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Kentucky Just Set the Stage for the Next Obamacare War

Joe Raedle/Getty Images

From the start of his long-shot campaign for governor of Kentucky, Republican Matt Bevin was gunning to make the race a referendum on Obamacare, promising to roll back a law that he dubbed "a disaster for Kentucky taxpayers." Tuesday's surprising victory for Bevin, a wealthy and ultra-conservative Louisville businessman, over Democratic Attorney General Jack Conway, will be a test of how far Republicans are willing to go to undo Obamacare—and take existing benefits away from ordinary Americans. If Bevin follows through on his campaign pledges, he could jeopardize health coverage for hundreds of thousands in a state that has been one of Obamacare's signature success stories. "This is the chance for a fresh start," Bevin said in his victory speech on Tuesday. "This is the opportunity for Kentucky to be a beacon to the nation."

Bevin has promised that Kentucky would make that "fresh start" by dismantling Kynect, the state's online marketplace for health insurance, and by becoming the first state to reverse course on Medicaid expansion, which currently covers more than 400,000 low-income adults in Kentucky. That's been thanks to outgoing Democratic Governor Steve Beshear, who sidestepped the legislature to turn Kentucky into one of the most conservative states to embrace Obamacare full-throttle. The impact has been dramatic: Between 2013 and 2014, Kentucky's uninsured rate dropped from 20.4 percent to 9.8 percent—the second-largest reduction in the country. The program has also been enormously popular. "We think Kentucky’s experience really has shown there is a large desire by the uninsured to actually get coverage—when coverage is available, they sign up," says Diane Rowland, executive vice-president of the Kaiser Family Foundation.

Those gains could now be in jeopardy, though exactly how remains unclear, as Bevin has repeatedly changed his position on Medicaid. In February, Bevin asserted that he would undo Beshear's executive action. "Absolutely. No question about it. I would reverse that immediately," Bevin said. Since winning the Republican primary in May, however, Bevin has wavered. The Lexington Herald-Leader explains: "In July, Bevin said it was 'an absolute lie' that he ever said he would reverse the expansion on his first day in office." But then he appeared to change his mind again: "In an August fund raising letter, he was back to calling for complete reversal."

Bevin's most recent position: Junk the current system and replace it with an alternative that's likely to include premiums or co-pays. “I want these folks to have skin in the game,’’ Bevin said last week, echoing a popular Republican talking point. “People don’t value something they haven’t invested in.” The Republican insisted that he wouldn't take away coverage from the 400,000 enrollees. But he also said in the interview that he "will not continue" to enroll Kentuckians at 138 percent of the federal poverty level, which is the threshold for Obamacare's Medicaid program. (It amounts to about $16,200 for a single person.) 

Bevin could apply to the Obama administration for a federal waiver to make lower-income beneficaries pay more under Medicaid expansion. He has mentioned Indiana as one potential model: The Hoosier state worked out an agreement with the Obama administration to expand Medicaid by building on an existing program that charged premiums for even the poorest beneficiaries with no income. Other conservative states are doing the same: This week, Montana became the 30th state to expand Medicaid after the feds approved a waiver that allows the program to charge premiums up to 2 percent of beneficiaries' income. That would be about $550 per year for a single individual at the income threshold. 

Republicans' insistence on "skin in the game" is worrying health advocates and policy analysts, who warn that additional costs could deter vulnerable low-income residents from getting coverage or being able to keep it. A 2014 paper in the journal Health Affairs shows that even tiny premiums reduce enrollment in low-income health programs like children's Medicaid. "There's a lot of research that charging people premiums that will discourage them from signing up," says Jesse Cross-Call, a policy analyst at the Center on Budget and Policy Priorities. 

But it won't be easy for Bevin to work out a waiver and raise premiums; the Obama administration is likely to be far more reluctant to grant waivers in a state where the program is already in effect. "The leverage to ask for some of these changes is best when you’re going in and not when you’re already in the door," says Rowland. That could quickly change, however, under a Republican White House that is more sympathetic to poking holes in Obamacare. 

Bevin could make still good on his earlier promise to reverse the Medicaid expansion without providing an alternative, but that would invite a huge backlash—and come at a financial as well as political cost. Contrary to Bevin's attacks about the burden of expanding coverage on taxpayers, the state's own analysis shows that the Medicaid expansion has saved Kentucky money and will continue to do so through 2021, even after the state is required to shoulder more of the cost. (The federal government covers the state’s full expansion cost through 2016, gradually declining to 90 percent by 2020, where it remains.)

Bevin has been clear all along that he plans to dismantle Kynect, the state's online marketplace for health insurance. One hundred thousand residents have signed up for subsidized health care through the exchange, which was largely free of the technical glitches that plagued the federal site and other state-run exchanges. By getting rid of Kynect, Bevin would be forcing the state back onto the federal exchange, abandoning a vehicle that's proven to be highly effective in enrolling residents. That could make it harder to sign up new enrollees, and cause confusion and lapses in coverage among current participants. 

Kynect succeeded partly because of its re-branding; the name "Obama" is not a popular one in the state. But that has also created a political conundrum for Democrats: Those who've benefitted from the state-run programs haven't always realized that they're receiving Obamacare, which Kentucky voters view far less favorably than their Kynect. Bevin spent the campaign hammering that connection home: Kynect, he stressed, "is just Obamacare in another form, plain and simple.”

Bevin's case against Kynect received a key political boost in the weeks leading up to the election, when the Kentucky Health Cooperative—the largest private provider on Kynect, with 51,000 enrolled—announced that it would be going out of business in early October. Bevin used it as an opportunity to link his opponent directly to Obamacare. "This financial debacle is a direct result of Obamacare, which Governor Beshear was too quick to embrace. Even though it is a disaster for Kentucky taxpayers, Jack Conway still says he would have been proud to vote for Obamacare," Bevin said.

To be sure, there were other factors playing into Bevin's late surge. The candidate got last-minute help from the Republican Governors Association, which poured $2.5 million in spending on ads that tied Conway to Obama—though not to Obamacare explicitly—in the final days of the race. Down the stretch, Bevin also embraced Kim Davis, the county clerk who became a cause celebre for the religious right after refusing to issue same-sex marriage licenses. That may have helped draw evangelical voters in an election where turnout was barely 30 percent, according to preliminary estimates.  

But Democrats spent almost $9 million on the race to Republicans' $5.5 million, and they'll be hard pressed to explain why they couldn't sell a fierce defender of Obamacare in a state where the law has benefitted so many people. Bevin's success in running against Obamacare could indeed be a "beacon" for 2016, reviving the issue as a Republican talking point and discouraging other red states from expanding Medicaid.