McAuliffe says refusal to expand Medicaid will send Virginia taxpayers' money to other states

Gov. Terry McAuliffe says the House of Delegates is tossing Virginia taxpayer’s dollars to other states by refusing to expand the Old Dominion’s Medicaid program.

"In America right now, 27 states are going to get our money – Virginia taxpayer money – into their states to provide health care for their citizens, paid for by us," McAuliffe, a Democrat, said during a Feb. 26 appearance on WTOP radio.

A few days earlier, the Republican-led House rejected a budget amendment to expand eligibility for Virginia’s Medicaid program to 400,000 low-income and disabled Virginians. Under provisions of the Affordable Care Act, also called Obamacare, the federal government would pay the entire expansion cost for three years and 90 percent of it down the road.

Since then, the sides have dug in on a debate that’s blocking passage of a new two-year state budget. The House last Thursday again rejected the expansion on a partisan vote, with GOP leaders saying the federal government can’t be trusted to pay its promised share. And McAuliffe has been touring the state, repeating that failure to expand Medicaid will send Virginia taxpayers’ money into 27 other other states to insure their working poor.

We wondered if the governor is right.

First, let’s look at the number 27. It refers to the number of states that have expanded their Medicaid programs and, according to McAuliffe, stand to gain from Virginia’s defiance.  

Brian Coy, a spokesman for McAuliffe, said the tally comes from a map of states that have expanded their programs compiled by the National Academy of State Health Policy. A chart by the Kaiser Family Foundation offers the same number.

What’s the evidence that Virginia taxpayer’s money will flow to Medicaid recipients in those states if Virginia opts not to expand?

"The Affordable Care Act pays for itself by raising taxes and cutting spending on health care programs," Coy emailed. "If we refuse to close the coverage gap, Virginians will be paying taxes into the federal government that were meant to help fund the ACA, but we will not be bringing our share of that money back home to cover our citizens. Those Virginia tax dollars will instead go toward the funding of the ACA and states that have elected to bring tax dollars back down."

Well, it’s not quite that simple.

Obamacare contains a series of new taxes and penalties on:

• individuals with adjusted gross income of more than $200,000 a year and families with more than $250,000.

• many companies that fail to provide health insurance to employees and individuals who fail to buy it.

• high-end, or "Cadillac," health insurance plans.

• manufacturers of drugs and medical devices.

The taxes will generate $570 billion over the next 10 years, according to February projections by the nonpartisan Congressional Budget Office. Virginia’s Senate Finance Committee estimated last year that the Old Dominion would pay about $26 billion in ACA taxes over a decade.

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The Obamacare levies will flow into the U.S. Treasury where they will mix with perhaps $40 trillion of other tax revenues collected over the next decade and funnelled to federal programs. There are no guarantees under Obamacare that states will reap benefits equal to the new taxes that they pay. So it’s possible that a portion of Obamacare levies paid by Virginians could help expand Medicaid in another state -- or build a military barrack, fund agricultural research or help pay for a multitude of other federal programs. There’s no telling. It’s like trying to tracing a drop of rain that falls into to reservoir to see who’s bath tub it eventually reaches.

But here’s the fine point: Virginia’s decision on Medicaid has no effect on the amount of money that will be available to expand the program in other states.

"There’s no finite money for expansion," said Edwin Park, vice president of health policy at the liberal Washington-based Center on Budget and Policy Priorities.

The expansion extends Medicaid eligibility to households earning up to 133 percent of the U.S. poverty line. Each state that opts in gets federal money based on the number of new Medicaid enrollees it signs up, regardless of what happens in other states. There is no cap on the federal money available for expansion that forces states to compete for shares.

Park said McAuliffe’s statement is misleading because other states will not get more money if Virginia opts not to expand Medicaid.

Michael Tanner, senior fellow at the libertarian Cato Institute, agreed with Park, but said McAuliffe has a valid point.

"To the extent Virginians pay federal income tax, some states will get Medicaid money that Virginia doesn’t," he said.

Our ruling

McAuliffe said that the General Assembly’s refusal to expand Medicaid would send Virginia taxpayers’ money into 27 other states to insure their working poor.

He’s right that 27 states have broadened Medicaid eligibility under the Affordable Care Act. And if Virginia doesn’t join suit, it will sacrifice federal dollars that would pay the overwhelming long-term cost of the expansion.

Virginians, like residents of all states, are subject to new taxes to help support the ACA. The payments pour into the U.S. Treasury where they are mixed with other tax dollars and piped out to federal programs. There’s no tracking of individual coins in this flow of money and it’s possible that some deposits from Virginia could end up helping Medicaid recipients in other states.

But contrary to McAuliffe’s statement, there’s no direct connection between Virginia’s decision on expansion and what happens to Medicaid in other states. The goal of expansion is to offer Medicaid insurance to people earning up 133 percent of the U.S. poverty line. States participating in the program will receive the same federal subsidy for each new enrollee regardless of whether Virginia participates.

So McAuliffe’s statement has an element of truth but gives an incorrect impression on the impact turning down the money would have. We rate it Mostly False.