PRACTICAL CONSIDERATIONS FOR EVALUATING MEDICAID EXPANSION

PROPOSALS AND THE AFFORDABLE CARE ACT (ACA)

White Paper SOC2014.1
January 3, 2014

The Spending Oversight Council (SOC) is an all-volunteer ad-hoc organization formed for the
purpose of exposing government spending that is derived from acts of fraud, inefficiency,
duplication, unneeded or unwanted activities, mismanagement, and waste of taxpayer money.

The SOC has reviewed numerous federal and state statutes and reports related to social welfare
programs, and has found a consistent pattern of spending programs that are carried out, year
after year, with no objective goals having been set, no metrics to determine effectiveness and
accomplishments of the programs, and unintended consequences that are seldom corrected
after being identified. Audit reports have shown that many of these issues continue year after
year without consequences to the agency or department, even while the departments claim to
correct the problems when they learn of them. Typical examples of these issues include:

 Failure to confirm eligibility of welfare recipients and failure to reconfirm eligibility

periodically as required by statute
 Treatment of each program as a stand-alone so as not to recognize that recipients may
be receiving benefits from numerous programs that overlap
 Incomplete documentation of the recipient’s situation and eligibility for benefits
 Poorly written statutes that are influenced by beneficiaries of the law who are not
concerned about the unintended consequences as long as they receive what they are
looking for, and sponsored by legislators who are lacking either the time or expertise to
recognize the consequences of what they are promoting
 Erroneous payment amounts or payments to the wrong people
  Measurement of program performance solely on quantity of activities rather than the
accomplishment of the original intent (if such original intent was even stated). This
results in action for action’s sake. In fact, the Missouri Department of Social Services
even admitted in a House of Representatives hearing that they “are strong on outputs,
weak on outcomes”, or as could be stated they are good at spending but not at
achieving results.

A perfect illustrative real life and current example of many of these problems is the Affordable
Care Act (ACA) which is the legal basis for proposed Medicaid expansions and the stated source
of funding for Medicaid expansion. The ACA statute of more than 2,500 pages, supplemented
by more than 20,000 pages of regulations, was passed by the US Congress and signed in to law
by President Obama without any member having read the law, while acknowledging that parts
of the law were still being written and changed less than 24 hours before the vote to pass it.
One need only to consider the many changes (illegal and unconstitutional dictates) made by
President Obama’s executive orders, in attempts to implement the law, to recognize the huge
number of unintended consequences that are continuing to be discovered due to the poorly
written law influenced by its benefactors. In fact, as these unintended consequences continue
to be discovered, President Obama has issued new executive orders in attempts to correct still
more unintended consequences that developed from earlier hurried and ill planned executive
orders. Since, to repeat, the ACA is the intended source of funding for Medicaid expansion, the
trials and tribulations of the ACA are likely to have a great impact on any Medicaid expansion
that would be implemented. As a result, the SOC believes that much more consideration of
facts, development of true objective and measureable goals, metrics and their details, and
potential unintended consequences should be studied and reviewed in depth before any action
should be considered as related to Medicaid expansion. This document will provide a list of
some important considerations that we recommend, but first we will provide some background
information that is relevant to this issue.

Background Information

Medicaid eligibility, like most other social welfare programs, is based on the income of the
recipients as the income relates to the official US poverty rate of income. Some facts and
figures that are important to note in considering welfare programs and/or expansion of welfare
programs include:

 The US Census Bureau defines the official poverty rate of income as “that income level
below which the basic human needs of food, shelter and clothing cannot be met”. This
 appears to imply that those basic needs can be met at incomes equal to or greater than
the official poverty level.
 The official US poverty level of income in 2013 for a family of four is $23,550.
 The proposed expansion of Medicaid in Missouri would increase eligibility for Medicaid
for a family of four from the poverty level income to a multiplier of 1.38 times the
poverty level or $32,500.
 Income, as defined by these programs, includes only cash payments to the recipients.
Therefore tax free income/benefits from such programs as food stamps (SNAP),
subsidized housing and utilities, Medicaid payments, free cell phones and other
government programs that do not include cash payments are not considered income. It
is worth noting at this point that President Obama does consider company provided
health insurance benefits to be taxable income to those whose income level exceeds
eligibility for government welfare programs even though free Medicaid health
insurance and government health insurance subsidies are not considered income.
 The ACA defines available health insurance subsidies for those with income levels of up
to 400% of the official poverty rate or $94,200 for a family of four.
 The median family income (taxable) in the United States in 2011, as reported by the US
Census Bureau, was $50,502 taxable income.
 The US War on Poverty program laws were passed in 1964. Per the US Census Bureau
we have spent $15 trillion for the War on Poverty between 1964 and 2011. The official
US poverty rate in 2011 was 15%. The official poverty rate was 15% of the population in
1965 and has varied only between 11.2% and 15% since 1964.
 The ACA prohibits health insurance companies from offering policies that do not meet
the coverage requirements demanded by the standards dictated by the ACA regulations.
The standards require inclusion in health coverage of items such as maternity care
without regard to age, gender or family status of the insured. Individuals, or their
companies, are mandated to purchase healthcare insurance with all provisions dictated
by the federal government or to pay a fine, without regard to whether such coverage is
applicable to the insured.
 The ACA purports to pay for 100% of Medicaid expansions during the first three years of
such expansions and to pay for 90% of the cost thereafter.
 Food stamps have been replaced by debit cards which allow recipients to buy food at
stores, meals at fast food restaurants, and obtain cash at ATM’s. (The inclusion of this
seemingly unrelated issue will become apparent later in this document.)
 Medicaid is a social welfare program intended to provide health insurance for the needy
that might otherwise be unable to provide for themselves. Eligibility decisions are based
on the official US poverty rate of income as determined by the government.
Medicaid Expansion Considerations and Questions

The SOC believes that any proposal to expand Medicaid should be avoided until full and
thorough consideration is given to what such expansion really means, what the objectives are
of such expansion, how will success of such an expansion be measured and who will measure it,
how will the program be altered or eliminated if objectives fail to be achieved, and how the
following questions and considerations will be addressed:

1. What is the actual goal and intent of any Medicaid expansion? Numerous welfare programs
have been adopted and/or expanded during the past 50 years and have had no effect on
the poverty rate as determined by the government. This begs the question of whether the
goal is to reduce the percentage of people living in poverty or simply to make the people
more comfortable in poverty and accepting of their conditions. The SOC believes that the
first thing that should be done before any expansion of Medicaid is considered is to provide
a detailed definition of what is intended to be achieved by an expansion, provide specific
objective goals that will be used to determine if the intent is being achieved, and provide
pre-determined metrics that will be used to evaluate if the goals are being met and whether
the program should be changed or discontinued. In developing these metrics we should
examine not just the raw percentage of individuals with an income below the official
poverty level but who is moving out of the poverty level income and who is moving into
the poverty level income. The SOC has seen reports that indicate these are not the same
people year after year, that many move above the low level of income as their careers
advance while others just starting their careers will be at a low income level until they
have achieved additional capabilities. We should then consider the possibility that it is
not probable that the percentage of individuals with income below the poverty level can
be improved, particularly if we raise the standard definition of poverty periodically.
2. Explain the basis and derivation of the 1.38 multiplier and how was it determined. Why not
1.37, 1.39, 1.7 or some other number. Without such an explanation the number appears to
be quite arbitrary and would potentially encourage further arbitrary increases in the future.
Provide a comparison of the effective income for a family of four with an income of
$32,500, and receiving tax free medical insurance and other welfare benefits, to the family
making the median taxable income of $50,502 and explain whether the family with the
median family income is any better off than the family receiving welfare even as the median
income family is paying taxes that result in their providing part of the subsidy. How does
this provide an incentive to improve oneself and move out of poverty status?
3. Note that with the ACA subsidies for families of four with incomes of up to $94,200 we are
subsidizing far more than half of the population of the nation. An income of $90,000 with
 standard deductions would pay federal income taxes of approximately $9,000 which means
that they are effectively subsidizing themselves. It also means that such a family is
essentially paying the IRS to take their money and paying HHS to give some of it back which
makes no logical sense. How can a federal government subsidizing a large majority of the
population and already in debt to the point of technical insolvency, be depended upon to
continue providing the funds for an expanded Medicaid program from the ACA law which is
falling apart as we write this white paper?
4. The Missouri State Auditor has stated in the annual Single Audit Reports that the
Department of Social Services (DSS) has consistently failed to perform the statutorily
required re-eligibility verifications for more than 70% of Medicaid recipients. He reported in
March 2013 that the Department of Health and Senior Services failed to perform eligibility
verifications on more than two-thirds of the cases for seniors and disabled residents who
receive Medicaid-funded home health and living services and questioned $68 million of DSS
programs. The federal government on June 28, 2013 ordered that Missouri’s DSS return
$21.4 million for Medicaid regulatory violations at a state owned hospital based on an audit
by a federal IG from 2005-2010. The SOC believes that these conditions must be corrected
prior to any consideration being given to add further responsibilities to DSS that results in
greater expenditures when it cannot be determined if current expenditures are legitimate.
Further, a GAO report of Feb 2013 stated that $44billion of 2012 Medicaid expenditures
nationwide were erroneously paid. If those expenditures were prorated among the states
by population it would reflect improper spending of more than $800 million in Missouri on
Medicaid alone. Before lowering the standards for personal responsibility we must get the
current situation under control and verified.
5. The Missouri House Speaker appointed an Interim Committee on Medicaid expansion to
hold hearings around the state to get public input on possible expansion. The committee
reported that sentiment of the public was strongly in favor of expansion but the SOC does
not believe that those hearings provided a representative view of public sentiment. The
committee was composed of 14 state representatives and 38 members at large. The 38
members at large were mostly people in the healthcare industry that would benefit from
expansion. The hearings were held on workdays when the working people who have to pay
for this welfare have limited availability to participate. As an example, the SOC was
represented at the all-day hearing in St. Louis by four members. The first SOC member
called on to testify was Number 55 to testify and only the second person to oppose
expansion. Of the first 54 to testify, the one person who opposed expansion was a paid
lobbyist and the remaining 53 all would be either recipients of the expanded benefits or
providers of the planned benefits. This hardly can be considered an unbiased
representation of the people of Missouri. Of the remaining three SOC members present
two testified against expansion and the other had to leave at 1PM without testifying due to
 work demands. We believe that if public sentiment is to be considered, a truly
representative base of the population should be used and certainly should include those
taxpayers who are being forced to pay for this welfare. It is not difficult to find support of
a program among those who receive benefits but can encourage the government to force
others to pay for it.
6. Claims have been made by some legislators that Missouri could save money ($42MM) by
shifting Medicaid cost to the federal government. The SOC believes that this is
preposterous. The expansion would be a new increased expenditure and the federal
government’s money comes from the taxpayers including Missourians. Furthermore, the
federal government can change the law at any time and leave Missouri holding the entire
cost. Governor Nixon even stated that should the federal government discontinue paying
for the expansion that the state would simply discontinue the expanded program. This too
is preposterous as taking a welfare program away once it has been started is extremely
difficult and certainly has never happened without making it a gradual change. The likely
failure of the ACA even brings into question whether there will be any federal money except
through further expansion of the nation’s enormous debt.
7. The ACA dictates the payment rates that healthcare facilities and practitioners can charge
and has already caused hospitals to shut down and doctors to retire because the rates do
not pay to continue. Expanding a Medicaid program that pays such low rates has a strong
potential of reducing even further the availability of healthcare for all including the
responsible people who have been paying their own way all along. Health insurance has no
value if there is no provider.
8. One of the more irresponsible provisions of the ACA is the exempting of companies with
fewer than 50 employees from the requirement to provide employee health insurance or
pay a penalty, but if they choose to provide insurance they must provide what the ACA
demands regardless of the cost as they are not allowed to give this benefit unless the
government approves. This takes away the incentive of small business to provide such
benefits. A truly responsible government would encourage the business to provide what
they can and let the employee buy supplemental insurance to cover what the company
policy does not.
9. The ACA dictates arbitrary healthcare coverage (which always makes fraud more likely)
without regard to age, gender or family status of the insured, which forces people to pay for
coverage that will not be needed and has no chance of being used. The government is
essentially saying that responsible people who have been buying their own health
insurance over the years, selecting their own coverage, paying their own deductibles are
now too stupid to decide what their health insurance needs are. At the same time some
people who are irresponsible receive food stamps and other welfare aid, and are given
debit cards that can be used to buy junk food, fast food and even get cash that can be
 used to buy alcohol and tobacco products, and they can be considered smart enough to
determine the healthy food to buy, including using the debit cards at fast food hamburger
joints that the government says are bad for us and spends money fighting the obesity
caused by these foods. How did we get to a place in time where we penalize responsible
people and reward irresponsible people? How do we justify considering health insurance
benefits provided by employers to taxpayer’s income, but those receiving health
insurance handouts paid for by working taxpayers do not have to consider it income?
10. Virtually every proponent of Medicaid expansion will find someone to use as an example of
a special case where the expansion would help a needy person who otherwise would
struggle, and put this person front and center to demonstrate their case. It is imperative to
recognize that there will always be special cases that are exceptions and should be dealt
with accordingly. A special case should not be used as the basis for a general law.
11. Giving more people less care does not constitute improvement in healthcare and, in fact,
provides a potential to dilute the quality of healthcare in favor of quantity.

The SOC does not choose to question the motives of those promoting the expansion of
Medicaid but good intentions are not good enough as good intentions are not a metric or a
result. If people truly have good intentions for the healthcare of our people, without political
agendas or considerations, we believe that they will embrace what the SOC proposes in this
white paper. If the issues brought forward in this document are addressed we believe that
the answers and ultimate results will make Missouri a better and healthier place to live.