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If Tennessee opts out of the Affordable Care Act, voters may have good reason to feel sick




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Does it sound like Ramsey is in the mood to expand Medicaid? Already, Republican state Sen. Brian Kelsey — a tea party favorite from Germantown — is calling for the legislature to balk. He touts the Medicaid option as one of the "silver linings" in Roberts' ruling.

"I will vote not to expand Medicaid in this fashion," Kelsey wrote in an opinion piece sent to news outlets, "and you should hold all your elected officials in Tennessee to the same standard. Expanding Medicaid would be fiscally irresponsible."

That states have this option is due in large part to James Blumstein, a Vanderbilt University law professor who acted as Gov. Phil Bredesen's lawyer during his curtailing of TennCare in the last decade. Blumstein thought Congress was overstepping its authority by essentially mandating the Medicaid expansion by threatening states with the loss of federal funding unless they went along. He asserted Congress pulled a "bait-and-switch" and "after-the-fact blindsiding." Acting on his own, he made his case for federalism in a brief to the Supreme Court.

Blumstein argued that Medicaid is like a contract between Congress and the states. In return for federal money, the states agree to follow federally imposed conditions. When the rules change, as they do under the Affordable Care Act, the contract is broken and states should have the right to refuse to comply with new conditions, Blumstein contended. He cited the case of an Alaska fishing boat whose crew waited until they went to sea to demand higher wages. Roberts agreed with Blumstein and relied on Blumstein's brief in his ruling.

Blumstein says he sympathizes with state politicians who question whether they can afford to expand Medicaid.

"Any money that's spent on TennCare or Medicaid crowds out other very important services like higher education that [have] been hit pretty badly in this state," Blumstein says. "There are lots of other claims on this money. Economic development is important. There's infrastructure investments. K-12 education.

"There are a lot of claims on state money. The prudent thing for the state to do is maintain as much flexibility as it can maintain. The history has been that once the states are in, the federal government ups the ante, imposing new obligations, and makes it very hard for the states to do anything but accept."

Blumstein argues the Affordable Care Act may indeed be one of those deals that's too good to be true.

"This is the example I use with my students," Blumstein says. "I say to them, suppose Bill Gates says to you, 'I'm going to give you my house but here are the terms. You have to pay the property tax, you have to pay the insurance, you have to pay the gardeners and maintain the lawn. If there's a storm, you have to put a roof on the house. You have it and it's yours, but you have to maintain it according to my standards.'

"Now that's a pretty good deal, but many of us couldn't afford that deal. That's the problem. Some good deals are good deals but still unaffordable."

How much would health care reform really cost the state of Tennessee? That question has been answered only superficially in the legislature and the media, with politicians and reporters mainly merely repeating the governor's assertions that it's too expensive.

The law expands Medicaid coverage to anyone earning up to 133 percent of the federal poverty level, or $14,300 for a childless adult and about $30,000 for a family of four. That will add 200,000 beneficiaries in Tennessee over the first five years, according to the TennCare Bureau. That's what the state's politicians have been complaining about.

But the feds won't pay the usual two-thirds of the cost of these new beneficiaries — they'll pay the whole bill for all of them until 2017. At that point, states will start paying a 5 percent share. That share would grow to 7 percent in 2019 and top out at 10 percent in 2020.

What about Tennessee's costs, the $300 million a year that so troubles the law's critics? Ramsey wouldn't agree to be interviewed for this article, but when the Scene spoke to him at the time Congress adopted the Affordable Care Act, he obviously was a little foggy on where the cost was coming from:

Ramsey: "It will be devastating to the state's finances.

Scene: "What exactly is going to cost $300 million a year?"

Ramsey: "You're going to expand the Medicaid rolls. ... The federal government is saying, 'States, you're going to have to expand your Medicaid rolls by lowering eligibility,' I guess is the way you'd put that — 'and by the way you're paying for it.' "

Scene: "No, actually the federal government is going to pay for it ... "

Ramsey: "They'll pay two-thirds of it."

Scene: "No, they'll pick up all the cost until the year 2017 and then it goes to ... "

Ramsey: "Well, OK, I'll have to see that to believe it. I know they put that amendment on there, but that was not in the original plan and I just don't think in the end that the states will end up getting this money. It's undeniable that it's going to cost the states taxpayers more money. The federal government just flat-out doesn't get it."

It turns out the state's major "cost driver," as the health care bureaucrats put it, is not newly eligible beneficiaries at all, as Ramsey and nearly every other Tennessee politician seem to assume. No, the big cost comes from the addition of an estimated 14,000 beneficiaries who already are entitled to Medicaid but aren't on the rolls mainly because they don't know they're eligible. It's believed that publicity over national health insurance and the individual mandate will lead them to discover they are eligible and to sign up for Medicaid.

In policy-wonk circles, that prospect goes by the charming appellation of the "woodwork effect" — meaning these people will come out of the woodwork like insects to sign up. And the feds aren't giving any special deals for them. The state will pay the usual one-third of their cost.

But here's the kicker: Those costs will come whether Tennessee opts in or out because publicity over the law exists either way. So even if the state chooses not to expand its Medicaid rolls, it will pay more — an inconvenient truth the state's politicians either don't know or choose to ignore.

"We have that cost anyway no matter what we do," says Gordon Bonnyman, director of the Tennessee Justice Center, a nonprofit law and advocacy group for the poor and uninsured. "The case for opting in is not just compelling but overwhelming."

If the Republicans who run state government eventually do opt in, it'll probably be thanks to Tennessee's hospitals, which will lobby hard for Medicaid expansion. It's one thing to deny health coverage to 200,000 voiceless poor people. It's another to shaft health care providers that maintain some clout in the political system. And opting out would definitely hurt hospitals, at least some of which likely would shut down, according to experts.

Here's why. To offset the bills of the uninsured, Medicaid sends extra money to hospitals that give the most uncompensated charity care. The Affordable Care Act phases out those payments, which were $11 billion in 2011.  The law assumes that if nearly everyone is covered, hospitals won't need the money anymore.

The problem is, everyone won't be covered in Tennessee if the legislature refuses to join the Medicaid expansion. So Tennessee's hospitals still will be stuck with the unpaid bills of the uninsured — only now without the extra Medicaid payments to help absorb the cost. That would really squeeze medical centers like Metro General, which treats many of this city's uninsured, but also hospitals in rural communities, where profit margins already are thin.

"If we end up with all these cuts and no coverage — whew! I'm not sure some of our hospitals will survive that," Tennessee Hospital Association President Craig Becker says. "We'd get all the cuts and none of the money. If that were to occur, then there are hospitals that won't survive. That's Armageddon for some hospitals."

If hospitals manage to stay afloat, many will be forced to close money-losing units — most likely, maternity wards and trauma treatment centers, Becker explains.

"But if the hospital closes, then we start talking about how do we keep a medical presence in the community," Becker says. "All the doctors leave, the nurses leave, the pharmacies close. Therefore, you really don't have any kind of medical presence in the community.

"We've got to make sure that doesn't happen. The hospital is part of the infrastructure. It's like the high school. It's like the post office. If you don't have it, you're certainly a lesser town because of it."

No decisions are likely in most states, including this one, until after the fall elections. Republicans are hoping they gain the power to repeal ObamaCare altogether by winning control of the White House and Congress.

Optimistically, perhaps, Bonnyman thinks Tennessee Republicans eventually will come around, hold their noses and vote to expand Medicaid. But there's an important caveat: that common sense prevails.

"Look at the money. Look at all these jobs. And all for a minimal investment," Bonnyman says. "It really is a no-brainer. The problem is that in today's supercharged political environment, the facts are often interesting but seldom determinative."


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