Invest in Virginia, not Medicaid

by Carter Blackwell

Medicaid expansion would cost Virginia $137.5 million dollars over the 2014-2022 period, with yearly costs rising as time progresses. Expansion would increase costs to Virginia and reduce incentives for private investment in health insurance. Refusal to expand the Medicaid program is in the best interest of the Commonwealth and provides the state with the most economic stability in the long run.

More than one million Virginia residents currently receive Medicaid and our state legislature is responsible for 50 percent of the funding. The Commonwealth spends over three billion dollars per year on Medicaid, comprising 21 percent of our state’s annual budget. Expansion aside, Medicaid costs are steadily rising at nine percent per fiscal year as the number of program participants continues to increase.

The Commonwealth of Virginia is one of many states currently undecided regarding the expansion of Medicaid through the Affordable Care Act. While Gov. McAuliffe supports the move, Republicans in the State House and Senate stand in vehement opposition. Acceptance or denial of ACA expansion will greatly affect those in need of healthcare as well as those in the private insurance and healthcare industries.

Proponents argue that the federal government will pay for 100 percent of the difference between our state’s current Medicaid eligibility level and the expanded ACA minimum, 138 percent of the federal poverty level. Promised federal funding, an opportunity to provide over 460,000 Virginians with healthcare, and the creation of over 30,000 jobs seem to be adequate justifications for expansion.However, in 2017, government compensation will fall to 95 percent and stabilize at 90 percent in 2020, thus, Virginia must pay 137.5 million dollars, with costs steadily increasing following 2020 due to increased demand and diminishing federal aid. Once granting Medicaid, it will be very challenging for the state to fund its promised entitlements, even if the federal government does provide its promised subsidies.

Increased Medicaid funding decreases funds available for other areas of the Commonwealth’s budget. Virginia faced a 350 million dollar budget deficit and has recently abandoned plans toincrease higher education funding in response. Such investments to our state’s future must take precedent over pouring money into a severely flawed Medicaid system.
Medicaid creates a disincentive to enter the workforce, as citizens near 138 percent of the federal poverty line may opt to refrain from work to qualify for federal healthcare. Universal healthcare will also crowd out private sector benefits, as government-provided Medicaid lowers incentives for businesses with low-wage employees to purchase private insurance packages.

Additionally, Medicaid is not universally accepted. Limited opportunities to find willing providers for Medicaid’s low reimbursement makes the coverage sub-par at best, inadequate at worst.

Others have proposed using federal funds, received through expansion of Medicaid, to purchase and distribute private healthcare plans to Virginia citizens under 138 percent of the federal poverty line. While the state would gain 3.9 billion dollars from the federal government and the private insurance market would grow through increased demand, private health care plans cost an average of 3,000 dollars more than Medicaid plans. Such a proposal would be economically infeasible given the cost.
Medicaid is a failing program. As the number of participants continues to increase and the number of taxpayers continues to decrease (given the slowing birth rate), fewer taxpayer dollars are available to fund such large universal aid programs. It is irresponsible to pull federal and state tax dollars away from more important long-term investments.

The Commonwealth should, for example, engage in the provision of education and job training subsidies for low-income areas across the state, rather than large, inefficient, wealth spreading operations. The number of residents in need of Medicaid will fall if the Commonwealth chooses to invest in other areas.

Virginia cannot afford Medicaid expansion. Although providing over 460,000 residents with healthcare and creating 30,000 jobs would benefit the state greatly, it is too costly to be considered a feasible option. The state as a whole will benefit in the long run by investing in the Commonwealth’s future and refraining from Medicaid expansion.