On Medicaid Expansion the Right Answer is Not Yet

Charlie Arlinghaus

May 22, 2013

As originally published in the New Hampshire Union Leader

Like most states in the country, New Hampshire is having a difficult time answering the question about whether or not to expand Medicaid coverage. For the last decade politicians of both parties have not made any attempt to expand Medicaid coverage in New Hampshire. With the federal government dangling some initial money for the program, some are tempted but unsure. Today, with so many unanswered questions and reasons to be skeptical policymakers should avoid a rush to judgment and just say maybe.

The federal government, as part of its new healthcare law, has offered to borrow about a trillion dollars to help states expand Medicaid coverage. Supporters in New Hampshire say it’s too good a bargain to pass up: the feds say they’ll pay 100% of the new costs in the first few years, then 90% and then 50%.

Supporters are excited that Medicaid coverage might reduce the percentage of people without insurance and reduce the amount of charity care (to the uninsured and to Medicaid patients) currently provided by hospitals.

But there are many reasons to be skeptical. There is some reason to believe the federal government may not live up to its promises and the experience in other states suggests the outcomes may not be as promised.

It’s important to remember that no one in New Hampshire would think this was a good idea if we paid for it ourselves at the regular Medicaid match rate. Remember that during the four years of a Democratic governor and Democratic legislature none of them proposed any significant expansion of Medicaid. The same is true of Republican control and divided control. There has been no local thought of expanding Medicaid in decades.

The feds currently claim they will pay 100% of the initial costs but they’ve already hinted at backing away. President Obama is perhaps the biggest supporter of this among any federal politician – it was his idea after all. Yet his 2012 proposal retreated from 100% funding and switched to a blended reimbursed rate attacked by left wing think tanks. If the biggest cheerleader for expansion has signaled a willingness to cut back before the program has begun, we ought not expect the promised federal funds to materialize.

While we are told that expanding Medicaid will reduce the level of uninsured, experienced across the country proves exactly the opposite. In the last decade, two states significantly expanded Medicaid: Maine and Arizona. In Arizona, the percentage of the population uninsured went from 19% to 19% over the decade – no change at all.

Lest you think it has something to do with deserts or warm air, our neighbors in Maine had precisely the same experience. Their uninsured went from 12% to 12%. In both states, the percentage with private insurance declined by the same amount as the increase in Medicaid coverage.

The other supposed policy benefit of expanding Medicaid coverage is a decrease in the amount of charity care provided by hospitals. Hospitals have a small number of patients with no insurance for whom they write off all their costs and a larger number of Medicaid patients for whom they receive payment for less than 50% of costs.

One of the big drivers of Arizona’s expansion was the expectation that it would dramatically reduce charity care and hence cost-shifting to private insurance. Instead, post-expansion, charity care costs rose an average of 9% per year (remember that that the percentage of uninsured didn’t change).

In Maine, a state almost exactly the same size as our own, they too saw increases in charity care. In the first eight years of expansion, charity care has climbed from $61 million to $215 million (in Maine too there was no reduction in the uninsured).

At this point, there are too many questions to say yes to Medicaid expansion. We know the results won’t be as advertised. There is every reason to be concerned about costs and the ability or willingness of a destitute federal government to meet its promises.

Proponents suggest we can adopt the program and just opt out at any time later but practically that isn’t true. The federal could adopt a maintenance of effort requirement like they adopted with the stimulus package that precludes any changes. And rolling back any program is always problematic.

This year, in this budget, there are too many questions, too many reasons to be skeptical to say yes to expansion.