HealthLawProf Blog

Editor: Katharine Van Tassel
Concordia University School of Law

Tuesday, July 3, 2012

The Medicaid Expansion, Politics, and Money

Are States Really Prepared for the Consequences of Refusing the Medicaid Expansion Money?

The ink is barely dry on the Supreme Court's Affordable Care Act decision, but at least 8 states have already raised questions about whether they will implement the now-optional expansion of Medicaid to childless adults under 133% of the federal poverty level, according to the American Health Lawyers Health Law Health and Life Sciences Law Daily. The governors of Missouri, Mississippi, Nebraska, Alaska, Georgia, Michigan, Florida, Louisiana, and Texas have all either said categorically that they will not implement the expansion, or that they are seriously studying whether or not to do so. All of them cite the costs of the expansion on their hard-pressed state treasuries as the reason for not implementing it, even though the states will pay only a small fraction of the overall costs of the expansion. Apparently, they view the Medicaid expansion as a sort of fiscal Trojan horse; it looks good on the outside, but once it gets in the gates, it will destroy the state treasury. Will these states really have the political will to refuse to take a large amount of federal money to help some of their poorest citizens? The poor are undoubtedly going to get sick and need care regardless of whether the states take the money or not. Who is bearing these costs now, if not the state-run or subsidized safety-net hospitals, or the other citizens of these states, through increased insurance premiums and state taxes? Or perhaps it is the employers of the working poor, who pay the price in lost productivity and absenteeism due to untreated employee illnesses? And how will people in non-expansion states feel about their federal tax money being redistributed to pay for health care for the citizens of the states that do expand their Medicaid programs? I hope that the political leaders of the "no-expansion" states review these costs and the real consequences of refusing the expansion carefully before making this decision, rather than just reacting in a knee-jerk fashion to the politics of the day.

Medical Device Manufacturers and Taxes

With regard to the costs of the ACA, National Public Radio ran an interesting story yesterday about the differing views of the effect that the new 2.3% excise tax on the sale of medical devices will have on the industry. A medical device manufacturer in the Boston area claimed that 70% of medical device manufacturers are not yet profitable, and that this will hurt innovation in the industry. An economist from a left-leaning think tank countered that the costs of the tax will merely be passed on to purchasers, such as hospitals and group purchasing organizations. Either way, consumers will lose, because those costs will be passed on in some fashion to the end-user, either through increased premiums or out-of-pocket costs. This is one of the major flaws in the ACA, it doesn't do enough to hold down the costs of care, and this could ultimately turn out to be its downfall.

Big Pharma and the Largest Health Care Fraud Settlement in U.S. History

The ACA also imposes hefty fees on the pharmaceutical manufacturing sector, of between $2.8 and $4.1 billion per year. However, big pharma has not been nearly as vociferous about the effect of these fees on its business as the medical device industry has been. And a news flash from yesterday may illustrate why--according to BNA's Health Care Fraud Report, GlaxoSmithKline just agreed to pay a $3 billion fine for misbranding, paying kickbacks, and improper marketing for a number of its most popular drugs, including Paxil, Avandia, and Wellbutrin. This is the largest health-care fraud settlement in U.S. history. Makes complaints about $2.8 in fees for the whole industry seem trite, don't you think?

- Vickie Williams

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