October 22, 2014
By Naomi Lopez Bauman

This article was written by Naomi Lopez Bauman and featured in the IndyStar on October 21, 2014.

Illinois residents have reacted with confusion, anger and shame upon seeing the infamous “Illinoyed?” billboards scattered across the state. The fact that more Illinoisans fleeing our high taxes, anemic job growth and crony politics head to Indiana than any other state is well documented, and it hurts when that image is reflected back at us.

That’s what makes Indiana lawmakers’ decision to take a page from Illinois’ playbook and expand Medicaid so surprising.

As part of the Affordable Care Act, states may choose to expand Medicaid eligibility to those earning up to 138 percent of the federal poverty level. Indiana Gov. Mike Pence is negotiating federal approval of his plan that would expand health coverage to, primarily, able-bodied adults with incomes up to $15,856.

It has certainly been a long time since anyone so enthusiastically copied an Illinois policy play. (In May 2013, the Democratic-controlled Illinois General Assembly passed the Medicaid expansion without a single Republican vote.) But that is exactly what has happened in Indiana, and the effects on the state’s fiscal health will be long lasting.

The plan Indiana originally submitted for federal approval is predicted to cost $18 billion through 2020, with the state paying $1.5 billion of that total. But according to recent analysis by the nonpartisan State Budget Solutions, the plan could actually cost the state an additional $2.9 billion. That is the equivalent of almost 177,000 Indiana jobs or $3,700 for every Indiana household for these costs.

Even more troubling is the potential impact that an Indiana expansion would have on the incentives for able-bodied adults to seek work. A recent working paper published by the National Bureau of Economic Research concluded that “policymakers should be prepared for a reduction in labor supply among those affected by the Medicaid expansion to childless adults under the Affordable Care Act.”

Not only did Illinois opt to expand Medicaid, Cook County, which is Chicago’s county seat, was a pilot for early Medicaid expansion. While the evidence is preliminary, there is already an indication that it may be discouraging work among the expansion population.

That is because additional annual income above 138 percent of poverty — even only a few dollars above — would deem an individual ineligible for Medicaid coverage. An individual would need a “jump” in income large enough to make up for the “free” health-care coverage they would have as a result of the expansion.

At present, an eligible individual in Indiana receives a federal subsidy for health care that gets smaller as income rises. Not only is this a smaller penalty on work as one nears the expanded Medicaid eligibility level, it also provides additional protection for Indiana taxpayers in the event that the federal government reneges on its Medicaid funding promise.

Contrary to some media reports and politician promises, once a state expands Medicaid coverage under the ACA, the state could be responsible for covering these above-poverty-level, able-bodied adults indefinitely. At present, the secretary of the Department of Health and Human Services has full discretion to deny a state’s efforts to roll back expansion-population Medicaid coverage, even if the federal government breaks its funding promise to the state.

For all the good intentions of providing health-care coverage to Indiana’s uninsured, the reality is that there are better approaches that have a realistic chance of achieving the desired results — without replicating Illinois’ approach.

Today, it stings a bit less to see Indiana’s “Illinoyed?” billboards. Indiana is still creating more jobs, but the grass is a little less green.

It might not be as catchy, but it is honest advertising. Indiana: the state that works a little less than before.