Dan Liljenquist: Obamacare employer incentives could drive up Medicaid expansion costs

Published: Thursday, June 26 2014 12:00 a.m. MDT

Updated: Wednesday, June 25 2014 10:34 p.m. MDT

While some are frustrated with the pace of the Medicaid expansion deliberations, I am grateful that the governor and the Legislature have not rushed this decision. This is one issue we need to get exactly right.

David Goldman, Associated Press

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Last week, I was invited to share my thoughts and concerns about Medicaid expansion with my former Republican legislative colleagues in the Utah House and Senate. I have been involved in the Medicaid policy debate since 2009, first as a Utah State Senator and now as a private citizen.

My primary concern over these past five years has been the financial sustainability of the Medicaid system, which, until recently, has been growing at around three times the rate of our state budget, gobbling up already strained resources and forcing cuts to other critical safety-net services, including those for people with developmental disabilities, substance-abuse problems and mental illness.

In 2011, I carried legislation (SB 180) that set the framework for a long-term structural reform to our Medicaid system. Utah became the first state in the country to cap Medicaid spending, limiting its growth rate to the growth in the state’s general fund tax revenues. We chartered Medicaid Accountable Care Organizations (ACOs), declaring affirmatively the state’s intention to pay Medicaid providers for the value of services rendered instead of the volume of services rendered.

After two years of exceptionally hard work by the Utah Department of Health, Utah’s Medicaid ACOs were launched in January 2013. The Medicaid ACOs are working as anticipated. Medicaid cost trends are down, and, if we stay committed to this course, the Medicaid program will be sustainable for years to come.

Medicaid expansion could easily unravel the progress we have made over the past couple of years in reining in Medicaid costs. While Gov. Gary Herbert’s Healthy Utah plan is a thoughtful and creative way to try to close an obvious hole in our safety-net system, I am concerned the costs of the Healthy Utah plan for Utah taxpayers could easily spin out of control, given the tremendously disruptive changes Obamacare is causing in the health insurance marketplace. Here’s why:

The costs of Obamacare are about to skyrocket. Word is finally out that by dropping their sponsored health care coverage, employers, from Fortune 500 companies and local governments to small mom-and-pop shops, can shift most of their health care insurance expenses to the government.

Analysts at S&P Capital IQ, in a report published April 30, predict that S&P 500 companies will save nearly $700 billion and all businesses with over 50 employees will save a combined $3.25 trillion over the next 10 years by dropping their employer-sponsored health care plans and moving their employees to the Obamacare exchanges, letting the government take over subsidizing health care insurance premiums. S&P Capital IQ predicts that by 2020, 90 percent of employers will have made this move.

Currently, Herbert’s Healthy Utah plan anticipates extending federal- and state-sponsored health care coverage to roughly 111,000 uninsured Utahns who earn up to 138 percent of the federal poverty level (FPL). But there are more than 200,000 Utahns earning less than 138 percent of the FPL who currently have commercial health insurance.

Should Utah employers follow the obvious financial incentives to ditch their employer-sponsored coverage (which multiple Utah business executives tell me they plan to do), Healthy Utah’s enrollment numbers could be three times higher than projected, costing the state hundreds of millions of dollars more than anticipated over the next 10 years. Such a financial shock to the state’s Medicaid funding requirements could lead to draconian cuts to existing Medicaid programs and could easily unravel Utah’s recent Medicaid reforms.

While some are frustrated with the pace of the Medicaid expansion deliberations, I am grateful the governor and the Legislature have not rushed this decision. This is one issue we need to get exactly right.

Dan Liljenquist is a former state senator and U.S. Senate candidate.

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