The Virginia General Assembly’s decision to expand the state’s already costly Medicaid program will have widespread effects on the state’s health care market. Despite the claim by critics that the expansion will not harm the state’s budget while improving health care for the poor, Virginians should brace for the massive negative effects of this so-called “free” money.
The recently passed legislation will dramatically increase the cost of Medicaid while imposing myriad new restrictions. The expanded Medicaid program would cover families and single adults earning up to 138 percent of the poverty level, or $28,180 for a family of three.
Expansion proponents have said Virginia and other states shouldn’t pass up this opportunity to get “free” cash from the federal government, but Medicaid expansion is anything but “free”; expanding Medicaid often ends up costing states millions of extra tax dollars every year and destabilizes the program. Why? Because as we’ve seen in state after state, far more people end up signing up for Medicaid under expansion programs that expansion advocates predict, skyrocketing Medicaid costs.
Further, although the federal government is currently promising to pick up a significant portion of the costs for the expanded Medicaid population for those states that sign up, there is no guarantee that this arrangement will continue in the future. This is particularly problematic because the federal government holds more than $20 trillion in debt and will undoubtedly have to adjust current spending programs, including Medicaid, should the nation remain financially solvent in the years to come.
It’s also worth noting the federal government will only pay the higher Obamacare-created rate for newly eligible Medicaid enrollees; new enrollees who were previously eligible will receive the same funding rate they do now under the non-expanded program.
A report from the Department of Health and Human Services (HHS) found the average cost of a Medicaid expansion enrollee was nearly 50 percent higher in fiscal year 2015 than the levels HHS had previously projected.
States should be working diligently to determine how to reduce their Medicaid rolls, not expand them. The rising costs associated with long-term care, major expenses for Medicaid programs, are expected to dramatically increase in the coming years as Baby Boomers retire. In 2010, approximately $129.3 billion of Medicaid funding, about 31 percent, was allotted for long-term care expenditures.
Some say expansion is worth the financial risk because Medicaid is vital for improving health outcomes, but data show Medicaid is an inferior, poorly performing health insurance program that does not improve health outcomes or reduce costs.
For instance, Oregon expanded its Medicaid program in 2008, adding an additional 30,000 people to the state’s rolls. A 2013 study in The New England Journal of Medicine noted that while the state’s Medicaid expansion program did create some improvements, such as overall health care use and financial assistance, the state’s expanded Medicaid program failed to achieve its principal goal: improving overall health. The results show expansion had no significant effect on the prevalence or diagnosis of hypertension or high cholesterol levels or on the average glycated hemoglobin levels measured by diabetic patients, even with increased use of diabetes medication.
In Virginia and elsewhere, Republicans have offered a more reasonable Medicaid expansion package—one that would include a work requirement of 80 hours per month and penalties for noncompliance. But these gestures will not make expansion financially viable nor provide better health to patients.
Any state that has chosen to avoid expansion should stand its ground, reject Medicaid expansion and embrace more meaningful reforms. HHS allows states to apply for Section 1115 waivers, which allow them to attain more flexibility in their state Medicaid programs. Reform proposals that can be submitted to the Centers for Medicare and Medicaid Services and HHS include: work requirements, payment enforcement mechanisms to encourage enrollees to pay cost sharing, incentives for enrollees to engage in healthy behaviors, time limits on coverage, monthly income verification and eligibility renewals, payment and eligibility changes, and the incorporation of health care innovations, including direct primary care.
Medicaid expansion, at its core, builds on a failing model, one where the beneficial aspects of market competition are lost. Instead of expanding the flawed Medicaid system, which is unnecessarily costly, delivers subpar health care, and shifts more power to the national government, state lawmakers should focus on reform options that would manage costs, ensure accountability, limit fraud, and refocus Medicaid on achieving its true purpose: providing care for those truly in need.