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President Obama has won reelection, and his administration has asked state officials to decide by Friday, November 16, whether their state will create one of Obamacare’s health-insurance “exchanges.” States also have to decide whether to implement the law’s massive expansion of Medicaid. The correct answer to both questions remains a resounding no.

State-created exchanges mean higher taxes, fewer jobs, and less protection of religious freedom. States are better off defaulting to a federal exchange. The Medicaid expansion is likewise too costly and risky a proposition. Republican Governors Association chairman Bob McDonnell (R.,Va.) agrees, and has announced that Virginia will implement neither provision.

There are many arguments against creating exchanges.

First, states are under no obligation to create one.

Second, operating an Obamacare exchange would be illegal in 14 states. Alabama, Arizona, Georgia, Idaho, Indiana, Kansas, Louisiana, Missouri, Montana, Ohio, Oklahoma, Tennessee, Utah, and Virginia have enacted either statutes or constitutional amendments (or both) forbidding state employees to participate in an essential exchange function: implementing Obamacare’s individual and employer mandates.

Third, each exchange would cost its state an estimated $10 million to $100 million per year, necessitating tax increases.

Fourth, the November 16 deadline is no more real than the “deadlines” for implementing REAL ID, which have been pushed back repeatedly since 2008.

Fifth, states can always create an exchange later if they choose.

Sixth, a state-created exchange is not a state-controlled exchange. All exchanges will be controlled by Washington.

Seventh, Congress authorized no funds for federal “fallback” exchanges. So Washington may not be able to impose Exchanges on states at all.

Eighth, the Obama administration has yet to provide crucial information that states need before they can make an informed decision.

Ninth, creating an exchange sets state officials up to take the blame when Obamacare increases insurance premiums and denies care to the sick. State officials won’t want their names on this disastrous mess.

Tenth, creating an exchange would be assisting in the creation of a “public option” that would drive domestic health-insurance carriers out of business through unfair competition.

Eleventh, Obamacare remains unpopular. The latest Kaiser Family Foundation poll found that only 38 percent of the public supports it.

Twelfth, defaulting to a federal exchange exempts a state’s employers from the employer mandate — a tax of $2,000 per worker per year (the tax applies to companies with more than 59 employees, but for such companies that tax applies after the 30th employee, not the 59th). If all states did so, that would exempt 18 million Americans from the individual mandate’s tax of $2,085 per family of four. Avoiding those taxes improves a state’s prospects for job creation, and protects the conscience rights of employers and individuals whom the Obama administration is forcing to purchase contraceptives coverage.

Finally, rejecting an exchange reduces the federal deficit. Obamacare offers its deficit-financed subsidies to private health insurers only through state-created exchanges. If all states declined, federal deficits would fall by roughly $700 billion over ten years.

For similar reasons, states should decline to implement Obamacare’s Medicaid expansion. The Supreme Court gave states that option. All states should exercise it.

Medicaid is rife with waste and fraud. It increases the cost of private health care and insurance, crowds out private health insurance and long-term-care insurance, and discourages enrollees from climbing the economic ladder. There is scant reliable evidence that Medicaid improves health outcomes, and no evidence that it is a cost-effective way of doing so.

My colleague Jagadeesh Gokhale estimates that expanding Medicaid will cost individual states up to $53 billion over the first ten years. That’s before an emboldened President Obama follows through on his threats to shift more Medicaid costs to states.

Neither the states nor the federal government have the money to expand Medicaid. If all states politely decline, federal deficits will shrink by another $900 billion.

Now is not the time to go wobbly. Obamacare is still harmful and still unpopular. The presidential election was hardly a referendum, as it pitted the first person to enact Obamacare against the second person to enact it. Since the election, many state officials are reaffirming their opposition to both implementing exchanges and expanding Medicaid.

If enough states do so, Congress will have no choice but to reopen Obamacare. With a GOP-controlled House, opponents will be in a much stronger position than they were when this harmful law was enacted.

Michael F. Cannon is director of health policy studies at the Cato Institute and coauthor of Healthy Competition: What’s Holding Back Health Care and How to Free It.

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8 Responses for “Obamacare Is Still Vulnerable”

  1. I would very much like to see a structure in which we explicitly fund care for the uninsured rather than, in an unstructured way, passing-on the costs of such care to those who have insurance. Similarly, I would like to see a structure to improve the availability of care in more cost-effective ways. The current default of letting sick people get sicker until they burden all of us with added costs, in a variety of ways, needs to change to a wellness-centered model.

    Yet this article does not propose such solutions. Rather, it is one of the repetitive arguments against Obamacare. I would welcome a positive contribution to the discussion.

    • BobbyG says:

      My thoughts exactly. Well put.

      Esteemed medical economist JD Kleinke calls people like this “policy tear-down artists.”

      They do nothing but throw useless rhetorical sand in the gears.

  2. bob hertz says:

    It is true that Mr Cannon is shooting buckshot here, but there are some blockbuster items nonetheless in the laundry list:

    - no money for federal exchanges? Can this be done with a Republican house?

    - no employer mandates in federal exchanges? The affected businesses do not know this.

    - without subsidies, the ACA exchanges are dog meat.

    This whole issue may not even get addressed in this lame duck session.

    • genelewis says:

      There will be employer mandates and subsidies on the federal exchanges. The idea that there won’t be rests on some strained legal interpretations made by opponents of the law that HHS has already said are not accurate.

  3. Let’s not refine our understandings of already well-understood problems. It’s time for constructive dialogs to produce solutions.

  4. lauren says:

    I think the nation is still pretty split with Obamacare. I know some that would love to get rid of it.

  5. I think the dozen or so points that were brought up in this article are pretty valid. And I think the problems with medicaid that Cannon pointed out are especially problematic for us all. Fraud is rampant in that government program as well as plenty of other ones as well since there isn’t much incentive for the government to eliminate it.

    It’s true this article doesn’t focus on a direct solution per se, but it wasn’t meant to. He’s just pointing out the debate over Obama care is not over.

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