January 12, 2015

We’ve commented before on cost overruns in the Arkansas Medicaid expansion plan that uses Medicaid money to buy private health insurance for the new recipients covered by ObamaCare’s Medicaid expansion. Some Medicaid expansion supporters want North Carolina to follow the Arkansas example.

Now, the Government Accountability Office believes the Obama Administration allowed Arkansas to fiddle around with cost estimates to get Washington’s okay for the plan. According to Fiscal Times, “When Arkansas expanded Medicaid through its private option earlier this year, the Department of Health and Human Services estimated that the first-of-its-kind program would be budget-neutral. But now federal auditors are blaming HHS for flawed estimates and say it will actually cost taxpayers an extra $778 million over the next three years.

In a new report from the Government Accountability Office, auditors say HHS did not ensure budget neutrality.

From the report:

“Specifically, HHS approved a spending limit for the demonstration that was based, in part, on hypothetical costs—significantly higher payment amounts the state assumed it would have to make to providers if it expanded coverage under the traditional Medicaid program—without requesting any data to support the state’s assumptions. We estimated that, by including these costs, the 3-year, nearly $4 billion spending limit that HHS approved for the state’s demonstration was approximately $778 million more than what the spending limit would have been if it was based on the state’s actual payment rates for services provided to adult beneficiaries under the traditional Medicaid program.”

There’s no free lunch. Whether we pass Medicaid expansion with regular Medicaid or private insurance, taxpayers are on the hook. And as costs go up, other priorities like education will get squeezed. Nobody can fake the numbers forever.