The States Stuck With the Tab

by Dave Schuler on June 23, 2014

Juice-Voxer Sarah Cliff muses over the substantial bills to which states running their own healthcare exchanges under the PPACA look forward:

The Affordable Care Act provided federal grant funding for states to get their new web portals up and running. The Obama administration doled out $4.6 billion in grants to states launching their own marketplaces.

But Obamacare also requires state exchanges to become self-sustaining by the start of 2015. That means every state exchange that will operate next year now needs to figure out how to pay their bills. Every marketplace needs to be able to pay staff (which sometimes number in the hundreds), maintain office space and continue running outreach campaigns to increase the insurance rate.

Ms. Cliff goes on to outline different strategies the states will use to offset their costs: fees on insurance companies, grants from various sources, and new taxes for the most part.

That’s just the tip of the expense iceberg. The states need to find the money to pay the increased Medicaid caused by the lurkers, those who qualified for Medicaid under the pre-PPACA rules but for one reason or another were not enrolled. No one knows how many of them there were or their state of health. That will emerge over the next year or so.

Additionally, the states will eventually be expected to bear their full share of paying for all of those enrolled in Medicaid in their states. No one knows how much that will be, either. It’s within the realm of possibility that the governors who elected not to participate in the healthcare exchanges could look like bloody geniuses. Time will tell.

I wonder if the insurers will attempt to get the federal government to bear the costs of the new state fees. My suspicion is that’s precisely what they’ll do. That will result in unforeseen unforeseen expenses.

Illinois, wisely, acknowledged that running a healthcare exchange website was beyond its core competency but not nearly so wisely assumed that the federal government would be much better equipped to do so. I have no idea where Illinois will get the money to pay its ever-expanding Medicaid bill. It can’t pay the bills it already has, the Democrats running the state legislature are unwilling to take the blame for increasing taxes any more than they already have, and Illinois is driving companies and individual taxpayers out faster than any other state.

Raising rates doesn’t always mean that you’ll raise revenues. That’s a lesson that Illinois’s legislators haven’t really appeciated yet.

{ 11 comments… read them below or add one }

Trumwill June 23, 2014 at 9:37 am

I have been thinking along similar lines, wondering for states if the only way to win is not to play.

jan June 23, 2014 at 11:06 am

The unknowns dwarf the knowns as to the real fiscal impact of the PPACA. Much of the data involves old projections — like the one used in Kliff’s article indicating the savings estimated by the CBO, that was made almost 2 years ago.

In the meantime, the deadline for states to have weaned themselves from the government’s assistance is just around the corner. And, usually the easiest course of action is simply to raise taxes or create new taxes (amply done in the ACA law) to cover all the new HC needs. I don’t know, however, how one can expect a society to proceed under such a taxpayer burden that only increases as time goes on.

... June 23, 2014 at 11:17 am

And, usually the easiest course of action is simply to raise taxes or create new taxes (amply done in the ACA law) to cover all the new HC needs.

No, with the PPACA the easiest course of action has been for the President to unilaterally delay the implementation of part of the PPACA. No reason this should be any different.

jan June 23, 2014 at 11:53 am

“No, with the PPACA the easiest course of action has been for the President to unilaterally delay the implementation of part of the PPACA. No reason this should be any different.”

…so true. However, once the delays end and full implementation begins, that will be went more taxation is demanded.

michael reynolds June 23, 2014 at 12:04 pm

Can someone create a flow chart of dire predictions about Obamacare? It’s hard to keep track of all the stuff that was confidently and noisily and endlessly predicted by opponents and then just kind of didn’t actually, you know, happen.

I guess we’re past the “no one will sign up!” and the “insurers will flee!!” and the “it won’t actually reduce numbers of uninsured!!!” and the “doctors will all move to Somalia so they can be free, free I say!!!!” predictions, but it’s so hard to keep track. We need a chart. We can call it the “Yeah, That Was Bullshit,” chart.

You know who was right about Obamacare? The guy who said that the essential fact was that health coverage had now been federalized so, sooner or later, even Republicans would accept it and we could move on to the improvements and modifications phase. Gosh, I wonder who that prophet was?

... June 23, 2014 at 1:18 pm

I remember hearing that this would guarantee that everyone would have not just insurance but access to healthcare. Now we’re hearing it will leave at least 30,000,000 uninsured. And it turns put people already guaranteed healthcare couldn’t get it, so why should this next batch be any different?

As for dire predictions, I stated that it appeared to double down on many of the worst features of the current system and looked like it was an attempt to break it. That still appears to be the case. It’s also noteworthy that the President has seen fit to delay a lot of the bigger items from the legislation.

So calling it a big success given that (a) many features have been delayed, (b) many of the features that have been rolled out have been done incompetently, and (c) so many of the promises made have been shown to be complete lies (a partial list: keeping one’s doctor, keeping one’s insurance plan, insuring all the 45,000,000 uninsured, reducing costs by $2,500 a year for the average family) seems like a bit of a stretch.

... June 23, 2014 at 1:20 pm

But then Reynolds thinks the IRS has been run completely competently and above board and is without a hint of scandal, so ….

Guarneri June 23, 2014 at 1:58 pm

“But then Reynolds thinks the IRS has been run completely competently and above board and is without a hint of scandal, so ….”

He also believes Benghazi is a Republican witch hunt and dead diplomats don’t matter, the VA is a model to strive for, and that the fact that he is better off for ObamaCare as opposed to 95% of others…………….that ObamaCare is good. And of course, the economy is just a humming machine. See also, steve.

Protect the “elegant black man” at all costs. Its a concept to be defended. Reality be damned. Its the ideology packaged chocolate. I flat guarantee you that if the “elegant black man” was, say, West or Sowell or Thomas they would be badmouthed to the heavens. Wait……….they are.

There are plenty of good black, women, Pole, Latino on and on people………just don’t you dare object to the liberal orthodoxy.

Guarneri June 23, 2014 at 2:00 pm

Micheal

Please. The straw men and knocking them down is Obama’s specialty. Leave it to the (totally dishonest) pros.

Its beneath you but become a standard feature of your comments.

CStanley June 23, 2014 at 2:36 pm

I notice Michael left out all of the dire predictions that involved cost. How’s that cost curve bending going?

I would argue, too, that the dire predictions that he claims have been avoided, were only avoided because money was shifted in order to avoid them. People won’t sign up–> individual mandate (oops, make that, cost sharing tax.) Insurers will flee–> backstop the insurers’ risks. Doctors will flee–> continue the doc fix, of course.

I won’t address the one about not reducing the numbers of uninsured, because I don’t remember anyone seriously saying that. I do remember people saying that increasing access to health insurance would not be the same as providing access to health care, and that it defied logic that it could be achieved while simultaneously bending the cost curve downward.

Guarneri June 23, 2014 at 4:16 pm

Facts are a bitch. But to be ignored when Obama is the subject.

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