Wisconsin not leaving any federal funds on the table by rejecting Obamacare expansion of Medicaid, Scott Walker administration official says

Gov. Scott Walker announced in February 2013 that Wisconsin would refuse what has been portrayed as a financial windfall for state governments -- an expansion of Medicaid under Obamacare that would be financed almost completely with federal funds.

Democrats have ripped the Republican governor, with some citing estimates that his proposed alternative will cost Wisconsin state taxpayers hundreds of millions of dollars.

Yet four months after the announcement, Walker's secretary of health services, Kitty Rhoades, painted a different financial picture.

Many people had said, "Why did you walk away from all of the money on the table?" the former GOP state lawmaker told a business-sponsored health care seminar in Madison on June 6, 2013. "Which is a line that just drives me insane."

Later in the speech, Rhoades added:

"We believe and we know that based off of our modeling, we’re not walking away from a dime. We actually will have more federal dollars flowing through the state of Wisconsin than we would have had by taking the enhanced rate of including people of 133 percent of federal poverty level into Medicaid."

So, despite estimates that state government is losing out on hundreds of millions of dollars, is it the case that ""we’re not walking away from a dime" in federal funds?

The wording of Rhoades' claim is key.

Medicaid and its expansion

Medicaid, a federal- and state-run health care program for the poor, serves more than 1.1 million people in the Badger State. Federal taxpayers pick up about 60 percent of the cost in Wisconsin. But President Barack Obama's Affordable Care Act offers an even larger share of federal funding if states make more people eligible for Medicaid, starting in 2014.

From 2014 through 2016, Uncle Sam would pay 100 percent of the cost of expanding Medicaid coverage for adults with incomes up to 133 percent of the federal poverty level. For an individual, that means an income of $15,282; for a family of four, it's $31,322. After 2016, the federal share would gradually decline until it reaches 90 percent in 2020, with the states picking up the remaining cost.

That gives the appearance of a lot of federal money going to state governments.

And indeed, that’s what the experts say will happen.

The number crunchers

Walker himself has acknowledged the federal government is offering more money to states that do the Obamacare Medicaid expansion. But he says that because of the federal budget deficit, he believes the federal government won't follow through on the promised funds.

That, of course, remains to be seen.

What is clear from budget experts is the State of Wisconsin is, in fact, giving up federal funds by declining the Medicaid expansion. (Although, with the state budget due to be adopted in a matter of days, the top Democrat in the state Senate held out hope that a compromise might be reached to at least give the Obamacare Medicaid expansion a try.)

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A week before Rhoades’ speech, the nonpartisan Legislative Fiscal Bureau, which both political parties have long cited as a neutral scorekeeper on budget matters, weighed in.  

For the 2013-2015 state budget, currently being debated in the Legislature, opting out of the Obamacare Medicaid expansion would cost state taxpayers $119 million, the fiscal bureau estimated.

The total could exceed $459 million through 2021, the bureau said.

Similar findings were produced a few days later by RAND Corp., a California-based independent think tank.

According to its study (subscription required), Wisconsin and 13 other states that said, as of late April 2013, they won't do the Obamacare Medicaid expansion, would forgo $8.4 billion per year in federal payments.

So, what is Rhoades talking about?

Rhoades’ evidence

Her spokeswoman, Stephanie Smiley, said Rhoades doesn't dispute the fiscal bureau's estimates of state government losing out on hundreds of millions of dollars by not expanding Medicaid through Obamacare.

Rhoades instead cites a different flow of federal funds. She argues that under Walker's alternative, even more federal money will come to Wisconsin -- but to health insurance companies and health care providers, rather than state coffers.

Walker's plan expands Medicaid eligibility to people with incomes at 100 percent of the poverty level, but not to 133 percent, as Obamacare would do. Under the governor's plan, people with incomes between 100 and 133 percent of poverty would get health coverage from private insurers through "exchanges," another feature of Obamacare.

Citing the fiscal bureau report, Rhoades notes the federal government would give the state a total of $489 million during the 2013-2015 budget cycle if it agreed to the Obamacare Medicaid expansion.

But she contends that "modeling" done by her department -- not the fiscal bureau -- projects that under Walker's alternative, $776 million to $784 million in federal money would flow into Wisconsin during that period. It would subsidize premiums and health care for people who go into the exchanges.

The problem here is that the fiscal bureau can make solid estimates knowing how many people would be eligible for Medicaid under Obamacare. But the Department of Health Services has to guess how many people will buy insurance through the exchanges and thus bring federal dollars into Wisconsin.

That's a difficult calculation, given that the fiscal bureau has determined many people eligible for coverage through the exchanges will decide they can't afford it. In fact, the fiscal bureau has said the Walker administration is "unreasonably optimistic" on the question.

So, it's unclear whether Walker's plan will result in more federal money coming to Wisconsin insurers and health care providers than would be paid to the state under the Obamacare expansion of Medicaid.

What is clear, is Walker's alternative to the Obamacare Medicaid expansion comes at a cost to state taxpayers of $119 million in 2013-2015 alone -- which is the criticism Rhoades was trying to refute.

Our rating

Responding to criticism that state taxpayers are taking a financial hit because Walker chose not to expand Medicaid through Obamacare, Rhoades claimed "we’re not walking away from a dime" in federal funds.

There's an element of truth in her claim, in that under Walker's alternative plan, some level of federal funds will flow to Wisconsin insurers and health care providers based on the number of people who choose to buy health insurance through Obamacare exchanges.

But the criticism focused on the impact on state government by not taking the Obamacare offer -- $119 million just in the next two years, a figure Rhoades doesn't dispute. Because of that, we rate her claim Mostly False.