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Side Effects: States Will Feel the Effects of Obamacare

Posted By Kathryn Nix On April 8, 2010 @ 12:00 pm In Obamacare | Comments Disabled

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The national health reform rammed through Congress is giving state officials headaches. Writing in The Wall Street Journal [2], Indiana Governor Mitch Daniels outlines several problems states will have to deal with as a result of Obamacare.

For example, Daniels now faces the prospect of terminating a popular insurance program for low-income Indiana residents. The “Healthy Indiana Plan” includes health savings accounts that have been widely popular with the program’s participants. Due to new health care law, however, Indiana will most likely have to dump the “Healthy Indiana” enrollees into Medicaid.

Moreover, the Legislature will probably have to hike state taxes. Though federal funds will cover–initially—the medical cost of expanding Medicaid rolls, the states must cover the additional administrative costs [3]. And the feds won’t cover the extra health costs forever. In later years, states have to pick up the tab of expanding benefits as well. At the end of the day, the Medicaid expansion will prove far more costly than “Healthy Indiana.”

Daniels also notes that states must now weigh the possibility of dropping insurance coverage for their employees. It might be much cheaper just to pay the new federal penalty for not offering insurance, and letting state government workers use lavish federal subsidies to buy individual or family coverage in the new exchange. A Heritage analysis [4] shows that’s one way private companies with a high proportion of insured, low-income workers can cut operating costs. It might work for some state governments, too.

Of course, when state governments save in that way, others pay. Hoosier taxpayers would wind up paying the penalty imposed on the state government not complying with the law’s employer mandate. And federal taxpayers would pick up the tab for the subsidies given to help state workers buy coverage in the exchange.

The unintended consequences of Obamacare outlined by Gov. Daniels demonstrate why we would have been better off letting the states take the lead in reforming the health insurance market. A federalist approach [5] allows states to adopt reforms that best suit the needs and desires of their residents.

To learn more about successful state health care reform, click here [6].


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2010/04/08/side-effects-states-will-feel-the-effects-of-obamacare/

URLs in this post:

[1] Image: http://www.foundry.org/wp-content/uploads/SideEffectsLogo2.jpg

[2] The Wall Street Journal: http://online.wsj.com/article/SB10001424052748704094104575144362968408640.html

[3] states must cover the additional administrative costs: http://www.heritage.org/Research/Reports/2010/01/Expanding-Medicaid-The-Real-Costs-to-the-States

[4] A Heritage analysis: http://www.heritage.org/Research/Reports/2010/03/The-House-Health-Fix-Even-Higher-Tax-Penalties-for-Employers

[5] A federalist approach: http://www.heritage.org/Research/Reports/2009/10/Preserving-Freedom-and-Federalism-Whats-at-Stake-for-Americans-in-the-Health-Care-Debate

[6] click here: http://s3.amazonaws.com/thf_media/2009/pdf/sr0055.pdf

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