Medicaid Expansion: A Quick Primer

In North Carolina, most news coverage on the Affordable Care Act (ACA), also known as Obamacare, has focused on the massive technical failures of the federal exchange website. But there is another healthcare issue that is heating up all over the country: Medicaid expansion. This article should help provide some background information for North Carolinians interested in learning more about the issue.

What is Medicaid?

Started in 1965, Medicaid is a government entitlement program that provides health insurance and health services for low-income people that fall under an eligible category. Those categories vary by state, but the most important diagnostic for eligibility is the federal poverty level (FPL).

A family of four with a combined annual income of $23,550 is considered to be at 100 percent of the FPL. However, it is possible to have an income higher than the federal poverty level and still be eligible for Medicaid.  For example, children under the age of 6 qualify for Medicaid coverage even if their family income is 200% of the poverty level ($47,100 for a family of four).

Why are people talking about Medicaid expansion?

In 2010, Congress passed the Patient Protection and Affordable Care Act. Also known as Obamacare, the Affordable Care Act (ACA) made huge changes to healthcare in the United States. The law itself is over 900 pages, with over ten thousand additional pages of associated regulations. As Speaker of the House Nancy Pelosi (D-CA) famously declared, “We have to pass the bill so that you can find out what is in it, away from the fog of controversy.”

One of the many provisions of the Affordable Care Act was a revised – and relaxed – set of criteria for Medicaid eligibility. The new requirement changed the eligibility for Medicaid to expand coverage to people with a household income of up to 138 percent of the federal poverty line. The new criteria also expanded Medicaid eligibility to childless adults. These changes, if enacted, would massively expand the number of people eligible for government entitlements. In an initial estimate, the Congressional Budget Office (CBO) projected that 13 million people would become eligible for Medicaid in 2014 under the Affordable Care Act.

Medicaid expansion hit a major snag, though. Only two years after the passage of the law, the Supreme Court ruled that it was unconstitutional to force states to expand Medicaid or else risk losing their existing Medicaid funding. This meant that states could decide whether or not they would expand Medicaid eligibility. Although the federal government promised to pick up 100 percent of the cost of Medicaid expansion for three years, only twenty-five states have moved to expand their programs.

What did North Carolina do about Medicaid expansion?

In March 2013, Governor McCrory signed Senate Bill 4, which rejected Medicaid expansion in North Carolina. Senate President Pro Tempore Phil Berger explained: “Too many people have been seduced by the lure of easy money from the federal government. They will promise anything and they do – often.”

Is Medicaid expansion a good idea?

It depends who you ask. North Carolina liberals argue that Medicaid expansion is a free lunch from the federal government. They say that expanded eligibility means that more low-income families will have health insurance, at no additional cost to the state through 2016.

But there is an overwhelming body of evidence that suggests that Medicaid expansion is a horrible idea:

  • There’s no such thing as a free lunch. The federal government has promised to pay for Medicaid expansion for three years. But what happens after that? North Carolina has to start picking up the tab. After 2016, the state will have to pay for 10 percent of the cost. That may seem like a negligible amount, but as Michael Tanner of the Cato Institute has observed, “10 percent of a very large cost is still a very large cost.” What’s more, there is nothing to say that the federal government won’t renege on its commitment to pay 90 percent of the cost for the indefinite future. The federal government currently has a $17 trillion national debt. This is somewhat akin to your bankrupt uncle promising to pay for college – you better start saving.
  • Medicaid expansion is fiscally irresponsible on the federal level. Going back to that $17 trillion national debt: it is absurd to argue that Medicaid expansion is “free federal money,” because we are paying for it as federal taxpayers. Medicaid spending is projected to grow exponentially (see graph below). It is reckless and irresponsible to assent to any policy that would plunge the country into even more crippling debt.

Sep2013 CBO

 

  • Medicaid expansion gives the federal government even more power over the states. Because the federal government controls Medicaid funding, any increase in the size of the program will only serve to further erode federalism in the United States. Federalism is a crucial part of the Constitution and a fundamental safeguard of liberty.
  • Medicaid expansion will not help the poor. There is a popular misconception that Medicaid helps poor people. It doesn’t. A groundbreaking study examined Medicaid expansion in Oregon, comparing outcomes for people who received coverage versus a control group that did not have health insurance. It found some limited benefits of Medicaid enrollment, like reduced rates of depression. But in terms of overall health outcomes, there was no difference between the Medicaid group and the control group in terms of blood pressure, cholesterol, diabetes, or obesity – all indicators that should have been readily improvable over the span of the study. If the goal of Medicaid is providing better health care to the poor, it is failing miserably.
  • Medicaid expansion will increase healthcare costs.  Supporters of Medicaid expansion have argued that expanding Medicaid coverage would help save money because the formerly uninsured would no longer go to the emergency room for non-emergency situations. But the Oregon study concluded that Medicaid participants were actually more likely than non-insured people to go to the emergency room. Over the course of the study, there was a 40 percent increase in visits to the emergency room, and a 25 to 35 percent increase in total spending on enrollees.
  • Medicaid expansion will cover people who can already afford health insurance. Although the program is intended to help Americans who are financially worst-off, Medicaid expansion would likely extend coverage to some young, healthy people who could already afford to buy health insurance at lower premiums. Because a limited number of health providers accept Medicaid patients, people who legitimately need assistance will have an even harder time getting access to care.
  • Medicaid expansion will cause private insurance to become even more expensive. Medicaid underpays doctors – which means that providers have to increase their rates on privately insured patients to remain profitable.

That’s only a partial list of the problems caused by Medicaid expansion. Avik Roy of the Manhattan Institute co-authored a paper with Grace-Marie Turner of the Galen Institute that goes into more detail on the subject.

Conclusion

North Carolina showed considerable restraint and prudence in rejecting Medicaid expansion. Medicaid expansion would fail to achieve its intended effect of helping the poor. Instead, it would massively increase costs, crowd out services for the neediest recipients, and make the state complicit in the country’s fiscal suicide. As voices on the left clamor louder for Medicaid expansion, legislators must stay the course.

 

This article was posted in Economy, Healthcare, Legislative Activity by Lee Brett on January 16, 2014 at 4:51 PM.

© 2011 The Civitas Institute. Visit us on the web at www.nccivitas.org.
This article can be found at http://www.nccivitas.org/2014/medicaid-expansion-quick-primer/

Comments on this article

  • 1

    Lonnie Webster
    Lonnie Webster Jan 17, 2014 at 10:05

    One of the solutions here is to legislate that any publicly traded corporation or any corporation that receives any government contract ( supplies food or services to public schools, prisons, or any government agency) must pay a living wage to employees. We should not have American citizens working full time and making half a living wage.
    The NCGA failure to expand Medicaid is short sited and bad economic. Hospitals across NC need Medicaid expanded to remain solvent. Those medicaid payment goes to pay wages for hospital staff, ground keepers, janitorial staff, jobs that maybe cut adding more to the unemployed. Expanding Medicaid will bring down the cost of insurance as those cost have to be made up some where.
    Humanity is lacking in the conservative movement as is common sense and justice.

  • 2

    Lee Brett
    Lee Brett Jan 17, 2014 at 10:30

    Mr. Webster,

    Surely we can have a rational discussion without resorting to attacks on personal character. I’m talking about your last sentence, which accuses conservatives of lacking humanity.

    It would seem much more inhumane to me to pass laws that would cause unemployment to skyrocket. And that’s exactly what a so-called “living wage” would do. If employers are forced to pay someone $20 to push a broom across a shop floor, then they will necessarily hire far fewer employees. On a larger level, companies would move out of North Carolina and make unemployment even worse.

    As to your point about Medicaid — that’s also wrong. Medicaid is not a jobs program. It’s not a handout for hospitals. It’s supposed to be a program to benefit the poorest Americans, and we should judge it on that basis alone. You have said nothing on those grounds, which I think is telling.

    Finally, your point about Medicaid bringing down the cost of insurance — nothing could be further than the truth. As I pointed out in the article, Medicaid expansion would cause private insurance to become more expensive, because providers will try to recoup losses from low reimbursement rates. It would also increase public health expenditures, since Medicaid patients are much more likely to use extremely costly emergency room services.

  • 3

    Lonnie Webster
    Lonnie Webster Jan 17, 2014 at 12:20

    Mr Brett

    Sorry but after 30 plus years of Rush Limbaugh being the conservative voice of the Republican Party your stuck with an image of inhumanity and angry old white men.
    Why do you think millions of Americans should live in grinding property so you can make a larger profit or buy a box of chicken or a burger for a quarter less? How is capitalism working for these people and why should their sons and daughters defend such injustice by serving in the US military when the sons and daughters of few wealthy Americans are willing to do so?
    Medicare, Social Security, SNAP, public schools, prisons and medicaid are jobs programs, maybe not by design but travel into pocket of Appalachia or the Midwest and those programs are the economic base of those communities.
    How do you think the medical expenses of the uninsured are paid now or before the ACA? It gets passed along but citizens die in the effort to not treat the poor but most do eventually get treated often at greater expense then if preventive medicine had been used.
    How does Europe or Canada care for the citizens of those countries? Are they richer or just more just and humane?

  • 4

    Lonnie Webster
    Lonnie Webster Jan 17, 2014 at 15:48

    Lee Brett

    I see in your debate you jump to a figure of $20.00 per hour for workers a number no one on the left has suggested. I have a couple of questions.

    #1: Is $20.00 per hour the realistic number you think is a living wage and that your own family could survive on such a number?

    # 2: Did you jump to $20.00 per hour figure because you knew you couldn’t defend the current slave wages being paid by multi national corporations who’s CEOs and executives make multi million dollar incomes while paying employees incomes requiring taxpayers to supplement their basic needs of food, clothing and housing?
    #3: How does Australia manage to keep workers from being exploited by wealthy unethical businesses? http://www.fairwork.gov.au/pay/national-minimum-wage/pages/default.aspx

  • 5

    Lonnie Webster
    Lonnie Webster Jan 18, 2014 at 17:11

    In an earlier post I made the comment “Humanity is lacking in the conservative movement as is common sense and justice” and was attack by Lee Brett for making a personal attack . the attack is on the cruelty of conservative public policy and the injustice of such policy. Below is a link to a News and Observer Opinion by Gene Nichol from Dec 28, 2013 show the misery and reality of conservative public policy. The people at Civitas Institute would have the public to believe more tax cuts for the wealthy will cure all social issues if the rich can hold onto just a little more wealth all boat will rise and the wealthy will share that welt of their own generosity. http://www.newsobserver.com/2013/12/28/3488213/from-silence-to-savagery-pain.html

  • 6

    Larry mcduffie
    Larry mcduffie Jun 17, 2014 at 21:59

    Lonnie,How much is a living wage,and who died and left u in charge of telling us what a living wage is?You talk about justice.Do u think its justice to take more than half of someone’s income and give it to another person?I know I am not going to get an answer to this.Instead,I will get a long drawn out Pile of crap about Sweden,Finland,and Norway.I already told u I will pay for your airfare if u promise not to come back.

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