In this Research & Commentary, Matthew Glans discusses Medicaid expansion and how states expanding with faux free-market reforms have failed to improve their Medicaid programs.
Medicaid expansion is an expensive endeavor that many critics believe does not provide better or more affordable health care. Many of the expansion plans states are considering would use federal funds to expand their Medicaid programs to a larger portion of their state, creating new costs the federal government may not always be able to cover and leaving state taxpayers on the hook for the new liabilities.
Some Republican-controlled states have expanded their Medicaid programs via reforms they refer to as “free-market,” even though the policies enhance the power of government and are fiscally irresponsible. Other states, including Kansas and Oklahoma, have considered using funds from the pot of allegedly “free” dollars offered by the federal government to expand Medicaid, even though many states have learned the hard way these funds have detrimental strings attached to them.
In an article published in Forbes, the Foundation for Government Accountability’s Nic Horton, Jonathan Ingram, and Josh Archambault argue expanding Medicaid in any state would harm those in real need. “Details aside, there is one fact expansion supporters cannot escape: every penny spent on expansion is a penny stolen from the state’s most vulnerable citizens.”
Arkansas and Indiana expanded their Medicaid programs under the false promise of offering a “free-market alternative” to “Obamacare,” and several Republican governors are reconsidering their opposition to Medicaid expansion. But the so-called “private option” plans are merely machinations concocted by Medicaid expansion supporters to give conservative legislators political cover for expansion. This is done so politicians on both sides of the aisle can grab what they incorrectly claim is “free money” from the federal government.
Indiana’s Medicaid expansion programs, which was initially implemented through a Section 1115 waiver in February 2015, added several reforms that were presented as free-market, including monthly premiums and penalties for non-payment of premiums as a modest cost sharing model. Despite these efforts, the cost of Medicaid expansion in Indiana continues to rise at an unsustainable rate and the premiums and enforcement rules have proven to be far from adequate.
A new study from the Pew Charitable Trusts has found that the states’ share of Medicaid spending has grown steadily over time and is taking up more and more of state revenue. In many states, Medicaid has become the states’ biggest expense after K-12 education. According to an article by Larry DeBoer, professor of agricultural economics at Purdue University, Indiana’s share of Medicaid costs “was expected to total $2.2 billion in fiscal 2019, then $2.5 billion in 2020 and $2.6 billion in 2021.” DeBoer argues these increasing costs will eat up any new tax revenue the state may generate.
“Rapid growth of Medicaid costs means an added $270 million will be needed in 2020, and $120 million will be needed in 2021. So Medicaid will require about 66 percent of all the new revenue in 2020, and 30 percent in 2021.”
The premiums also failed to achieve their goals. According to the Kaiser Family Foundation, more than half of all of those eligible to pay premiums under Indiana’s waiver during the first two years of implementation failed to do so.
Over the past decade, Medicaid rolls have expanded much faster than many states can handle. From 2013 to 2018, the number of Medicaid enrollees increased by nearly 28 percent, to more than 67 million. In 2017, the cost of Medicaid reached $581.9 billion. States and the federal government share costs for the safety-net program and as the federal share of costs decreases, states must take on more of the cost burden. In the states choosing to expand Medicaid, the federal share has decreased since the passage of the Affordable Care Act and now sits at 90 percent.
Medicaid costs are skyrocketing due to overregulation, rising drug and medical device costs, and increased use of long-term and behavioral health services. In Indiana, Medicaid costs have risen consistently over the past decade. These rising costs will continue to grow over time. According to a recent report from the Centers for Medicare and Medicaid Services, Medicaid expenditures are expected to rise at an average annual rate of 5.7 percent from 2017 to 2027, a rate that far exceeds annual U.S. gross domestic product growth.
Indiana’s Medicaid expansion should serve as a cautionary tale and a lesson for all other states. There is no such thing as a conservative Medicaid expansion, the strings attached make any expansion difficult to support over the long run.