A branch of economics called game theory involves studies strategic decision-making. If you have ever watched the television program Numbers, you probably heard Charlie, the crime solving mathematician, refer to this a time or two.
The principles of this field of study can be used to explain the decision-making process taking place among the states as they consider whether to implement certain provisions of ObamaCare.
In layman’s terms, game theory using mathematical equations to study what independent rational decision makers will do in a given situation. Each of the 50 states operates as the decision makers in this application of game theory. Those who designed ObamaCare predicted the best way to persuade states to implement its numerous moving parts assuming each state would act as a rational player.
The two key components that states have some say in implementing are setting up the state health insurance exchanges and expanding their Medicaid coverage.
The health insurance exchanges will allow individuals to compare both public and private health insurance plans available. States can design their own health insurance exchange, allow the federal government to design it or have a hybrid approach of the two. Of course, the federal government has no desire to tweak these plans for each individual state and offers generous grants to get the state to implement the exchanges.
The thought here is that a rational state decision maker would not turn down this free money to set up their own health insurance exchanges. By agreeing to implement the exchange, the manna from Washington would flow down to the state – which would then likely hire a worker or two and send the rest to consultants to work with the state’s insurance and health care providers to put together their own exchange.
The second component that states now have a degree of control is whether to expand their Medicaid program to include those up to 138 percent over the poverty line. In Arkansas, this expansion would add around 250,000 individuals. Originally, this was not really optional as states would risk loosing their entire Medicaid funds if they did comply. But the U.S. Supreme Court ruled this was too big of a stick and said that states could choose not to expand their coverage without the risking of loosing these separate funds.
With the stick gone, the federal program now has to rely on the carrot instead to persuade states. ObamaCare provides full funding for this expansion for the first three years and then will provide funds for 90 percent of the coverage after that.
Arkansas Department of Human Services estimated that this manna from the federal government would total $372 million in direct funds and indirect benefits to Arkansas from 2014 through 2021. Gov. Mike Beebe summed up the game theory well when he was asked about this expansion.
"We’re going to pay those same taxes as Arkansans to the federal government. So if it’s going to happen, do we let New York take it and California take it and Florida take it or whoever, and tell our people no?" asked Beebe.
This is the core of how the legislation gets states to implement a program that is not popular in those states. Turning down these federal dollars is counter intuitive to the way state leaders have consistently behaved. We might not like the program but we don’t want to give up our piece of the pie.
But times are changing and a new crop of conservative lawmakers committed to reducing the size of government views these funds differently. And recent polling has shown that this mindset is well representative of the majority of Arkansans. A Talk Business poll found that 58 percent of Arkansans want the state Legislature to continue blocking implementation.
Opponents of ObamaCare believe that if enough states do not behave as expected and instead refuse to implement the exchanges or expense Medicaid, then the whole program will fall apart.
Jason Tolbert is an accountant and conservative political blogger. His blog — The Tolbert Report — is linked at ArkansasNews.com. His e-mail is jason@TolbertReport.com