Wednesday, October 30, 2013

Will red states stonewalling the ACA pay for self-inflicted punishment?

The long-term effects of the Affordable Care Act that everyone should ardently wish for are 1) access for all Americans to affordable, adequate health insurance and 2) reduced or reversed health care inflation.

Republican governors and/or state legislatures determined to sabotage the law are causing needless suffering, by denying millions the access to Medicaid the law was designed to provide, and by refusing to run the private insurance marketplaces, forcing the federal government to operate them in 34 states, with so-far disastrous results. State-level stonewalling goes beyond refusal to build a website: it also means abjuring the responsibility both to entice insurers into the exchanges and to impose discipline on those that participate, via state adaptation of the federal coverage guidelines, and by working to prevent adverse selection in the exchanges through state regulation of the individual market outside them.

No real good can come of deliberate misgovernance. But its consequences may trigger self-correction over time. States that try to make the law work may emerge as better places to live than states that don't -- offering Medicaid to the lowest-income adults, and a competitive, well-regulated and subsidized market to those with modest incomes. That creates a range of economic freedoms -- to leave a full-time job to start a business or go to school, to go from full- to part-time to do either, or undertake the kind of de facto apprenticeships that a career change often requires, or care for a sick parent.

On the most basic level, Donald Taylor points out that the states refusing Medicaid expansion are effecting a wealth transfer to states that embrace it:

According to an analysis I have done using Kaiser Family Foundation data–in 2016 alone–the 24 expanding states will receive $30.3 Billion additional federal dollars, while those not expanding will forego an additional $35.0 Billion they could have had (the fence sitters have an aggregate $15.2 Billion at stake in 2016). This represents a huge redistribution of federal money from non-expanding to expanding states.

I wouldn't overstate the case that stonewalling the ACA may prove unsustainable or exact a political price. Existing benefits in red states are in many cases horrendously stingy, yet that doesn't deter population in-flows. People move where the jobs are (or where the sun is when they retire) -- and where there's a job, there's usually insurance. And adverse selection can work in labor markets too, as those in need move where the benefits are. Moreover, state governments that commit to a decent safety net and labor protections can be at a disadvantage in the race-to-the-bottom labor market competition among states.

But over the long haul, perhaps the broad economic freedom to change jobs, or careers, or life situations will attract the able and employable as well as the needy to states that try to make the law work.  That is, if sabotage continues in a significant number of states for a significant length of time, and if federal administration of the law and the exchanges proves inferior to state control over time.

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