Rejecting Medicaid expansion is effectively raising the minimum wage

States that continue to resist the Affordable Care Act (ACA) are finding themselves in a tougher and tougher spot. It’s hard to retain ideological purity while dealing with the nuts and bolts of implementation. Exhibit A is the health insurance exchanges. States can run their own exchanges, but those that decide not to act will find the federal government running their exchanges for them. So you will have the weird phenomenon of blue states running their own exchanges and red states ceding authority to the feds.

The Medicaid expansion is an even tougher issue. From where I sit, states that refuse to accept the expansion of federally funded Medicaid are essentially putting through an increase in their state minimum wage. Here’s what I mean:

As the Wall Street Journal reports, low-wage employees could qualify for Medicaid under the ACA. If the states accept the federal expansion of Medicaid the federal government will pay the tab and the employers will pay nothing. But if the state rejects the Medicaid expansion employers will be responsible for insuring their employees or paying a non tax-deductible fine of $2000 per worker or so. That means anti-ACA states will be making the choice to increase the cost of hiring low wage workers –which will have the same impact as a substantial increase in the minimum wage. That doesn’t fit well with rhetoric that refers to ObamaCare as a job destroyer and touts the value of small business.

The article also reveals some of the mind-bending ironies driven by the fact that health care is such a large industry with a big government presence already. The Journal quotes the CEO of a home health care company in proudly self-reliant Montana, who is pushing for acceptance of the Medicaid expansion:

[The CEO] said he is constrained in raising prices for customers because most of his services are reimbursed at fixed rates by government health programs, including Medicaid, and that he would have to resort to cutting wages instead if he can’t find another solution.

So in other words, his private business relies on Medicaid as a major customer, and Medicaid is so stingy that he can’t afford private insurance for his employees but needs Medicaid¬†coverage for them¬†instead.

February 11, 2013

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