Hearing Exposes Obamacare’s Implementation Challenges for States

Yesterday, the House Energy and Commerce Committee held a hearing to discuss the implementation of Obamacare’s exchanges and Medicaid expansion, both of which are slated to begin in 2014.

Exchanges

Two officials from the Centers for Medicare and Medicaid Services expressed confidence that exchange implementation was on schedule, stating, “All Exchanges will open for enrollment in October 2013.”

Despite their assurance, Dennis Smith, the Secretary of Health Services in Wisconsin—a state that has declined to operate a state-based exchange—is not convinced: “[W]e are not confident that the federal government has adequately prepared for handling an unprecedented number of applications, verifications, and enrollments.”

Bruce Greenstein, Secretary of Louisiana’s Department of Health and Hospitals, added, “With incomplete regulations and unrealistic deadlines, both states and the Federal government will struggle to have a health insurance Exchange ready for open enrollment on October 1, 2013 that is not beset with major complications for the insurance market and the respective residents of the states.”

At least 26 states have rejected or remain undecided on whether to establish state exchanges, leaving the federal government responsible for creating and operating them.

Medicaid Expansion

States also face a choice of whether to expand Medicaid to able-bodied, childless adults up to 138 percent of the federal poverty level. If they do expand eligibility, the federal government will pay 100 percent of the cost for the expansion population for three years, but by 2020, states will be on the hook for 10 percent of the cost. As Smith pointed out, “Of course, taxpayers pay 100 percent of the cost regardless of whether the funding comes from a state account or a federal account.”

Offering a state budget perspective, Gary Alexander, Pennsylvania’s Secretary of Department of Public Welfare, testified:

These costs are not simply high, but overwhelming. We are told that the federal government will pay 90 percent of the cost, making this a good deal because states only have to pay the remaining 10 percent. But this simple formula minimizes the magnitude of the total costs. Ten percent of a huge unknown number is still a very large number, and you still must come up with the 10 percent. A sale of 90 percent off the price of an item does a consumer no good if he cannot come up with the 10 percent. It is actually worse because these are not one-time costs, but ongoing costs. Given the magnitude of the ongoing federal deficits, I have doubts that the federal government will be able to fulfill its end of the bargain.

Thus far, states have not been too eager to implement Obamacare’s sweeping health care changes. Only 12 states have committed to doing both the Medicaid expansion and state-based exchange. As Heritage’s Nina Owcharenko and Ed Haislmaier write, “Enormous uncertainty still surrounds the health care law. With less than one year remaining before the major provisions of Obamacare take effect…other states would be wise to decline those risky steps and instead prepare better alternatives for health care reform.”

Watch the entire hearing here.