The Trouble with Medicaid Expansion

As yesterday's deadline to enroll in an Obamacare marketplace insurance plan quietly passed, Gov. Wolf is boasting about Medicaid expansion—a major component of the federal government's health care overhaul. Unfortunately, the first year of full-blown Medicaid expansion will not result in better outcomes for the most vulnerable Pennsylvanians. 

The administration is celebrating 500,000 new Medicaid beneficiaries—many of whom are childless adults earning up to 138% of the federal poverty line—and a modest decline in the state's uninsured population. Fewer uninsured Pennsylvanians is a good thing, but too often Medicaid coverage doesn’t translate into accessible health care. If past experience is any guide, these new Medicaid patients will face long wait times and poor quality care thanks to low provider reimbursement and a maze of red tape. 

Worse, Obamacare's perverse incentives make the neediest Medicaid patients (children, pregnant women, the blind, and the disabled) most vulnerable to benefit cuts. While states receive roughly half of their funding for traditional Medicaid patients from the federal government, newly-enrolled beneficiaries are entirely funded by the federal government until 2017. This means that traditional Medicaid patients will be squeezed out in the event of state-level program cuts. 

Consider the experience of Arizona, a state that expanded Medicaid to able-bodied, childless adults in 2000.

The state quickly discovered its Medicaid expansion would cost taxpayers four times what was initially expected, forcing policymakers to cut other areas in order to maintain the expansion.

In 2010, Arizona eliminated Medicaid coverage for heart, liver, lung, pancreas and bone marrow transplants in order to pay for the growing costs of its Medicaid expansion.  As a result, truly vulnerable Medicaid patients in desperate need of life-saving organ transplants died so able-bodied adults with no disabilities keeping them from employment could keep receiving free, taxpayer-funded Medicaid coverage.

Advocates of Medicaid expansion also claim budget savings, such as when Gov. Wolf estimated more than $500 million in savings in his 2015-16 state budget. The administration is expected to tout more Medicaid cost savings in next week’s 2016-17 budget address.

There are two problems with counting Medicaid expansion as “a savings to the taxpayers.” First, the money “saved” by Medicaid expansion is better described as money “shifted” from state to federal taxpayers. One way or another, Pennsylvanians are footing the bill for expansion.

Secondly, short-term savings will likely be eclipsed by long-term cost increases. A recent report from the Independent Fiscal Office projects a 7.2 percent growth in Human Services in 2016-17, largely due to Medicaid cost growth—despite the federal government picking up 100% of the cost of new Medicaid enrollees. Starting in 2017, a portion of these costs will be shifted back to Pennsylvania—with state taxpayers assuming 5 percent of the burden in fiscal year 2017-18 and 10 percent by 2020.

Our Medicaid program fails patients and taxpayers alike. Giving patients more control over their care, regularly reviewing eligibility, and making it easier for mid-level providers to serve low-income patients are a few responsible ways to give more Pennsylvanians access to high quality health care.