Obama Administration Still Silent On $37 Billion Obamacare Tax Endangering Medicaid Plans

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The Obama administration still hasn’t directed states on how to pay for $37 billion in Obamacare taxes that will hit state Medicaid programs and potentially put them afoul of federal law, according to a letter from an industry trade group.

The Medicaid Health Plans of America is asking the Centers for Medicare and Medicaid Services to clarify whether state taxpayers must foot the bill for billions in Obamacare’s new taxes on Medicaid plans. If not, Medicaid plans will be at risk for failing to meet federal requirements and could be pushed out existence. (RELATED: $37 billion in Obamacare ‘insurer tax’ will hit Medicaid programs

“MPHA is extremely disappointed that CMS has not provided clear guidance on this issue and urges that CMS provide written guidance to states so that Medicaid directors and health plans do not misunderstand this new tax and plans can be assured actuarially sound payment rates,” MHPA CEO Jeff Myers wrote to CMS administrator Marilyn Tavenner Tuesday.

The Affordable Care Act institutes a widely controversial health insurer tax that will charge all insurers $59 billion by 2018. The tax applies to all for-profit health insurers, whether they sell Medicaid or private coverage.

But state governments keep Medicaid programs affordable by negotiating prices as low as possible — leading the federal government to issue a law in 1997 mandating that Medicaid plans must be paid enough to remain “actuarially sound.” The law is meant to prevent Medicaid plans from being paid so little that they go out of business, to the detriment of the state and Medicaid patients alike.

Obamacare’s massive tax boost will push Medicaid plans into actuarially unsound territory, according to the MHPA, and Medicaid programs will have to pay their insurers more to make up for the difference. State taxes will go to Medicaid insurers so that they can pay federal taxes to keep Obamacare afloat.

The problem gets worse. That extra funding states have to give to Medicaid insurers is taxable income. According to MHPA federal policy director Amy Ingham, for every dollar states will have to give Medicaid plans to cover Obamacare’s original tax, they’ll have to pay another 54 cents to cover the federal excise tax placed on the Obamacare tax.

“We hope we’ll hear from [CMS],” MHPA director of federal policy Amy Ingham told The Daily Caller News Foundation. “We’ve contacted them before about this issue, and we’re hopeful that they’ll recognize the need for this guidance.”

Continued failure to act could spell disaster for Medicaid plans in every state. If state governments don’t adjust their payments to cover the $37.7 billion in added costs from Obamacare, Medicaid plans could crumble.

Not all the money will come from state governments. Medicaid plans are state-federal partnership, and the federal government will have to contribute matching funds to whatever amount states give their Medicaid insurers.

Of the $37.7 billion in extra Obamacare taxes, $13.6 billion will come from state taxpayers. $24.1 billion will comes from the federal government — meaning they’ll be paying states to have the Medicaid insurers pay federal Obamacare taxes. To add insult to injury, the federal government will also be partly funding the extra federal excise tax Medicaid plans have to pay on the whole transaction.

“It’s a burden on the Medicaid program,” Ingham said. “It’s important that now that the tax is in effect, that it’s handled properly.”

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