precedent to receipt of Medicaid funding commencing in 2014.
I have not heard the Obama administration or any other ObamaCare supporter claim that the law contains such a mandate. I have made inquiries in a handful of states. None of them report that the Obama administration has said that failing to create an Exchange will result in the loss of Medicaid or SCHIP funds. If what Toumpas says is true, it will certainly come as a shock to the 35 states that have not enacted legislation to create an Exchange, including many states that have flat-out refused.
But is it true? Parts of ObamaCare might seem to support Toumpas’ claim.
- Section 1311 declares that each state “shall” set up an Exchange.
- The law also imposes conditions on the receipt of federal Medicaid and SCHIP funds, and those provisions do make reference to Exchanges. Section 2101 provides that, with regard to certain children who are not eligible for SCHIP, states receiving federal SCHIP funds “shall establish procedures to ensure that the children are enrolled in a qualified health plan that…is offered through an Exchange established by the State under section 1311.”
- Section 2201 provides that as a condition of receiving federal Medicaid funds, states “shall establish procedures for” several things, including “ensuring that individuals who apply for but are determined to be ineligible for [Medicaid and SCHIP] are screened for eligibility for enrollment in qualified health plans offered through such an Exchange.” The words “such an Exchange” refer to the words “an Exchange established by the State under section 1311,” which appear a few lines before.
Thus, sections 2101 and 2201 might seem to require states to establish an Exchange so that the required “procedures” can interface with it. But there are serious problems with that interpretation.
First, the directive that states “shall” create Exchanges does not amend that part of the U.S. code where Congress imposes conditions on Medicaid and SCHIP funds—i.e., the Social Security Act, or chapter 7 of title 42. It instead appears in chapter 157, which is also where Congress explains that the consequence for failing to create an Exchange is that the federal government will create one.
Second, sections 2101 and 2201 provide, respectively, that states “shall establish procedures to” enroll certain children through a state-run Exchange, and that states “shall establish procedures for” enabling the state’s Medicaid-eligibility system to coordinate with a state-run Exchange. One need not diagram those sentences to see that the object of “shall establish” is “procedures,” not “Exchange.”
Third, ObamaCare does create these “coordination” conditions within the Social Security Act. That fact demonstrates that ObamaCare’s authors knew how to make the directive to create an Exchange an explicit condition of receiving Medicaid and SCHIP funds, if that’s what they wanted to do.
Fourth, if ObamaCare’s authors had intended to condition Medicaid and SCHIP funds on the creation of Exchanges, or if that were a defensible interpretation of the law as written, then one might expect to have heard members of Congress discussing it. One might expect the Obama administration to have informed states of this condition as part of their effort to encourage states to implement the law. I have been paying fairly close attention to this issue. I have seen no evidence of either.
Fifth, the Supreme Court has held that “if Congress desires to condition the States’ receipt of federal funds, it must do so unambiguously, enabling the States to exercise their choice knowingly, cognizant of the consequences of their participation.” It is simply not credible to argue that ObamaCare unambiguously conditions Medicaid and SCHIP funds on the creation of an Exchange. The law never does so explicitly, and the language and structure of the law militate against the claim that it does so implicitly.
A more reasonable interpretation of these conditions is that states will be in compliance so long as they have the required procedures at the ready—regardless of whether those procedures are coordinating with a state-created Exchange, a federal Exchange, or no Exchange (in the event that neither level of government creates one).
I have no doubt that, had ObamaCare’s authors had any inkling that two thirds of states might balk at setting up an Exchange, they would have made it a condition of Medicaid and SCHIP participation. But they didn’t foresee the widespread resistance ObamaCare would encounter. When drafting ObamaCare and for some time afterward, they honestly thought, “The more people learn about this bill, the more they [will] like it.” Thus they didn’t create that requirement.
If Toumpas is the only state or federal official who sees this mandate in the law, that’s probably because it isn’t there. Just as important, there is no evidence that the Obama administration sees or is enforcing such a requirement. If Toumpas has such evidence, he should furnish it.
Until then, New Hampshire and the other 49 states can be confident that refusing to create an Exchange will not cost them Medicaid or SCHIP funds.
Obama’s Top 10 Constitutional Violations
That’s the topic of my latest op-ed, in the Daily Caller. Here’s the list:
- The individual mandate
- Medicaid coercion
- The Independent Payment Advisory Board
- The Chrysler bailout
- Dodd-Frank
- The deep-water drilling ban
- Political-speech disclosure for federal contractors
- Taxing political contributions
- Graphic tobacco warnings
- Health care waivers
For descriptions of what makes these things so constitutionally bad, read the whole thing.
RomneyCare: Making a Fool of Every Republican It Touches Since 2006
New Jersey Gov. Chris Christie’s (R) hearts former Massachusetts Gov. Mitt Romney (R), so much that Christie says it is ”completely intellectually dishonest” to compare RomneyCare to ObamaCare. Why? Because Romney didn’t raise taxes, and President Obama did. Oh.
Avik (pronounced O-vik) Roy explains how Christie gets RomneyCare so very, very wrong:
There isn’t a single person, left or right, who follows health policy seriously who disagrees with the assertion that Romneycare was the model for Obamacare. And Massachusetts has had to raise taxes, after Romney left office, to pay for the law’s significant cost overruns.
Here are some examples, left and right. But Roy o-mits a few important points.
- Mitt Romney increased taxes the moment he signed RomneyCare. RomneyCare increased net government spending. That in itself is an increase in the tax burden. All that remains to be determined is who will pay for that added spending and when they will pay it. The fact that the incidence of that added tax burden fell after Romney left office does not mean that’s when the added tax burden was created.
- Mitt Romney has raised taxes on as many people as Barack Obama has. Half of RomneyCare’s new spending was financed by the federal government through the Medicaid program, which is financed through federal taxes, which fall on taxpayers in all 50 states. That means that when Romney financed half of RomneyCare’s new spending by pulling down more federal Medicaid dollars, he increased taxes on residents of all 50 states.
- RomneyCare was born of, and expanded, a corrupt scheme by Massachusetts politicians to tax residents of all 50 states. What motivated Romney to enact RomneyCare, as former Romney/Obama adviser Jonathan Gruber explains here, was the widespread desire (within Massachusetts) to hang on to $385 million of federal Medicaid money that Massachusetts had secured using one of Medicaid’s notorious and fraudulent “provider tax” scams. In other words, the whole purpose of RomneyCare was to enable Massachusetts to hold on to $385 million that it received by defrauding and taxing residents of other states. And of course, Romney/RomneyCare caused the tax burden that Massachusetts effectively imposes on non-Massachusetts residents to grow.
Christie is so laughably wrong about RomneyCare that one cannot help but smile that his remarks came during the same news cycle as this:
Newly obtained White House records… show that senior White House officials had a dozen meetings in 2009 with three health-care advisers and experts who helped shape the health care reform law signed by Romney in 2006…One of those meetings, on July 20, 2009, was in the Oval Office and presided over by President Barack Obama, the records show.
“The White House wanted to lean a lot on what we’d done in Massachusetts,” said Jon Gruber, an MIT economist who advised the Romney administration on health care and who attended five meetings at the Obama White House in 2009, including the meeting with the president. “They really wanted to know how we can take that same approach we used in Massachusetts and turn that into a national model”…
Romney said the people involved in the White House meetings were “consultants,” not “aides”…
[Gruber said,] “If Mitt Romney had not stood up for this reform in Massachusetts … I don’t think it would have happened nationally. So I think he really is the guy with whom it all starts.”
All of which is pretty much what my colleague/boss David Boaz and I have been saying since April 2010 in this well-worn Cato video:
Heritage Scholar Urges States: Don’t Implement ObamaCare Exchanges, Send Back Grants
Back in March, Heritage Foundation scholar Ed Haislmaier wrote that states could blunt ObamaCare’s impact (A) by creating non-ObamaCare compliant, “consumer-centered” Exchanges and/or (B) by creating ObamaCare-compliant, “defensive” health insurance Exchanges. Many states, including some that are suing to overturn ObamaCare as unconstitutional, saw this as a green-light from the free-market groups and forged ahead with creating an ObamaCare-compliant Exchange.
In a blog post last week, Haislmaier recanted on Strategy B. He writes that “defensive” Exchanges won’t blunt the impact after all, and that states should refuse to create any type of ObamaCare-compliant Exchange and send back all federal ObamaCare grants:
Initially, while HHS was still deciding how to implement the legislation, a narrow window of opportunity existed for states to pursue a “pushback” strategy of creating a restricted exchange and requiring it to contract with the state’s Medicaid program and insurance department to perform the eligibility, enrollment, and insurance regulation functions that state lawmakers seek to retain control of. HHS effectively closed that window in its proposed exchange regulations issued in July…
The combined effect of these regulations and grant requirements are that a state would have to agree to surrender any last vestiges of meaningful control over how Obamacare is implemented. Thus, a state would now have no more real control over an exchange it set up than over one HHS established…
Consequently, at this point the best course of action for states is to neither apply for nor accept exchange establishment grant funding.
Free-market groups are now united on these points.
Haislmaier still recommends that states pursue Strategy A: a “consumer-centered,” non-ObamaCare Exchange using only state-government dollars. As I explain here, however, there is no such thing as a non-ObamaCare Exchange. Insurance carriers will not patronize non-ObamaCare Exchanges, and the federal government will commandeer them or push them aside to create an ObamaCare Exchange. Creating any type of Exchange merely lends manpower to ObamaCare’s federal takeover of health care. States should refuse.
‘Biggest Crackdown Ever’ Shows Medicare’s Anti-Fraud Efforts Are a Fraud
The Obama administration somehow continues to garner positive coverage for arresting (alleged) Medicare fraudsters who bilk the program for, say $295 million. See this CBS News report:
Combating fraud is a good thing, but $295 million is chicken feed compared to the $100 billion or so that Medicare and Medicaid lose to fraudulent and other improper payments each year.
Instead of merely parroting the government’s press releases on its anti-fraud efforts, it would be nice to see some media outlet examine why Medicare and Medicaid fraud is so prevalent, so persistent, and why politicians have no incentive to do anything serious to combat it. They could start with this article and this video:
An 85 Percent Increase in Health Care Fraud Prosecutions? Be Still My Beating Heart…
USA Today reports that the Obama administration’s efforts may yield an 85 percent rise in federal fraud prosecutions. Yawn.
Fraud expert Malcolm Sparrow:
By taking the fraud and abuse problem seriously this administration might be able to save 10 percent or even 20 percent from Medicare and Medicaid budgets. But to do that, one would have to spend 1 percent or maybe 2 percent (as opposed to the prevailing 0.1 percent) in order to check that the other 98 percent or 99 percent of the funds were well spent. But please realize what a massive departure that would be from the status quo. This would mean increasing the budgets for control operations by a factor of 10 or 20. Not by 10 percent or 20 percent, but by a factor of 10 or 20. [emphasis added]
That’s not going to happen, as I explain here and in this video:
$154 Million Medicaid Fraud Settlement a Sign of Govt Failure, Not Success
The federal government, four states, and a whistleblower have extracted a $154 million settlement from Par Pharmaceuticals for fraudulently inflating the prices it charges Medicaid, according to the Associated Press.
With Medicare and Medicaid losing roughly $100 billion each year to fraud and other improper payments, however, the fact that a paltry $154 million settlement is news can only mean that federal and state governments are not even trying to combat fraud in any serious way. As I explain in this video, that’s because politicians have almost zero incentive to do so — which makes massive amounts of fraud an inherent part of these programs:
Under ObamaCare, Medicare and Medicaid fraud will only get worse.
Medicare Fraud: Et Tu, Reverend?
From today’s Los Angeles Times:
On Tuesday, a jury found [south Los Angeles pastor Christopher] Iruke, his wife and an employee who worked for the couple guilty of healthcare fraud and conspiracy to commit fraud…
Authorities said Iruke and associates often supplied power wheelchairs to Medicare patients perfectly capable of walking on their own —including one who did jumping jacks to show agents he never needed one. Also among the patients Iruke and his associates filed reimbursement claims for were two people who were deceased, according to court papers…
After purchasing the wheelchairs at about $900 wholesale and paying for the prescriptions, he pocketed the remainder of about $6,000 in taxpayer money he received as Medicare reimbursements, according to court documents. The pastor operated four medical equipment supply companies between May 2002 and September 2009 as part of the scheme, according to authorities.
In all, Iruke’s companies filed for $14.2 million in claims and received about $6.6 million in reimbursements.
The money funded a lavish lifestyle, including several luxury cars, international travel, and about half a million dollars of remodeling on his Baldwin Hills home, prosecutors contended in trial…
The case was brought as part of a federal strike force on Medicare fraud, which has resulted in charges against more than 1,000 people across the country who billed the program $2.3 billion, according to a Department of Justice press release.
Apologies for the long excerpt, but this stuff is fascinating for several reasons. The ease with which these folks defrauded Medicare. The vast gulf between the market price for a wheelchair ($900) and what Medicare pays ($6,000) — which practically begs people to defraud the program. The fact that DOJ pats itself on the back for nabbing the perpetrators of $2.3 billion of fraudulent billings even though that represents a much smaller number of fraudulent payments, which in turn account for a teeny-tiny share of the official estimate that Medicare loses $48 billion to fraud and other improper payments per year, which itself understates the extent of fraud in the program.
As I explain in this article and the below video, the extent of Medicare and Medicaid fraud is truly mind-blowing.
ObamaCare will bring even more fraud. And efforts to combat Medicare, Medicaid, and ObamaCare fraud will always be inadequate until Congress reforms or scraps these entitlement programs.
‘Project Veritas’ Releases New Medicaid Fraud Video
Available here. Something about Medicaid employees coaching faux Russians on how to hide income and assets so as to enroll their father in Medicaid.
I’m not sure how much of what Project Veritas has found counts as fraud. But I’m pretty sure it’s chump change compared to this stuff:
It is interesting, and consistent with the thesis of this video and my National Review article, that Project Veritas’s Medicaid-fraud videos haven’t garnered nearly as much attention as their other “stings.”
Budget Plans: Gang of Six and Senator Coburn
The “Gang of Six” senators has released an outline of budget reforms that would supposedly reduce deficits by $3.7 trillion over 10 years. Revenues would rise by at least $1 trillion, while spending would be theoretically trimmed by various procedural mechanisms. The plan promises to “strengthen the safety net,” “maintain investments,” and “maintain the basic structure” of Medicare and Medicaid, which doesn’t sound very reform-minded to me.
The Gang of Six plan is a grander version of Sen. Mitch McConnell’s recent debt-limit proposal, which was aimed at putting off any spending cuts. The Gang outline has a few specific cuts, but the document mainly consists of promises to restrain spending and raise taxes in the future.
I’m surprised that Sen. Tom Coburn supports the Gang plan because his office has just released a massive study chock-full of specific spending-cut ideas. The Gang plan is all about avoiding specifics, while Coburn’s plan has 621 pages of details.
Coburn’s “Back in Black” plan would reduce deficits by $9 trillion over the next decade. The plan includes some tax increases, but the core of the document is a line-by-line analysis of every department’s budget, with lists of programs to cut and terminate. The plan includes a wealth of useful information that will aid policymakers interested in cutting spending for years to come.
So congratulations to Roland, Joelle, and the whole Coburn team for their late nights spent pouring through the budget, and for their great job documenting their findings with more than 3,000 endnotes.
Every Senate and House office should perform a similar exercise of proposing specific cuts. The government faces a debt crisis, yet only Coburn, Sen. Rand Paul, and perhaps a few others in Congress have put any effort into identifying unneeded programs.
Look on the official websites of most members of Congress and you will see discussions in support of spending on education, seniors, energy, research, highways and many other activities. When members are in front of TV cameras, they sound like they take the debt crisis seriously, but most congressional websites reveal a different mindset where federal spending is always wonderful and helpful to society.
Coburn’s staff tells me that about a dozen staffers chipped in on its Back in Black effort in recent months. If other House and Senate offices went through such an exercise, it would help members clarify their positions about the role of government and help them think about spending trade-offs.
My summer homework assignment for every congressional office is to go through a Coburn/Paul-style budget downsizing exercise. That could lead to more serious spending debates and more concrete proposals than the generally meaningless bullets points issued by the Gang of Six.
GAO’s 159th Report on Medicare/Medicaid Fraud Finds Anti-Fraud Measures ‘Inadequate’
Today, the Government Accountability Office will release a new report on fraud in Medicare and Medicaid. By my count, it is the 159th report the GAO has issued on fraud in these programs since 1986. According to the Associated Press:
The federal government’s systems for analyzing Medicare and Medicaid data for possible fraud are inadequate and underused, making it more difficult to detect the billions of dollars in fraudulent claims paid out each year, according to a report released Tuesday.
The Government Accountability Office report said the systems don’t even include Medicaid data. Furthermore, 639 analysts were supposed to have been trained to use the system – yet only 41 have been so far, it said.
The Centers for Medicare and Medicaid Services – which administer the taxpayer-funded health care programs for the elderly, poor and disabled – lacks plans to finish the systems projected to save $21 billion. The technology is crucial to making a dent in the $60 billion to $90 billion in fraudulent claims paid out each year.
In this article for National Review, I explain that there are reasons why those tools are, and will remain, “inadequate and underused.”
Filed under: Cato Publications; General; Government and Politics; Health Care
ObamaCare Supporters Are Over-Interpreting Oregon Medicaid Study
Columbia Business School economist Ray Fisman has a piece at Slate.com discussing the first-year results of the Oregon Health Insurance Experiment. In brief, when Oregon transferred an average of $3,000 from taxpayers to poor people in the form of Medicaid coverage, it did those poor people some good.
Fisman’s interpretation of the results is different from mine in mainly two respects. First, I describe the one-year benefits of Medicaid coverage as modest; he says they’re “enormous.”
A more fundamental difference concerns whether expanding Medicaid was a cost-effective use of the taxpayers’ money. Fisman writes:
Given the added expense, did the Medicaid expansion prove to be cost-effective? That is, did the treatment group actually have better health outcomes?
That’s not what cost-effectiveness means. For Medicaid to be cost-effective, it must (A) produce benefits and (B) do so at the same or a lower cost than the alternatives.
The OHIE establishes only that there are some (modest) benefits to expanding Medicaid (to poor people) (after one year). It tells us next to nothing about the costs of producing those benefits, which include not just the transfers from taxpayers but also any behavioral changes on the part of Medicaid enrollees, such as reductions in work effort or asset accumulation induced by this means-tested program. Nor does it tell us anything about the costs and benefits of alternative policies.
Just as some opponents of ObamaCare over-interpreted previous Medicaid studies, Fisman and other ObamaCare supporters are over-interpreting the OHIE.
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