Solving the Medicaid Expansion Problem


The expansion of Medicaid is both a blessing and a curse. It’s a blessing in the short run for politicians who can brag they have expanded healthcare coverage for low-income residents of their state. It’s a curse for politicians who must balance their state budgets to pay for Medicaid expansion.

ObamaCare changed the rules of Medicaid. Prior to ObamaCare the federal government paid an average of about 60 percent of the cost of the Medicaid program and the states picked up the rest. This percentage varied with the economic prowess of individual states. ObamaCare changed the eligibility requirements for Medicaid and agreed to pay 100 percent of the additional costs for three years beginning in 2014.

In 2017 the federal portion of the expanded Medicaid costs dropped to 95 percent. It will continue to decline until 2020 when it levels off at 90 percent. It will continue thereafter at that level indefinitely.

This means that every state that expanded Medicaid is now into the first year of declining federal support. That puts pressure on state budgets to lower expenses elsewhere and the usual victim is the education budget. Therein lies the curse.

This year for the first time the federal government will spend more on Medicaid than on defense according to The Wall Street Journal.

All this expense might be justifiable if Medicaid provided good healthcare and was cost effective. But neither is true. Studies like the Oregon Healthcare Experiment have shown Medicaid enrollees have no better healthcare outcomes than the uninsured – and use hospital emergency rooms 40 percent more often. The value of Medicaid treatment has been calculated at only 20 – 40 cents on the dollar. With these poor outcomes and efficiency statistics, a better way to care for the poor is needed.

Republicans are grappling with these issues as they debate the best solutions to repealing and replacing ObamaCare. Most favor block grants for the states that allow states the flexibility to design their own programs to administer Medicaid dollars more effectively and efficiently.

I favor universal tax credits that vary by age for everyone to give low-income Americans the option to purchase private health insurance with the same dollars being spent on Medicaid. Given the choice, many people will switch from Medicaid to private insurance, which will be a win – win situation for everyone. The people will have better healthcare outcomes and improved access to doctors – and the federal and state governments will see lower expenditures as healthcare markets stabilize.

For those who favor Medicaid, or just don’t like change, the current system will remain in place. But the inevitable decline in Medicaid enrollment will take pressure off state legislatures at budget time without the political consequences if overall healthcare coverage was eliminated.

The Wall Street Journal editorial board says, “The Foundation for Government Accountability has proposed a temporary freeze for new Medicaid, which is a shrewd idea. No new applications for expansion would be approved, and gradually enrollment would fall as people naturally move up the income ladder and qualify out. The goal isn’t to strip people from the rolls but to ensure that fewer people need to be dependent on government.”

Anything that gets more Americans off Medicaid and onto private healthcare insurance has to be considered a good thing.

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