Medicaid Expansion: Wolf in Sheep's Clothing

Medicaid Expansion: Wolf in Sheep's Clothing

In Utah, the recent meeting between Gov. Gary Herbert and Health and Human Services secretary Sylvia Burwell has brought Medicaid expansion back to center stage. Those who support the expansion note that it will bring in extra money from the federal government. But they ignore several important long-term problems with this plan.

The Kaiser Family Foundation estimates that the Medicaid Expansion will cost Utah $5,638 million over ten years. According to KFF, the additional federal funds will probably be in the vicinity of $5,274 million over ten years. At a quick glance this might seem like a good deal for Utah. It’s not.

It is very likely that the cost estimate is low. Such sweeping policy changes can foster widespread unintended consequences and change the behavior of patients, doctors, and hospitals. To put this into perspective, in 1967 the House Ways and Means Committee predicted Medicare would cost $12 billion by 1990. Instead, it cost $110 billion.

At the core of exploding Medicaid costs are the matching funds the federal government already provides to states. In this system, the more a state spends, the more federal money it receives; the average federal match was 57 percent in fiscal year 2012. For spending on the newly eligible in states that expand Medicaid, the federal government promises a 100 percent match for three years and a 90 percent match thereafter. This will likely magnify these perverse incentives and hasten reckless spending, resulting in higher-than-anticipated costs.

It is probable that, the federal government will attempt to scale back the enhanced match as Medicaid costs soar. In fact, the 2013 federal budget proposed by the Obama administration included a change to the match. It would have replaced the original Medicaid match, the enhanced match for the Children’s Health Insurance Program, and Obamacare’s increased match for the newly eligible with a single blended rate for the three types of beneficiaries. The Hill called this blended rate a "major Medicaid cut."

Utah lawmakers have absolutely no guarantee that future Congresses and administrations will maintain the enhanced federal match. Nor do they have any guarantee that they will be able to roll back eligibility if costs exceed projections. The end result will be higher costs, higher federal deficits, increased taxes, slower economic growth, and fewer jobs.

It's also worth noting that, under the Affordable Care Act, Medicaid costs in Utah are likely to increase regardless of whether the state proceeds with the expansion. Due to "streamlined" applications, publicity, and the individual mandate, many who are eligible for Medicaid even under the old criteria, but have not enrolled, likely will. Even if Utah expands Medicaid, it will not receive the enhanced federal match for these enrollees. These beneficiaries -- and more if Utah opts for the Medicaid expansion -- will also increase administrative costs, which are similarly not covered by the enhanced match.

Medicaid needs more reform, not more beneficiaries. Utah needs the flexibility to tailor the program to the unique needs of the state and individual patients. While Utah legislators must certainly work with federal regulators to provide more accessible, higher-quality care to the uninsured and underinsured, there are better ways to achieve these ends than a costly expansion of Medicaid.

Jason D. Fodeman is a board-certified internal-medicine doctor practicing in Tucson, Ariz.

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