Greenberg: Medicaid Expansion Is Bad for Health Care, Coverage, and Cost

Editor's note: Dan Greenberg, author of this commentary, is a lawyer and former state legislator. Currently, he serves as president of the Advance Arkansas Institute, a conservative public-policy organization.

Arkansas policymakers will soon be asked to sign onto Obamacare’s expansion of Medicaid. The Beebe administration’s attempts to portray Medicaid expansion as having all upside and no downside are highly misleading: Medicaid expansion is bad for Arkansas, and those who want to see affordable and accessible health care in Arkansas should oppose it.

The central question of Medicaid should be: how do we best care for the poor and sick over the long run? Those who know how Medicaid works in the real world also know this program falls short.

Consider the case of Deamonte Driver, a 12-year-old Maryland child who died a few years ago of a tooth abscess. A routine $80 tooth extraction might have saved him; unfortunately, five out of six dentists in Maryland don’t take Medicaid. Deamonte’s mother was already demoralized by the difficulties of finding a dentist who took Medicaid; she had previously made over 25 calls before finding a dentist who accepted Medicaid to see her older son. Eventually, she took Deamonte to the emergency room, where he got medicine for a headache, sinusitis, and a dental abscess. But he just got sicker: at that point, the bacteria from the abscess had spread to his brain. Despite a series of brain surgeries that cost taxpayers more than a quarter of a million dollars, Deamonte died a few weeks later.

Deamonte was a victim of Medicaid: a broken federal program that, regrettably, the Obama administration is doing its best to expand to the middle class. On average, Medicaid pays doctors just 56 percent of the amount that private insurers pay; nearly a third of doctors nationwide won’t accept new Medicaid patients. The barriers Medicaid clients face don’t make their needs go away: instead, they end up using hospital emergency rooms more often. Academic studies have consistently demonstrated the result of this bureaucratic dysfunction: Medicaid patients have inferior access to health care when compared to privately insured patients.

Indeed, there is very little evidence generally that expanding Medicaid will improve the health of the uninsured: the evidence calls into question whether broad coverage expansions improve health at all. When Oregon randomly picked 10,000 new Medicaid enrollees a few years ago, it tracked the results and compared them with the unenrolled population. The result: although the enrollees consumed more services, actual medical outcomes barely changed at all. Two-thirds of reported self-improvement in health came after enrollment, but before receiving health care. These facts should teach policymakers not to confuse spending inputs with health outcomes. Ultimately, what government has created for many low-income Medicaid clients is a trap. The prospect of losing Medicaid benefits deters people from seeking increased income, because a higher paycheck would force the loss of Medicaid benefits and trigger actual income loss. One study found that many Medicaid recipients would have to double their earnings before their additional income would compensate for loss of Medicaid benefits.

Medicaid also pushes savings downwards; Medicaid recipients, to retain their eligibility, routinely shift assets from savings to consumption. The most dangerous long-term effect of Medicaid expansion will be to reduce access to private health insurance: new Medicaid enrollees will take free Medicaid over private health insurance, thus increasing private insurance’s scarcity and cost.

From a taxpayer/budgetary perspective, the expanded funds will almost certainly not cover the increased costs over the long run. This isn’t just based on the fact that an Arkansas expansion won’t cover many of the new entrants into the system or the increased administrative costs that more health care spending brings. More generally, in the shadow of what promises to be just one of a series of “fiscal cliffs,” we shouldn’t pretend that the likelihood of the federal government keeping its long-term Medicaid promises is 100%. Reduced Medicaid payments over the long haul are on the congressional bargaining table, like it or not: observe the Obama administration’s “blended rate” proposal in its FY2013 budget, which will shift more costs onto states.

Similarly, the Beebe administration’s estimates of savings assume state cuts of one-third of “uncompensated care” payments to hospitals and clinics in 2014, and cuts of two-thirds of this current spending by 2020. Because federal cuts for uncompensated care also loom, the notion that providers will accept such state cuts on top of them appears dreamily rosy.

In the real world, expanding Medicaid in Arkansas will also make our state a magnet for potential Medicaid clients who live nearby, given that at least three of our neighboring states (probably more) will opt out of the expansion. Government estimates of future costs are notoriously bad at taking such real-world variables into account.

Consider the famous 1967 congressional estimate that, in 1990, we would spend $12 billion on Medicare – by 1990, the Medicare budget was nearly ten times as expensive as predicted. Government bureaucrats’ claims about how more spending now will lead to large savings later deserve skepticism: indeed, now that Arkansas legislators are currently being instructed that the only choices available to them are significant cuts in Medicaid services or a large Medicaid cash infusion, this suggests that past Medicaid predictions relied on by Arkansas lawmakers were (quite literally) terribly optimistic. Arkansas legislators have already demonstrated a consensus not to establish a state exchange, perhaps because of the tens or hundreds of millions of dollars that maintaining the exchange would load onto our state budget, or perhaps because rejecting a state exchange might protect Arkansas businesses and families from Obamacare mandates. Declining a state exchange is best for Arkansas, and policymakers should decline Medicaid expansion as well.

The best way to improve patient outcomes would be to transform Medicaid by integrating the proven success of private health insurance into the existing Medicaid system. As the Advance Arkansas Institute explained in our new book, Action Plan for Arkansas 2013, Florida’s successful reforms flattened Medicaid’s costs by giving Medicaid patients a choice of private managed-care programs. A five-county pilot version of the reform saved the state nearly $120 million annually and produced greater access to care, higher degrees of patient satisfaction, and significant improvement in health outcomes. Arkansas policymakers should follow Florida’s approach and pursue better health outcomes, not just bigger budgets.

We need policies that encourage the provision of health care, not the provision of government subsidies – not just because it’s good for taxpayers, but because it’s good for the health of the people.