Avoiding Medicaid Expansion Was Smart

 

ObamaCare changed the eligibility rules for Medicaid. Originally it tried to force all the states to accept these new rules and expand their Medicaid population. But the Supreme Court struck down this portion of the law in 2012 making Medicaid expansion voluntary.

The incentive for this state expansion of Medicaid was that the federal government would pick up 100% of the additional costs. But that deal was limited to the years 2014 to 2016. Beginning in 2017 the states will have to pick up 5% of the additional costs, 6% in 2018, 7% in 2019 and 10% in 2020 and thereafter.

medicaid-expansion-2016

As you can see from the chart above, 32 states including the District of Columbia have expanded Medicaid under the new ObamaCare guidelines. Most of these states are controlled by Democratic legislatures or governors or both. Most notable exceptions are Indiana, which created its own unique Medicaid plan, Ohio, where Republican Governor John Kasich overruled his own legislature to expand Medicaid, and Arkansas, where Democratic Governor Steve Beshear overruled the Republican legislature.

In my own state of Florida there was a heated debate in the legislature prompted by the hospital lobby under an organization called A Healthy Florida Works. Governor Rick Scott opposed this expansion after showing early signs of approval.

Medicaid Expansion Arguments

Democrats have argued that expanding Medicaid is a good thing because it provides healthcare for the poor, especially when the federal government is offering “free money” to pay for it. Republicans have argued that expanding a second-class healthcare system (with healthcare outcomes poorer than the uninsured) by soaking taxpayers from other states is immoral on both humanitarian and fiscal grounds. Who was right?

Multiple studies have repeatedly demonstrated that those Americans on Medicaid have poorer health than even the uninsured, mostly due to poorer access to healthcare. These people use hospital emergency rooms 40% more often than the uninsured because hospitals cannot refuse to see them. Therefore, expanding such a system is only exacerbating a bad situation.

But the clearer argument is the so-called “free money” to expand Medicaid. The cost to state budgets is going to skyrocket soon as a new study reveals. Jonathan Ingram and Nicholas Horton recently released a new report for the Foundation for Government Accountability that tracked the original enrollment projections by actuaries in 24 states that expanded Medicaid and have at least a year of data on the results. Their data says 11.5 million have been added to the rolls of Medicaid, or 110% higher than projections.

Here are some examples for given states:

  • California – 910,000 projected – 3.84 million enrolled – 322% higher
  • New York – 276% higher
  • Illinois – 90% higher

All three of these liberal governance states are already experiencing huge budget deficits.

Other states are also experiencing higher than expected enrollment:

  • Kentucky – 134% higher
  • Ohio – 60% higher
  • Arkansas – 51% higher

 

The cost of this Medicaid expansion will be felt in the downsizing of other budget items in state legislatures, mostly education and infrastructure spending. Those governors who resisted the pressure to expand Medicaid can now rightly claim the last word.

All of this discussion on Medicaid expansion and its costs highlights the need for a new healthcare reform legislation that replaces ObamaCare and provides a better way forward for Medicaid as well. The Sessions-Cassidy plan (see blog archives) I have been discussing recently offers such a way to improve healthcare for all Americans and should receive serious consideration by the new Trump administration.

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