State Medicaid Tax Trap

The bill for expansion hits business in Rhode Island.

WSJ editorial. Excerpts:

"Medicaid expansion under ObamaCare was sold as a free federal lunch for the states, but the bill is now coming due. Witness Gov. Gina Raimondo’s plan to tax businesses that employ low-income workers to fund Rhode Island’s booming Medicaid case load. Look for this soon in a state near you.

Ms. Raimondo has proposed a 10% payroll tax on businesses with more than 300 workers for each employee who enrolls in Medicaid. ObamaCare requires businesses with more than 50 full-time workers to offer health insurance and duns employers $3,750 for each employee who purchases a plan on the exchanges with a federal subsidy.

But many low-income private employees sign up for Medicaid because they pay nothing. By contrast, the average family earning below 200% of the poverty line with employer coverage will pay about 14% of income on premiums and out-of-pocket costs, according to the Peterson-Kaiser Health System Tracker. More workers also qualify now because ObamaCare’s expansion increased Medicaid eligibility to 138% of the poverty line. 

Medicaid enrollment in Rhode Island has increased 63% since 2014. In 2013 the state projected about 40,610 low-income childless adults would become eligible, yet 119,754 have since signed up. While the feds have picked up most of the tab, state Medicaid spending has also increased by more than 25% since 2013.

Last year 6,428 more people enrolled in Medicaid than Rhode Island estimated and spending tracked nearly $20 million above budget projections—about as much as Ms. Raimondo’s new employer tax would raise."

"her Medicaid tax would discourage businesses from hiring low-income workers and prompt many to shift jobs to other states or automate work where possible. Employers won’t know whether their workers enroll in Medicaid until they get the state’s tax bill"