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The False Choice: Health Reform Versus Education

Nebraska Governor Dave Heineman’s call for education leaders to support health reform’s repeal on the grounds that the state would have to finance it through big cuts in education is based on a gross overestimate of the law’s likely impact on the state.

The Affordable Care Act requires states to expand Medicaid to include adults and children with incomes up to 133 percent of the poverty level (around $14,000 for an individual and $29,000 for a family of four) starting in 2014. But the federal government will pay 100 percent of the cost of the expansion for the first few years and 90 percent of the cost starting in 2020.

Warning that a “lack of action [against health reform] is tacit support for increased Medicaid funding and the likely reduction in funding for education,” Governor Heineman cites estimates that health reform would impose large new Medicaid costs on Nebraska. But these estimates are based on flawed assumptions.

One estimate, for example, assumes that literally everyone who becomes eligible for Medicaid under health reform will sign up for it — something that has never happened in a means-tested public program. The estimate also assumes that a significant number of people who have private insurance will drop that coverage and enroll in Medicaid, even though previous experience with Medicaid expansions indicates this is not the case.

As I’ve explained, the Medicaid expansion in health reform is a good deal for states. Under the new law, Medicaid and the Children’s Health Insurance Program will cover an estimated 16 million more low-income adults and children, most of whom are now uninsured. And by dramatically shrinking the ranks of the uninsured, the law will lighten the burden on states of providing health care to their uninsured residents.