Why Medicaid expansion is a bad idea.
This column is a reponse to “Medicine Brawl,” by writer-at-large Michael Ennis.
For Michael Ennis, the gritty details of Texas’ Medicaid problem aren’t the main reason Governor Rick Perry would choose to opt out of the Obamacare Medicaid expansion. Rather, it’s Perry’s “inflexible antigovernment ideology.” In Ennis’ view, putting “Texas businesses and workers ahead of ideology” means accepting the expansion as a viable way to provide coverage for low-income Texans.
His implication is that Perry’s resistance isn’t motivated by concrete facts, and that the governor would rather stick it to Obama than help poor people get coverage. Starting from this premise, Ennis doesn’t have to argue for Medicaid expansion on its merits, he just has to poke fun at Perry and repeat that a quarter of Texans are uninsured.
But in fact, serious opponents of Medicaid expansion defy Washington for immensely practical reasons, not partisan ones. Here’s the main reason: Medicaid is a mess, and expanding it is a bad idea. Medicaid in its current form was created by decades of federal overreach and state acquiescence, and fixing it will mean admitting that it is broken and unsustainable—something Democrats and Republicans alike have been loath to do with open-ended entitlements.
Obamacare proposes to transform Medicaid from a targeted program to help specific groups of poor people (pregnant women, the disabled, needy families, children) into a massive welfare entitlement for the entire nonelderly population earning up to 138 percent of the federal poverty level—about 17 million people nationwide. Half of those who get health insurance under the law’s individual mandate will get it through Medicaid. In Texas, that’ll be about 1.8 million by 2022 (on top of the 3.3 million Texans already enrolled in Medicaid), which is a lot of people to force into a program that provides sub-standard care and that doctors are abandoning in droves.
Medicaid is not a panacea for the country’s health care woes; it isn’t even sufficient for those currently covered by it. Today, less than a third of Texas physicians accept new Medicaid patients—a figure that’s been dropping for years and will continue to drop as the rolls increase. Medicaid reimbursement rates have been cut to less than half of what physicians usually charge, so Medicaid enrollees not only end up without timely access to routine, preventative care, but when they finally do see a doctor it’s often as a “charity case.”
Ennis thinks Perry should simply dump more money and patients into this mess and hope for the best. Expanding Medicaid, he says, would provide coverage to millions of uninsured Texas workers, “probably helping Texas more than any other state.” Leaving aside for the moment the fact that it would actually be a net loss for the state, an uncomfortable implication lurks in the background: private health insurance and the world’s best health care are only for the upper and middle classes, while Medicaid is good enough for the poor.
That’s unacceptable. Low-income people should have access to the same health care everybody else has. If all those eligible for Obamacare’s health insurance exchanges—those earning between 138 and 400 percent of the federal poverty level, which is basically the entire middle class—will get a federal subsidy to help them purchase insurance, why shouldn’t those who would otherwise be stuck in Medicaid have the same thing?
Under Obamacare, states must expand Medicaid if they want to get tens of billions in “free money” from the feds. The billions would fully fund expansion for the first three years and then the federal government’s support would gradually drop to 90 percent of the costs by 2020. But there is good reason to believe that after that the feds will cover significantly less—perhaps as little as the current rate, which is 58 per cent. .
In other words, even if the federal government comes through with the money—as we cannonball over the fiscal cliff—we’ll still be on the hook for the extra ten percent after three years, and in a decade we’ll be on the hook for billions more. There’s a $4 billion hole in the current state Medicaid budget that needs backfilling before lawmakers can address the projected $8 billion shortfall in the 2014-15 budget. If we can’t afford the Medicaid program as it is, what makes anyone think we can afford an even bigger program ten years from now?
Ennis notes that Texas hospitals spend $5 billion a year providing care for the uninsured, and then argues that Obamacare’s Medicaid expansion “would most effectively address” this problem because once the law is in place everyone will have private insurance or be on Medicaid. But this sunny notion is somewhat undermined by a cold, hard fact: about 1.8 million illegal immigrants in Texas, who are uninsured and completely excluded from Obamacare, will keep on getting primary care in emergency rooms—with or without Medicaid expansion. Ennis is correct in saying that Washington reimburses Texas hospitals for providing this care, but he fails to note that Obamacare cuts federal funding for uncompensated care by $18 billion between 2014 and 2020. It’s reasonable to think that some, and perhaps quite a lot, of the $5 billion Ennis thinks we’ll save will evaporate over time, and the social safety net we’re left with will have more holes in it than the one we have now.
If anyone’s packing a pistol in the Medicaid expansion fight, it isn’t Perry; it’s the feds. The expansion, like much of the health care law, amounts to the federal government putting a gun to the states’ heads and saying, “comply, or else.” The Supreme Court ruled that states could opt out of the Medicaid expansion, but Washington’s attempts at coercion persist. Ennis admits as much, reasoning that, “we’ll give away considerably more if we refuse the expansion.” That’s the original flaw of Medicaid: matching federal funds. By intermingling state and federal finances, Medicaid created a witch’s brew that hooks states on federal dollars. The addiction will grow as Medicaid grows, and it will remain with us down the road, once the expansion is no longer “fully funded.”
State governors must make a momentous choice. If Perry resists the temptation to expand, and succeeds in getting flexibility from the feds, then Texas can blaze new paths to reform, like transforming Medicaid into a sliding scale subsidy program to help uninsured Texans purchase private insurance. Opting out of the Medicaid expansion will also save Texas from the fate that will befall other states: exploding costs, tax hikes, deep spending cuts. More importantly, it will save millions of low-income Texans from being forced into a failing system.
By contrast, betting his political career on the “Medicaid expansion spigot” would be the epitome of putting politics and ideology ahead of needy Texans. Perry’s legacy will not be ensured by doubling down on the unstable foundation of an unsustainable entitlement program. It might temporarily placate his critics, but in the long run it would ruin Perry’s reputation as a leader who was willing to face reality when Washington was not.
John Daniel Davidson is a health care policy analyst in the Center for Health Care Policy at the Texas Public Policy Foundation.