Republican Rationality on Medicaid

Florida governor Rick Scott, with his skeletal frame, shiny bald pate, nine-figure fortune possibly obtained at least partially through Medicare fraud, and love of humiliating poor people, resembles nothing so much as a comic-book villain. So it was something of a surprise when he announced yesterday that he is reversing his previous position and will allow poor Floridians to receive Medicaid coverage as provided for in the Affordable Care Act. It isn't hard to explain why: the federal government is paying 100 percent of the cost of new enrollees in the first few years, and nearly all the cost thereafter, meaning for a small investment on the state's part it gets a healthier, happier, more productive citizenry. Only a truly despicable politician would turn it down, preferring to see their constituents go without health insurance than get it from the government, as I've argued (OK, "raged" is more like it) before.

After the Supreme Court said it its Obamacare decision that states could opt out of the Medicaid expansion, some people were more optimistic than I was, arguing that though Republican governors might shake their fist at Barack Obama for a while, eventually the Medicaid money would be too difficult to turn down. It's looking like I was wrong and they were right; Scott follows Republican governors in states like Ohio and Michigan in announcing that they'll accept the expansion, and though there are still some holdouts (most notably Rick Perry of Texas, which has more uninsured than any other state), the dominoes are starting to fall.

So what does this tell us? It turns out that even the most ideological politicians respond rationally to the incentives they're presented with—maybe not all the time, but much of the time. Which is also why Scott and others, even as they accept the Medicaid expansion, are continuing to refuse to set up health insurance exchanges for people to shop for private insurance in their states, which means Barack Obama's Department of Health and Human Services will run the exchange for them. Sarah Kliff explains why this makes sense, despite the apparent irony of these conservative Republicans rejecting the market mechanism and accepting the big-government insurance program:

Why embrace one part of the health care law — a single-payer system that will stretch President Obama’s law to cover millions more Americans — while ditching the other more market-oriented aspect? It likely has to do with the big consequences for a governor who chooses not to expand Medicaid—versus the tiny reward with setting up a very complex insurance marketplace.

There's not a lot riding on governors’ decision to build a health insurance exchange. The marketplaces certainly are important to the Affordable Care Act: They're the online portals where millions of Americans will ultimately purchase health insurance, the key vehicle for delivering the health law's insurance expansion.

Building a health exchange is a huge undertaking. Between connecting disparate government computer systems and creating a seamless shopping experience, industry analysts say that this process should take two or three years...

That's the story with the exchanges: There's little political upside to building one, but lots of potential fallout. On the Medicaid expansion, the calculus is completely different. The federal government cannot provide a back-up Medicaid expansion—and governors are deciding whether to extend health insurance to hundreds of thousands of their residents.

Provided the Obama administration does a good job with the exchanges it runs (by no means a sure thing), this is the best of both worlds. The states that are setting up their own exchanges are mostly those where Democrats are in charge, meaning the government is run by people who want to do a good job and see the ACA succeed. The states that are letting the federal government do it for them are places like Florida, where the state government is run by Republicans who probably would have done a crappy job of it anyway. So in the end, everybody wins.

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