President Obama’s solution to everything is more taxpayer money. This time he wants to throw more money at Medicaid – more than $100 Billion over the next decade.
The problem, as usual, is ObamaCare. The Affordable Care Act (ObamaCare) changed the rules for Medicaid, enticing states to expand their Medicaid rolls by promising to pay 100% of the additional costs until 2016. Currently, the federal taxpayers pick up the tab for approximately 50% of the cost (varies from state-to-state) and the state taxpayers pick up the rest.
Since the passage of the law in 2010, thirty states plus the District of Columbia have signed up for the new Medicaid rules under ObamaCare. Since ObamaCare created a mandate to have healthcare insurance (or pay a tax penalty), enrollment in Medicaid has exceeded expectations. In fact, ObamaCare is largely an expansion of Medicaid with over 70% of the newly insured enrolled in Medicaid.
As many critics predicted, the costs of Medicaid are skyrocketing. ObamaCare has enrolled many people into Medicaid who had avoided healthcare treatment for years. These newly enrolled adults have had higher expenses than those previously enrolled.
Brian Blase of the Mercatus Center at George Mason University says inflation-adjusted Medicaid spending has increased 43% from 2008 through 2015, with federal spending on the program up 59%. (See table below.)
Also, according to the 2014 Actuarial Report on the Financial Outlook for the Medicaid program, the “newly eligible” Medicaid enrollees average benefit costs of $5,517 per year compared to $4,650 for “old eligible” enrollees. Previous reports actually reported costs for “newly eligible” adults as 1% lower than “old eligible” adults.
Low Value of Medicaid
Two important studies have revealed the low value of Medicaid healthcare. An ongoing study since 2008 called The Oregon Healthcare Experiment has shown Medicaid patients do not show benefits from regular healthcare when compared to the uninsured except for slightly lower incidence of depression. Common medical conditions such as diabetes and high blood pressure were not improved.
A second study assessing the value of Medicaid found that “Medicaid’s value to recipients is lower than the government’s costs of the program, and usually substantially below.” They estimated the “welfare benefit to recipients from Medicaid per dollar of government spending range from about $0.2 to $0.4.” In other words, for every $1 of Medicaid spending, recipients valued that spending as little as 20 cents.
President Obama’s New Medicaid Spending Proposals
President Obama wants to spend more than $100 billion in additional Medicaid spending over the next decade. Most of that money will be spent on the following three initiatives:
- Enhanced Federal Match Rate for All Medicaid Expansion States
To reward those states who complied with his Medicaid expansion, and to incentivize those who didn’t, he proposes to change the rules of ObamaCare and continue to have federal taxpayers pay 100% of the costs of “newly eligible” enrollees for three years, regardless of when states expand. The CBO estimates this proposal will cost $31 billion over the next decade.
- Bailout for Puerto Rico
Obama wants to bail out Puerto Rico by “increasing federal funding for Medicaid in Puerto Rico and other U.S. territories.” The CBO estimates this will cost federal taxpayers $28 billion over the next decade. The administration fails to mention that Puerto Ricans do not pay federal income tax and federal income taxes finance the federal share of Medicaid spending.
- State Option for 12 Months of Continuous Medicaid Eligibility for Adults
The ACA prevents states from renewing Medicaid coverage more than once a year, but enrollees are still required to report changes that would cause them to lose their eligibility, such as an increase in income. But Obama’s proposal scraps this requirement and allows states the option of 12-month continuous Medicaid eligibility for adults. CBO estimates this proposal would cost federal taxpayers $18 billion over the next decade. With this proposal, many people with newly-increased income will be able to remain on the Medicaid rolls long after they are no longer eligible.
The pattern is now well-established – if ObamaCare isn’t working, Obama will just spend whatever it takes to fix it. (So will Hillary) Rather than get to the root of the problem, government control of healthcare, he’d rather spend the taxpayers’ money. As former British Prime Minister Margaret Thrasher once observed, “The problem with socialism is that sooner or later you run out of other people’s money.”