While a pair of former GOP governors are dominating the news in the early stages of the 2016 presidential race, no fewer than six sitting Republican governors appear to be positioning themselves for presidential bids. Each of them—like every governor—has had to decide whether to accept or decline Obamacare’s offer of federal funding to expand his state’s Medicaid program, which provides health insurance for the poor. The six governors’ decisions, then, can serve as a starting point for understanding their different approaches to some of the most important issues the country is facing: our constitutional order, entitlements, and the economy.
The contrasts could hardly be sharper. On one end of the spectrum stands Rick Perry of Texas, who has strongly denounced Medicaid’s current structure and refused to expand it. Bobby Jindal and Scott Walker, of Louisiana and Wisconsin, respectively, have also declined the expansion money, although in different ways. Mike Pence is attempting to negotiate a reform of Medicaid unique to Indiana, while New Jersey’s Chris Christie has accepted the expansion money outright. John Kasich has enthusiastically accepted it for Ohio, too, even going so far as to cast moral aspersions on those who object to his decision.
Overall, about half of the states outright rejected the expansion. Perry has described accepting Medicaid money in rather bombastic terms: “It’s like putting 1,000 more people on the Titanic when you knew what was going to happen,” he said at the Republican governors’ annual meeting in late 2013. His refusal has more than a hint of Texan independence and brashness in it.
Although he can be light on policy specifics, Perry has suggested an alternative: turning Medicaid into a “block grant” giving the states greater autonomy in running the program. At present, Washington pays between 50 and 74 percent of the costs for each state, and it lays down requirements for how the program must be run. This leaves the states far from the independent centers of power they were originally intended to be under the Constitution.
Jindal has taken just as definite a stance against accepting the money, but he has justified it in much more specific policy language. He wrote in an op-ed in 2013that the federal government has turned down requests to grant waivers (for greater cost-sharing, for example) in exchange for the money, and he noted the subpar outcomes the program produces as well as other problems. He has approached this issue, as he has many others, with considerable technical policy expertise.
The subpar outcomes are a result of a significant design flaw in Medicaid: States can easily expand the program, because the federal government pays for so much of it, but only with great difficulty can they pare it back to save money. The easiest way politically for states to save money is by cutting payments to doctors, which prevents people from being thrown off the rolls—and thus limits the political blowback from taking away poor people’s health insurance.
The result is that states pay doctors far less than either private insurers or Medicare, which makes doctors reluctant to accept patients covered by Medicaid. On average, Medicaid pays only 52 cents for every dollar a private insurer pays, according to Manhattan Institute scholar Avik Roy. And the result is predictable: Doctors accept new patients with Medicaid at a far lower rate than they do other patients. This effect is well known and widespread, and it means that some poor people are locked out of our health care system even with Medicaid.
Scott Walker has also turned down the funds, although his situation is different from that of Jindal or Perry. Wisconsin’s Medicaid program was already quite generous. Instead of taking the new federal Medicaid money, Walker dropped about 77,000 people who made over 100 percent of the federal poverty level from the state’s Medicaid rolls and added about 83,000 more adults who made under the poverty level. Those who were dropped could buy insurance on the new Obamacare exchange. Walker here is leveraging the Obamacare insurance exchange to focus Wisconsin’s program on the poor.
Mike Pence of Indiana is one of the Republican governors who have accepted the Medicaid funds—but he has done so provisionally while he tries to negotiate a deal with the Obama administration. Pence’s predecessor, Mitch Daniels, implemented an innovative Medicaid program for healthy adults that required participants to make regular contributions to a health savings account and imposed stiff penalties if they failed to do so. Daniels had to get a waiver from the Bush administration to implement this Healthy Indiana Plan because it exceeded the federal cost-sharing requirements for Medicaid.