In his new budget, Governor Evers is once again proposing that Wisconsin expand its Medicaid program to take advantage of additional subsidies available under the 2010 Affordable Care Act. Senators and Assembly Members should carefully consider the long-term risks of expansion before accepting this proposal.
From a short-term budgetary perspective, Medicaid expansion seems like a great deal for Wisconsin. The federal government covers 90% of the costs for providing medical care for individuals in the expansion population compared to 60.66% (in 2024) for those currently eligible for Medicaid and 0% for BadgerCare Plus members who are ineligible for Medicaid.
Further, the American Rescue Plan Act of 2021 gave states an additional incentive to expand their Medicaid programs. If Wisconsin accepts the expansion, the Federal Medical Assistance Percentage (FMAP) on its existing beneficiaries would rise by 5% (from 60.66% to 65.66%) for two years. This extra funding would likely offset Wisconsin’s state budgetary cost of the program while it is available.
But what about the longer term? Wisconsin Manufacturers & Commerce (WMC) opposes Medicaid expansion because “federal Medicaid dollars will decline over time, leaving state taxpayers responsible to pay for a large unfunded entitlement.”
That is a reasonable worry. While it is true that under current federal law, the enhanced FMAP of 90% for the expansion population is permanent, it is also true that laws are subject to change. And, in an environment of high projected federal deficits over the long-term, the enhanced FMAP is an obvious target. As the controversy over the Affordable Care Act—which set the 90% rate—fades from memory, many will wonder why this inconsistent matching percentage was established and will question whether it makes any fiscal sense.
The enhanced FMAP was in Republican crosshairs when they narrowly controlled the federal government in 2017. The Better Care Reconciliation Act (BCRA) considered by the Senate that year would have phased out the Enhanced FMAP between 2020 and 2024 (Paul Ryan’s House version would have phased it out even faster). BCRA lost by a wide margin but that is likely because of other provisions in the bill which was intended to repeal and replace Obamacare.
In 2018, CBO estimated that a standalone bill eliminating the enhanced FMAP and providing federal matching grants for all Medicaid beneficiaries at the standard FMAP would have saved $345 billion over ten years. If the CBO scores this measure again, the savings would likely be much higher given the growth in Medicaid enrollment during the Covid-19 pandemic and medical cost inflation. And about 2% of these federal savings would have to be absorbed by Wisconsin’s state budget.
While the enhanced FMAP seems safe under the Biden Administration, it could end up on the chopping block in 2025 should Republicans take the White House and Senate. So WMC’s view that expansion poses a long-term financial risk for the state is reasonable.
Proponents might argue that this risk is worth taking to provide health coverage for those now ineligible for BadgerCare Plus, such as a single adults with incomes between 100% and 138% of the Federal Poverty Level. But this ignores the fact that these individuals are eligible for heavily subsidized insurance plans on the Affordable Care Act exchange (healthcare.gov). In at least some cases, it is possible for individuals in this income bracket to choose policies with $0 net monthly premiums, because the subsidy is equal to or greater than the amount the insurer charges. These policies do have copayments and deductibles, but this is consistent with the idea that everyone capable of contributing to the cost of healthcare should do so. Also, paying for care at the time of service dissuades people from overutilizing providers, by for example, calling a doctor when one only has minor cold symptoms.
Given the dubious benefits of Medicaid expansion, it may not be worth the risk for Wisconsin taxpayers.
