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Mike Pence's Medicaid problem

Indiana Gov. Mike Pence is starting to look like a 2016 front-runner, as Americans For Prosperity touts his economic record.
Indiana Gov. Mike Pence walks to the podium to give his State of the State address on Jan. 14, 2014, in Indianapolis.
Indiana Gov. Mike Pence walks to the podium to give his State of the State address on Jan. 14, 2014, in Indianapolis.

Mike Pence is having a very good year.

Multiple news outlets have described the Indiana governor and former congressman as a strong contender for the Republican party's 2016 presidential nod. He's been described as "the increasingly rare Republican who doesn't outright frighten the electorate," even as he's openly courted steadfast conservative groups like the Koch Brothers' Americans For Prosperity. And while the reputations of several other Republican governors with rumored presidential ambitions -- Chris Christie, Rick Perry, and Scott Walker -- have been bruised by recent state-level scandals, Pence has been luckier.

If he's not yet the man to beat in the 2016 Republican primary, he's certainly in the top tier of potential candidates. 

That's at least in part due to the economic record he's amassed during his time as governor. Though Pence has only resided in the Governor's Residence since January 2013, he has managed to enact a number of substantial conservative reforms in that time. He has reduced spending, cut taxes, blocked new government regulations, and continued to support his predecessor's right-to-work law, which prevents unions from automatically charging fees to the all workers they represent. 

Yet despite his efforts to cultivate the fiscal conservative vote, Pence still has a major dark spot on his record that could land him in trouble with the GOP's Tea Party base: his administration's decision to expand Indiana's Healthy Indiana Plan (HIP) as an alternative to the Medicaid expansion made possible under the Affordable Care Act (ACA).

Gov. Pence has described his so-called HIP 2.0 plan as a conservative alternative to outright Medicaid expansion, but many conservative groups aren't convinced. For many of the organizations Pence has courted in advance of his rumored presidential run, accepting any expansion money from the federal government is strictly verboten.

"This is not at all the Mike Pence of the House of Representatives."'

"Obviously we're a policy organization and we don't analyze politics, but I would say that it's not necessarily a deal-breaker. But it will make fiscal conservatives much less comfortable with him than they were before," said S.T. Karnick, research director for the conservative Heartland Institute. "This is not at all the Mike Pence of the House of Representatives."

Conservative opponents of HIP 2.0 argue that it could create a significant financial burden for future Indiana taxpayers. Under the ACA, the federal government picks up the tab for Medicaid expansion until 2020, after which it ratchets down its contribution to 90%. While states that expand their Medicaid coverage -- or build out a program like HIP 2.0, which accomplishes something similar -- don't shoulder most of the financial burden for the expansion, they do have to eventually take on some additional expenses. And given that Medicaid already accounts for close to one-fifth of all state expenditures, hard-line deficit hawks have no interest in seeing it become even a little more expensive.

Pence, anticipating these criticisms, has tried to position HIP 2.0 as the conservative answer to Medicaid. In his May 2014 remarks announcing the proposal, Pence described HIP 2.0 as a "market-based, consumer-driven" program, to be developed at no additional expense to the state of Indiana. Unlike traditional Medicaid, HIP provides low-income Indiana residents with individual health savings accounts (HSAs), to which most of them contribute a share of the payments. In his speech announcing HIP 2.0, Pence took pains to distinguish the plan from Medicaid or President Obama's health care reform law.

"I have long advocated for the repeal of the Affordable Care Act," he said. "I believe that as strongly now as I ever have."

But even close Pence allies on the right aren't buying it. Shortly after Pence unveiled his HIP 2.0 plan, the Indiana chapter of Americans For Prosperity described its potential cost as "troublesome" and argued that it stripped much of the "personal responsibility" out of the original HIP program by offering coverage even to some recipients who stop paying into their accounts. While the criticism from Americans For Prosperity (which did not return a request for comment) was relatively mild, some right-leaning groups have gone significantly further.

Enter the Foundation for Government Accountability (FGA), the Florida-based group behind the website That site, which consists of a single page about Pence's HIP 2.0 plan, accuses the governor of "sliding to the left"  and describes his proposal as "little more than a thinly-disguised way to bring a massive expansion of ObamaCare entitlements."

FGA CEO Tarren Bragdon said the group singled out Pence because "he had such a dramatic flip-flop on the issue."

"Mike Pence the congressman was clearly a conservative, but Mike Pence the governor is a flip-flopper," he said. "And both the folks on the right and the folks on the left have no idea how Mike Pence the president would be."

"Mike Pence the congressman was clearly a conservative, but Mike Pence the governor is a flip-flopper. And both the folks on the right and the folks on the left have no idea how Mike Pence the president would be."'

The Indiana governor, who held a 95% grade on the right-leaning Club for Growth's scorecard during his last year in Congress, has proven to be a consummate small-government budgeteer on most issues besides Medicaid. Within two months of taking office he had signed a law cutting Indiana's corporate income tax by almost 25%. And although the Indiana state legislature did not accede to his request for a 10% cut to the individual income tax, it did agree to a compromise tax cut of 5% over four years. At the same, time he's sold off the state's airplane and trimmed tens of millions of dollars out of the state's higher education budget.

Not only that, but Pence has made good on a campaign promise to block government regulation. As soon as he was sworn in, the new governor signed an executive order placing an indefinite moratorium on new regulations. The same executive order also mandated that the state review existing regulations to see if they should be eliminated.

Yet Bragdon gave a low rating to the governor's overall economic policy, saying that his tax cuts were "pretty week compared to this very liberal move of embracing Obamacare."

"You look at those actions compared to the largest expansion of welfare in Indiana history through this Medicaid expansion, and I think they're overwhelmed by that," he said of the governor's other economic policies.

In a statement to msnbc, the Pence administration stood by HIP 2.0 and insisted that the governor's plan was in keeping with conservative principles.

"HIP 2.0 is very much a Medicaid reform proposal based on what conservatives have advocated for a long time: HSA’s, contributions by participants and ownership over their healthcare choices, and a premium support plan for those with employer insurance," said Ryan Streeter, Pence's deputy chief of staff for policy and strategy.