Unfunded Mandates? Not Quite, Governor

What is clear is that the mandates in the Affordable Care Act are not “unfunded.” Though Iowa will be required to cover a small portion of the costs of the Medicaid expansion, this hardly qualifies as “shackl[ing] Iowa taxpayers.”

Andrew Cannon photo
Andrew Cannon

This week, Governor Branstad signed Iowa on to a multistate lawsuit challenging health care reform. In his statement announcing that Iowa would join the suit, Governor Branstad said the health reform law would “shackle Iowa taxpayers for billions in unfunded mandates.”

You may be wondering what “unfunded mandates” he’s referring to. So am I.

He might be talking about the individual responsibility requirement, since that is the provision that is being challenged in the lawsuit. Section 1501 of the Affordable Care Act requires all individuals to maintain health insurance coverage or face a tax penalty (with exemptions for those with religious oppositions or with financial difficulties).

But the individual mandate is not “unfunded;” indeed, it is largely funded by the federal government. Individuals and families earning up to 400 percent of the federal poverty level  ($88,200 for a family of four) are eligible for premium assistance. The vast majority of Iowa’s uninsured, approaching 300,000 Iowans, will be covered by the Affordable Care Act’s expansion of Medicaid. After the Medicaid expansion, the majority of the remaining Iowans will be eligible for the health insurance premium tax credits. Only about 27,400 Iowans earned more than 400 percent of the FPL ($88,200 for a family of four) and were uninsured, on average, from 2008 to 2010.

On the other hand, Governor Branstad could have been referring to the expansion of Medicaid as an “unfunded mandate.” As noted above, the Affordable Care Act vastly expands the Medicaid program, allowing all individuals with income below 133 percent of FPL ($29,326 for a family of four) to enroll. Medicaid is jointly financed by the states and the federal government, with the feds picking up the lion’s share of the tab. In normal times, the federal government pays for around 63 percent of the Medicaid program in Iowa; in recent years, that has been increased to around 71 percent, thanks to the federal Recovery Act.

But unlike traditional Medicaid, which comprises a large portion of the state’s budget, the Medicaid expansion will be almost entirely funded by the federal government. In other words, no unfunded mandate here, either. During the first three years, (2014-2016) the costs of expansion will be fully covered by the federal government. In subsequent years, the federal government’s share of the expansion costs will decrease, but not by much. In 2020 and beyond, Iowa will only be paying for 10 percent of the cost of the Medicaid expansion.

The fate of the lawsuit (and thus reform) is unclear, at this point, though experts and administration officials alike are confident that health reform will survive the legal challenges. Given the diverse rulings to date, the challenge will likely be resolved by the Supreme Court.

What is clear, however, is that the mandates in the Affordable Care Act are not “unfunded.” Though Iowa will be required to cover a small portion of the costs of the Medicaid expansion, this hardly qualifies as “shackl[ing] Iowa taxpayers.”

Posted by Andrew Cannon, Research Associate

Author: iowapolicypoints

The Iowa Policy Project is a nonprofit, nonpartisan organization that provides research and analysis to engage Iowans in state policy decisions. We focus on tax and busget issues, the Iowa economy, and energy and environmental policy. By providing a foundation of fact-based, objective research and engaging the public in an informed discussion of policy alternatives, IPP advances effective, accountable and fair government.

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