March 23, 2016

Countering the Powerful Work Disincentive in Medicaid Expansion

Charles M. Arlinghaus

 

The New Hampshire state senate is prepared to ignore economic research and abandon any real effort to include a work requirement in its expansion of Medicaid to able-bodied, childless adults. A proposal that began as a supposed compromise would currently abandon the supposed centerpiece of that compromise effort.

 

New Hampshire’s regular Medicaid has 139,000 enrollees. The effort two years ago to expand Medicaid to the previously ineligible category of childless adults expanded the Medicaid rolls by more than 49,000. As 100% federal funding expires, so does the expansion expire at the end of this year. Supporters of renewing the expansion were able to attract previous opponents by promising to improve the incentives in the program, primarily a work requirement. That promise turned out to be a predictable bait and switch on the part of the sponsors.

 

Traditional Medicaid applied to categorically eligible populations who could not work — children, the elderly, the disabled. The few times before the ACA that states expanded Medicaid to the population of able-bodied childless adults, they found that having public insurance discouraged work and looking for work. In most cases, a full-time job will raise a worker’s income above the level to qualify for Medicaid so he has a strong incentive not to work full-time.

 

The most significant natural test of this theory came in Tennessee. Tennessee had expanded Medicaid to childless adults but quickly found it could not afford the costs. In 2005, 170,000 enrollees lost coverage. Academic researchers from Northwestern, Columbia, and Chicago studied the results. The National Bureau of Economic Research summary of the study said “they find an immediate increase in job search behavior and a steady rise in employment and health insurance coverage following the disenrollment.”

 

NBER’s summary concluded: “The findings suggest there is a powerful work disincentive from public health insurance eligibility.” A similar study by Dague also for NBER similarly found “enrollment into public insurance leads to sizeable and statistically meaningful reductions in employment.”

 

For New Hampshire’s purposes, these and other similar studies suggest that enrollment of childless adults will reduce job searches and employment for the population we newly cover.

 

There exists what researchers call a benefit cliff: one additional dollar of income costs the beneficiary thousands of dollars worth of benefits. They behave rationally by staying on the benefit side of that cliff, avoiding full-time employment that would put them over the edge.

 

To counter-balance that ill-effect, sponsors promised significant and meaningful work requirements of the kind that have made a big difference in welfare programs.

 

Consider that with meaningful work and job search requirements, our main welfare program called FANF has seen caseloads decline from 13,803 in 2011 in the midst of the recession to just 5,307 last month.

 

The federal government would prefer we not institute work requirements and has rejected them in other states. But in each of those other states, there was no risk to the feds in rejecting the requirement. The program was not dependent on them. They were just a stand alone wish.

 

The expansion bill as proposed earlier in the year would have made the program dependent on a work requirement. But sponsors instead imposed a “severability” clause which tells the federal regulators that they can reject our idea with no consequence.

 

Right now, our plan to “negotiate” with the federal government is to say “I know this is perhaps the last time in modern history you will want something from us but we don’t care. We will do everything you want no matter what. You don’t have to do anything we want. You don’t have to do anything we think is a good idea. But gosh it would be nice if you did.”

 

I believe the promoters of the expansion plan honestly believe that expansion will create a work disincentive. They also truly believe that a work requirement is good and important. Sadly, though, they don’t want to negotiate for it. They want to give up and not even try.

 

Making the clause “severable” is the same as neutering it. A more honest approach would be to remove it entirely and dispense with the fiction.

 

Better policy would be to admit to the “powerful work disincentive” that researchers have found and is just plain common sense. No state before us has gone to the federal government explaining that a work requirement is the only way of addressing one very serious problem with the program and that we simply can’t proceed without one.

Charles Arlinghaus is president of the Josiah Bartlett Center for Public Policy, a free market think tank based in Concord. He can be reached at [email protected]

Parker Bolt

August 2014

Canada has one of the most commonly cited single-payer health systems in the world. Many countries are constantly trying to improve their healthcare system, leading to comparisons to perceptually better systems. But before anyone tries to make direct comparisons, they should remember that regardless of its design, no healthcare system was created in one step. Canada’s healthcare system has developed over decades, with the goal of providing equal care to every citizen.

Prior to large changes in the 1940s, private insurance in Canada could be purchased as one saw fit, though most people simply paid their doctor as needed. Doctors privately charged patients based on the service, ability to pay, charging more or less based on the patient’s wealth. The end of WW1 and the subsequent Spanish Flu epidemic motivated the government to consider changes to provide for the mass of sick and injured. Changes to healthcare included setting lower medical costs for the poor and urban dwellers, and encouraging doctors to practice in rural areas that were otherwise short of medical professionals. The medical society in Canada briefly discussed ways of creating a national standard of accessible and affordable care, leading to  the idea of government controlled healthcare. However the idea never gained popular support, and the onset of the Great Depression put a halt to healthcare reform.

The Great Depression changed the mindset of Canada, namely due to the actions of the prime ministers that lead during that time. William King was Prime Minister with the Liberal Party from 1921-30. He believed the economy would right itself without any government involvement. During his administration King adamantly refused to give financial assistance to provinces, believing they should solve their problems independently. Though King did extend the legal powers of the provinces, the fiscal and economic issues they faced were out of their control. His strategy for solving the troubles of the Depression can be exemplified in his saying,  “It is what we prevent, rather than what we do that counts most in Government.”[1] Throughout the Depression, provinces had the legal power and authority but lacked the funds to overcome the problems facing them. During a campaign speech in 1930, King declared he “would not give a five-cent piece” to any province for Welfare relief; proving to the people that he simply refused to aid them in their suffering. King lost the election in 1930 to the Conservative Richard Bennett.

However, Bennett proved to be of a like mind with King with regards to taking action, again leaving provinces to struggle with their own problems. Bennett did not pledge to take strong action until the last year of his first (and final) term. When he did though, he wholeheartedly embraced the ideas of FDR’s New Deal. In 1935 Bennett declared that capitalism was dead and embraced FDR’s New Deal in a radio address that vastly differed from any of his previous speeches. “In the last five years great changes have taken place in the world,” he told his listeners. “The old order is gone. We are living in conditions that are new and strange to us. Canada on the dole is like a young and vigorous man in the poorhouse … If you believe that things should be left as they are, you and I hold contrary and irreconcilable views. I am for reform. And in my mind, reform means government intervention. It means government control and regulation. It means the end of laissez-faire.”[2] However, Bennett’s new promises failed to win him reelection. He lost to William King who campaigned on Bennett’s failings during the height of the Great Depression, with the slogan “King or Chaos”. King returned to the office of Prime Minster towards the Depression’s end, still believing that provincial matters should be solved by the provinces themselves.

Despite Bennett losing the election in 1935 and the government swinging to a Liberal majority, Bennett’s plan was sent to the supreme court, to rule on its constitutionality. However, the proposed federal powers were deemed beyond constitutional limits. The Depression had eroded the wealth of Canadians. Both King and Bennett had made the impression that provinces were on their own when it came to the well-being and health of the citizens.

Saskatchewan in particular had been severely hit by the depression, becoming the epitome of the “dirty thirties.” Its successful farming economy plummeted due to years of drought and a decrease in demand for farm products. In 1928 Saskatchewan’s net income from farming was $363 million, by 1933 it had decreased to a mere $11 million[3]. With such a crippling impact to the population’s finances, basic healthcare services for many became unaffordable.

After World War Two, Canada finally had the time and money to institute social programs and changes.  Saskatchewan had seen the worst of the Depression, and while Bennett and King served, provinces had gotten used to fending for themselves. Under the leadership of premier Tommy Douglas, Saskatchewan was the first to act on healthcare, passing the Hospital Services Plan  in 1947. It focused on guaranteeing accessibility to hospitals. Designed to be simple and affordable, a $5 premium per person to a maximum of $30 per family was supposed to account for all costs and possibly even make the province some money.[4] Those enrolled could simply go to a hospital and receive their care without any hassle of payment.

However, a year-end study found that per-capita costs were twice the original estimate in 1947 at $7.56; leaving Saskatchewan to pay 40% of hospital costs.[5] Subsequent years saw significant increases as costs rose to $11.41 in 1948 and to $13.59 in 1949. Despite the higher cost, the federal government took Saskatchewan’s plan and offered it to every province in 1957 by passing the Hospital Insurance and Diagnostic Services Act. In exchange for a province establishing a hospital insurance system, half of the cost would be covered by the federal government.  British Columbia, Alberta, Saskatchewan, Ontario, and Newfoundland accepted in 1958, but only after each had sent representatives to Saskatchewan to copy their method of organization and payment. By 1961 every province had instituted a hospital insurance plan, giving virtually all of the population hospital coverage.[6]

In 1960 Saskatchewan was on the eve of an election. Douglas promised the next major step in healthcare reform, proposing a universal insurance plan for Saskatchewan. Though this time, the population was starkly divided and the plan became a political talking point for the Liberal party hoping to win control from Douglas’ New Democratic Party (NDP). The vast majority of doctors opposed the plan, citing fears that they would become civil servants and be unable to treat their patients as they thought best. July 1st 1962, the day the law went into effect, 90% of Doctors went on strike. At first, public sympathy favored doctors plight, and the Liberal party used them to highlight flaws in Douglas’ administration. However the strike quickly lost momentum; Saskatchewan brought in doctors from other provinces as well as the U.S. to ensure that care was still being administered, and by mid-July many doctors had returned to work. Despite failing to prevent universal insurance in Saskatchewan, the strike had enough of an impact for a later concession to be added, which allowed doctors to opt-out of the Medicare plan.

In 1966, the Canadian government passed The Medical Care Act (MCA), allowing every province to provide universal insurance, with the federal government paying for half. The MCA also set requirements of affordability, comprehensiveness, accessibility, portability, and universality.[7] By 1971 every province had instituted an insurance plan that fulfilled all requirements.

The federal government was constitutionally unable to directly provide healthcare to citizens. However, the financial power it wielded could assist provinces with health costs they would otherwise be incapable of affording. Federal funds enabled every province to follow Saskatchewan’s example, and continued to support growing healthcare usage. The federal government was legally barred from directly controlling healthcare, they could only offer financial support, which they willingly gave in MCA’s early years.  The agreement involved in every national healthcare law since 1961 had included federal dollar for dollar contributions based on provincial spending. Increasing healthcare costs caused the federal government to limit its payments to provinces, and to give a five-year notification for the cancellation of the hospital insurance plan.

As an attempted solution, the Established Programs Financing (EPF) Act of 1977 moved from cost-sharing to block funding. Block funding gave healthcare providers far greater freedom with respect to billing in an attempt to make provinces fund their own costs. Due to the payment freedom, many doctors began billing directly to patients and extra-billing. Many doctors also opted out of Medicare and returned to a more private method of practice. The federal government was dissatisfied with the prospect of extra-billing, and the possibility that all of the money granted to provinces was not being spent on healthcare. The Canada Health Act, unanimously passed in 1984, altered the existing laws to force provinces to cover 100% of their populations (previously 95%) and prevented any form of direct-billing, extra-billing, or user charges. EPF also allowed the federal government to deduct funds from provinces if any form of extra-billing or direct payment took place. Due to the EPF, the federal government maintains a greater influence over provincial affairs, (a serious point of contention at the time) while paying less than their original pledge.

The changes to Canada’s healthcare system were designed to provide the same care to every Canadian with no differences in access or quality; and to prevent quality and access from being influenced by a patient’s ability to pay. Saskatchewan was the foundation of change for every major healthcare plan, any problems they had (finding adequate funds for hospital insurance in 1947) would carry on to every other province. An issue that many critics of universal insurance or any major social program often mention, is a governments ability to pay into the far future; a prospect which Canada has struggled and continues to struggle.

Canada has a well established system (one that is highly revered and held as a national symbol in its home), and I would be very surprised if it took any major changes in the foreseeable future; but it is not a cut and paste template for every country, nor is it feasible for every country due to its specific goals of equality and billing control over other issues.

Canadian healthcare is where it is today due to decades of pursuit. As Americans seek ways to improve our healthcare, we should follow Canada’s example and focus on creating a system that is unique to our own needs, rather than copying another nations plan.

 

[1] — Mackenzie King, August 26, 1936

[2] Blaming the Prime Minister. http://www.cbc.ca/history/EPISCONTENTSE1EP13CH2PA1LE.html 05/02/14

[3] Encyclopedia of Saskatchewan http://esask.uregina.ca/entry/great_depression.html 6/11/14.

[4] Encyclopedia of Saskatchewan. http://esask.uregina.ca/entry/hospital_services_plan.html 5/19/14/

[5] Encyclopedia of Saskatchewan. http://esask.uregina.ca/entry/hospital_services_plan.html 5/19/14/

[6] Historica Canada: Health Policy. http://www.thecanadianencyclopedia.ca/en/article/health-policy/ 4/29/14.

[7] Parliament of Canada. http://www.parl.gc.ca/content/sen/committee/371/soci/rep/repintmar01part1-e.htm 5/7/14.

March 2014

 Josh Elliott-Traficante

5,417 Granite Staters selected an insurance policy on the federal exchange in February. Since open enrollment began in October a total of 21,578 people have selected coverage. Overall, there has been very little change in the demographics of the pool since January, which is to be expected since as the pool grows larger, the harder it is to change the numbers.

Plans Purchased:

Looking at the different polices purchased (Bronze, Silver, Gold, Platinum, Catastrophic) there was only a minor change to the percentage share of Gold level plans, likely due to rounding. Otherwise, the market shares of the other plans remained unchanged.

 

Bronze

Silver

Gold

Platinum[i]

Catastrophic

New Hampshire

23%

59%

17%

N/A

1%

Change over Jan

0

0

-1

N/A

0

 

A Demographic Look:

The New Hampshire pool saw a small increase in the proportional size of the 26-34 cohort, mirroring single percentage point increases in the 18-25 and the 35-44 cohorts realized last month. As with last month, there was also a corresponding decrease in the 55-64 cohort.

The likely cause is, generally speaking, the older the person, the more insurance coverage is valued. Those were the people most likely to select policies in the early months of open enrollment, while younger people have delayed until the final months.

Despite the increase in younger enrollments, the 18-34 cohort saw its share of the pool only increase a single percentage point to 24%. Nationally the share remained unchanged at 25%, still well short the intended target of 40%.

 

<18

18-25

26-34

35-44

45-54

55-64

>65

18-34

New Hampshire

5%

8%

16%

14%

23%

34%

0%

24%

Change over Jan[ii]

+1

0

+1

0

0

-2

0

+1

 

Subsidies:

The percentage receiving subsidies remained unchanged from January, at 74%. For the current pool, that translates to 16,038 receiving a subsidy, while 7,610 are not.

Looking at subsidy data, cross referenced with plan level, there was little change over last month. For those who did not qualify for subsidies, there was roughly an equal distribution between the three metal plans, with a small number opting for a catastrophic plan.[iii] Those receiving subsidies overwhelming continue to choose Silver level plans over the other three options. (Look for a piece coming soon explaining why)

New Hampshire

Bronze

Silver

Gold

Catastrophic

With Subsidies

19%

68%

13%

0%

Without Subsidies

35%

30%

31%

4%

Who Has Paid?

One glaring hole in the data released from HHS is the percentage of people who have paid their first month’s premiums. The law requires insurance companies to carry policy holders for three months without payment before cancelling their policies. For those receiving coverage starting in January, anyone being dropped would not show up in the data until after the open enrollment period ends.

Despite claims from HHS that they do not know how many have paid, insurance industry officials contend that they actually do. Insurance companies estimate that nationally, between 15% and 20% have yet to pay for their premiums.



[i] Note: Anthem does not offer any Platinum level plans in New Hampshire

[ii] Note: Percentages may not equal 100% due to rounding

[iii] Note: Catastrophic level plans are only available for purchase by those age 30 and below.

By Parker Bolt

February 2014

In New Hampshire, the state’s Medicaid program is designed for parents, children, elderly and the disabled who meet certain financial guidelines. Every year, the state spends 39% ($2.1 billion) of its state budget on healthcare and social services, of which $700 million state funds go to Medicaid.  In comparison, California spends only 33% of its budget providing the same services with a population 29 times bigger than New Hampshire. California provides Medicaid for approximately 30% (6.8 million people) of its population[1], while N.H. provides for around 10% (137,000 participants) of its population.[2]

The Cost of Expansion:

To fully expand Medicaid in NH according to the Affordable Care Act, over seven years it would cost the state an additional $85 million dollars, but it is critical to break down this number on a yearly basis. The first two years save New Hampshire $10 million; this is the period that the Federal government pays 100% of Medicaid costs. After this though, the state first pays 5%, then 10% of the cost. Year six will cost New Hampshire $27 million, and when N.H. settles into its 10% share of the pay in year seven, the cost will be at least $40 million annually[3]. Conversely, if Medicaid is not expanded, over seven years, New Hampshire’s Medicaid costs would be reduced by $65 million-a swing of $150 million. It may not sound like a big increase but considering how much N.H. already spends on Medicaid as a percentage of its annual operating budget (which is 13%), $85 million is quite a large sum. The first 5 years are designed to entice a state into expansion, with savings for the first two years or so, gradually increasing a state’s share to 10% in the seventh year. Looking beyond seven years, the $40 million yearly cost is not simply a onetime expense but a permanent annual increase.

Lessons from Arizona and Maine:

A number of states have previously expanded Medicaid, but Arizona’s and Maine’s expansions are of particular interest because they expanded to the same population of childless adults that Medicaid expansion under the ACA seeks to cover. (Arizona and Maine expanded to 100% of Federal Poverty Level (FPL)[4] while ACA expansion covers up to 138% of FPL.)

When Arizona decided to expand Medicaid in 2000, it estimated that it would cost $2 billion based upon an estimated number of additional enrollees over a ten year period. In 2010, Arizona expected 47,000 parents to enroll; instead, 150,000 enrolled. They also estimated 75,000 childless adults to enroll in the same year, instead 206,000 enrolled[5]. Expansion cost $8.4 billion, just between 2002 and 2008 alone. Childless adults, who are a large part of the population that would be eligible, cost between two and four times as much as parents and children. All of this occurred, even though Arizona also only raised the Medicaid eligibility level to 100% of the FPL as opposed to 138% current proposed.

Arizona spent four times the originally estimated cost and received three times the estimated enrollment, yet the number of uninsured did not drop from pre-expansion levels. In fact, from 2005 to 2010 the number of uninsured actually increased[6]. However, the percentage of the population covered by private insurance sank from 62% in 2002, to 56% in 2010; while Medicaid coverage increased from 13% to 20%.

Similarly, after expansion, Maine’s percentage of population on private insurance dropped from 66% in 2002 to 59% by 2010, while Medicaid rose, and the uninsured stayed at its 2002 levels. Maine’s budget could not sustain the number of Medicaid enrollees, and there are 24,000 people on a waiting list for coverage under the program. Both Maine and Arizona saw a 7 percentage point decrease in coverage by private insurance, and a corresponding 7% percentage point increase in Medicaid. This means that the increase in Medicaid enrollments came from individuals who dropped private insurance and switched to Medicaid, not from the ranks of the uninsured. This phenomenon is referred to as the “Crowd Out Effect.” Of course, the intended purpose of Medicaid expansion is to provide coverage for the uninsured, not to shift people off of private coverage and onto government coverage.

Some argue that if the rate of uninsured by decreased even a single percentage point, then the cost would be worth it, however, in neither Arizona nor Maine did the uninsured decline. Both states independently expanded Medicaid, with the virtuous goal of expanding coverage to the uninsured population, yet both greatly underestimated the cost and were rewarded with a 7% percentage point decrease in the privately insured and no change in the rate of uninsured.

Conclusions:

There are four main points for New Hampshire legislators should ponder when assessing whether to expand Medicaid. First, the cost to New Hampshire must be considered by looking at year seven and beyond and by planning for increased costs due to Crowd Out. The best method to do this is to measure the increased costs and enrollments in Arizona and Maine and to increase our projections accordingly. Secondly, the problem of Crowd Out needs mitigated. Third, what if Medicaid Expansion proves to be unsuccessful? Once the government has promised people access to Medicaid, they cannot in good faith deny them. In practice repealing or scaling-back Medicaid expansion in a state is near impossible, hence we should consider Medicaid expansion permanent. Fourth, can Medicaid Expansion even accomplish its goal? Arizona and Maine did not expand as far as the ACA requirements, and still they encountered greatly increased costs with no drop in the rate of uninsured to show for it. Given the results in Arizona and Maine, the Expanded Medicaid does not accomplish its goal.



[1]Medicaid.gov.  http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-State/california.html

[2]Medicaid.gov. http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-State/new-hampshire.html

[3]Lewin Group. An evaluation of the impact of Medicaid expansion n New Hampshire. http://www.lewin.com/~/media/Lewin/Site_Sections/Publications/NHMedicaid%20Expansion.pdf

[4] Federal Poverty Level is $19,530 a year for a household of three, this is the 2013 level

[5]Medicaid Cure: Policy Brief #3. March 11,2013. Medicaid expansion: We already know how this story ends. http://www.medicaidcure.org/wp-content/uploads/2013/03/Medicaid-Expansion-We-Already-Know-How-the-Story-Ends-Medicaid-Cure-Policy-Brief-31.pdf

[6] Medicaid Cure: Policy Brief #3. March 11,2013. Medicaid expansion: We already know how this story ends. http://www.medicaidcure.org/wp-content/uploads/2013/03/Medicaid-Expansion-We-Already-Know-How-the-Story-Ends-Medicaid-Cure-Policy-Brief-31.pdf

 

 

Charlie Arlinghaus

February 26, 2014

As originally published in the New Hampshire Union Leader

Some supporters of the Senate Medicaid Expansion Plan would have you believe the only two choices are their non-compromise and just saying no. As is typical, the reality is far more complicated. Most conservative opponents of the Senate’s Medicaid Expansion are more than willing to support a real compromise and have a more detailed knowledge of the plan and therefore its flaws than the public statements of some sponsors indicate they do.

A more detailed knowledge of the program suggests how and where compromise really is possible. The most obvious place is in the area of waivers. Senate Medicaid Expansion is best thought of as adopting the same program the governor proposed for a two year bridge period with the hope of changing it but only if the federal government grants us permission.

Sponsors of the program have claimed they can’t support the governor’s proposed expansion but can support the program the federal government may or may not approve.

Most conservatives believe that starting a program before the waiver is approved eliminates any real negotiating power with the federal government and then locks us into a program that will always be reauthorized because of irresistible political pressure. No significant social benefit program can be reversed.

Supporters are confident their program will be approved. But remember that we are asking the federal government to pay New Hampshire 100% of the costs of our program or the program won’t continue after December 2016 (see section XXV-c). In 49 other states the feds will only pay 90% so to continue the program we would be asking the feds to do something they can’t do. I’m all in favor of asking for anything but the feds have already turned down this request and can not realistically ever approve such disparate treatment.

Knowing that, we know with as much certainty as we can in a situation like this that the waiver will not be approved, at least not beyond the first year. So we are adopting the governor’s preferred expansion with no real concessions to conservatives about who is covered, the total size of Medicaid in the state, or how the benefits are administered.

In two years, the legislature will be asked to reauthorize a program that is providing health benefits to between 50 and 80,000 people. We will be told they tried to do something better and couldn’t but now we have no choice.

Why would it not be better to ask for all waivers up front? The plan is essentially a replication of Iowa’s. Iowa did not expand until the waiver was received. If the federal government had rejected any important component, Iowa would not have proceeded. That is clearly a stronger negotiating position that adopting something the federal government prefers and then hoping they’ll give us permission to make changes they and that are not being detailed.

Time is not that big an issue here. Iowa’s waiver took seven months from the bill’s passage even though they had to write a waiver from scratch with no examples to follow and the federal government had to rule on something they hadn’t seen before. In our case, we’re merely piggy-backing and the feds have seen every component of what we want before. Further, it is a poorly kept secret that the administration has been having informal conversations with the feds for months.

The second obvious area of compromise is in enrollment numbers. At this point, virtually everyone agrees that there ought to be a safety net. Most of us are willing to see Medicaid changed into a program with income based targeting of the benefit instead of categorical targeting. But the Senate Medicaid Expansion will increase the number of our citizens under Medicaid-funded social welfare programs from 135,000 to, by my estimate, 217,000 – an increase in the program’s size of more than half.

Would it not be reasonable to target the resources to the poorest 135,000 people? The governor showed us the way with her treatment of the breast cancer eligibility. Everyone in that program over 138% of federal poverty would receive the sliding scale subsidy offered by the exchange while those below would remain Medicaid eligible. If this same principle were applied to other populations it would alleviate much of the conservative concern about an enormous expansion of a dependency culture.

Almost no conservative of any variety would have any quibble with a decision to cover the same number of people but target that coverage to the lowest income levels.

A real compromise is still possible and desirable. But it has to acknowledge at the start that the current proposals is mistaken in not asking for waivers up front, in not endorsing any cost sharing measures, and in not redirecting resources instead of just expanding. While any conservative could support real compromise, no conservative of any shade or stripe can embrace the lack of compromise called Senate Medicaid Expansion.

Without a doubt, Medicaid is the biggest issue this session in Concord. We have collected all of our work on the issue, as well as from like minded friends, to serve as a one stop shop on this complex issue.

 

Recent Columns:

A Real Compromise On Medicaid Expansion is Still Possible

Advice from Maine: Don’t Follow Our Lead on Medicaid Expansion

Wrong Policy for New Hampshire at the Wrong Time

Medicaid Expansion is Bad Medicine for New Hampshire

State Medicaid Plan in Not as Advertised

The Medicaid Compromise that Isn’t

 

Text of Bill Currently Under Consideration:

Senate Bill 413

Senate Bill 413 Status Docket

 

Oregon Medicaid Study Findings:

Several years ago, researchers were recently given the rare opportunity to study the effectiveness of Medicaid Expansion. Oregon opted to expand its Medicaid program to include some low income, uninsured adults. However, funds were only available to enroll only a portion of those eligible, so roughly 10,000 individuals were chosen by random lottery to receive coverage. While unintended as such, these conditions laid the groundwork to conduct a scientific study of the efficacy of Medicaid by creating a randomly selected sample (those chosen) with an established control group (those not chosen).

Medicaid Expansion Leads to Increased ER Usage

Medicaid Expansion: Little Bang for the Buck

 

Older Columns: (Note: May refer to older proposals)

Glitch Makes Republican Plan the Same as the Democrats

On Medicaid: A Tale of Two Commissions

Finding Common Ground on Medicaid Expansion will be Hard

 

Kenneth Fredette

Maine House Republican Leader

March 1, 2014

As originally published in the Concord Monitor

When I heard that the Great State of New Hampshire was considering an expansion of its Medicaid program under ObamaCare, the first thought I had was of a quote from Dante’s “Inferno”: “Abandon all hope, ye who enter here.”

I say this as the Republican Leader in the Maine House of Representatives and as someone who has served on my state’s Appropriations Committee, where we spent countless late nights trying to patch the Medicaid-induced leaks in our state budget after past expansions.

Maine and New Hampshire are two very similar states in terms of geography, culture, and population size.  They are two very different states, however, in terms of economic policy.  It wasn’t always this way.  Decades ago, Maine took a decidedly sharp left turn, heading in the direction of more government programs and higher taxation.  New Hampshire avoided the income tax, the welfare state, and other trappings of big government.

Despite starting out in similar situations decades ago with roughly equally-sized private sector economies, New Hampshire has rapidly outpaced Maine according to almost every economic indicator.

New Hampshire’s median household income is about $65,000 to Maine’s $48,000.  Your unemployment rate has been among the lowest in the country since the recession.  Liberals in Maine like to tout welfare programs that are designed to reduce poverty, but our poverty rate is 58 percent higher than yours, despite Maine ranking second in the nation for welfare spending as a percentage of overall state spending.

It’s interesting how liberals in Maine make excuses for New Hampshire’s success while liberals in New Hampshire make excuses for Maine’s failures.

We’ve made a lot of positive changes here in Maine thanks to Gov. Paul LePage and a Republican legislative majority in 2011-2012.  Those reforms began to lower taxes, trim regulations, reform welfare, and bring some fiscal sanity to Augusta, and people are starting to take notice.  But there’s a long way to go.

Mainers are hardworking and independent-minded people, and they’re sick of economic stagnation.  I’m confident we’ll stay on the right track.

In fact, our competitive advantage with your state would be greatly enhanced if we managed to resist ObamaCare’s welfare expansion while you embrace it.

Over the past 10-20 years, Maine has taken the bait of federal matching funds and expanded its Medicaid program considerably while New Hampshire has declined the money and its attached strings.

All of the promises of Medicaid expansion have fallen flat.  Emergency room usage goes up, not down, with Medicaid coverage.  Charity care provided by our hospitals has tripled.  Federal matching rates have been slashed.  Physical health outcomes are no better.  Cost and enrollment levels were not manageable; instead, expansion shattered its original cost estimates.

What this has meant for Maine’s budget, taxpayers, and economy is very tangible.  Maine’s total income tax revenues collected equal the difference in cost between Maine’s and New Hampshire’s public welfare departments.  So if our DHHS was the size of yours, we could eliminate our income tax.

Medicaid’s share of the state budget has doubled since 1998 and now sits at 25 percent of all state spending.  By 2024, medical welfare will consume 36 percent of our budget.  State aid to municipalities is under siege, taxes continue to go up, and politicians have even raided oil spill cleanup funds to plug the perennial budget gap in our Medicaid program.

I understand that the proposal currently being considered in Concord uses federal Medicaid expansion funds to expand subsidized private coverage on the exchange.

That’s a better deal than the one originally offered by the feds under ObamaCare, and you can credit Republican leaders in your state’s senate with that.

But it’s still an expansion of state government and a major strain on taxpayers over the long term, similar to what we’ve experience in Maine, and I would caution you to avoid it.

The most important thing to remember, as citizens of the Granite State, is that the “New Hampshire Advantage” is not by accident; it is by design.  Your elected officials have made good economic decisions over the years and it has paid off.

Maine has gone down the path of Medicaid expansion before.  Take it from me.  You don’t want to follow us.

Michael and James Sununu

March 3, 2014

As originally published in the Nashua Telegraph

Politics and governing aren’t the same thing, but they are inevitably intertwined. As much as we would like otherwise, political considerations often drive policy decisions. Sometimes the repercussions are small. In the pending decision over Medicaid expansion, however, the stakes are huge and it would be a serious mistake for Republicans in the state Senate to make this a political decision. The potential for the largest-ever expansion of state government should be considered only on the merits of “Is this good public policy?” Unfortunately, in the face of significant evidence that this policy will not work, it looks like the strongest driving force on this issue for the Senate GOP is that, politically, “we need to do something.”

Republicans champion individual freedom and limited government that intervenes only when necessary. Our policy decisions should reflect this. We fight expansion of the welfare state because it makes people more dependent on government and creates perverse incentives against work, independence and income mobility. But Senate Republicans appear to be on the abyss of enabling a new and significant round of dependency, one that will still not solve the problem at hand.

Supporters of expansion say we have to reduce the uninsured population. They argue the cost of the uninsured is too high and by insuring them through the government (albeit through taxpayer support for private insurance premiums) we will lower the overall cost of health care. Except available evidence shows us it doesn’t work. Maine expanded Medicaid coverage in 2002 for the same reason, but it was a huge failure. Before expansion, 12 percent of their population was uninsured. After Medicaid expansion? Still, 12 percent uninsured. Markets adjust when government gets more involved, so while Medicaid rolls expanded, private insurance rolls fell, costing taxpayers and businesses more money.

Another argument for Medicaid Expansion is to reduce emergency room visits, increase preventative care all while lowering the overall cost of health care. Again, the evidence doesn’t support this claim. A recent study published in the journal Science reached the opposite conclusion. Economists at MIT and Harvard studied Oregon’s Medicaid experiment. They compared similar populations, part of which “won” the lottery to enroll in Medicaid and part that remained uninsured. They found that expanding Medicaid “generated no significant improvement in measured health outcomes”.

More importantly, the study also found that emergency room use increased among those added to Medicaid, exactly the opposite of the desired outcome.

Proponents of expansion in New Hampshire will argue their plan is different because they support the use of private insurance. But once the market adjusts, we could end up with undesirable outcomes and no real net benefit, at the cost of tens or hundreds of millions of dollars.

It is puzzling that hospitals and many in the business community are supportive of this expansion. Hospitals are mired in their own battles over uncompensated care, the Medicaid Enhancement Tax, and low reimbursement rates. Yet somehow shifting tens of thousands of patients from private insurance to a system with lower reimbursements is going to help matters? And the business community should certainly know better than to support any large-scale expansion of government. When the program costs more than projected, or the federal government fails to meet its obligations, where do businesses think the state will turn for more revenue?

The notion that “we need to do something” seems to have been hatched and nurtured inside Concord’s version of the Beltway. The first attempt at Medicaid Expansion died last year, and there was hardly an outcry from the general public. Yet Senate Republicans still feel they have to pass a “compromise” that is in reality a bad deal. What’s worse is that in the future, if the program doesn’t live up to expectations it will be almost impossible to pull the plug. A sunset provision is nice, but only if you have the nerve to let it sunset – and political “Profiles in Courage” are pretty scarce in Concord these days.

For the sake of argument, though, let’s add some political context. In 2012, the Republican nominee for President was in the difficult position of having supported a large government intervention into health care in his state and could not aggressively attack Obamacare. But the unfolding Obamacare disaster will be front and center in the 2014 elections. New Hampshire Republicans should be pointing out the folly of large-scale interventions in health care, not strapping themselves to the mast of a sinking ship because they are afraid Ray Buckley will accuse them of class warfare. Bulletin: Ray Buckley will accuse Republicans of that no matter what.

New Hampshire’s corner office has lacked leadership and direction for far too long. Senate Republicans have often been the only bulwark against bad public policy, and deserve credit for such victories as a responsible budget and limiting regulatory overreach. They should continue this approach with Medicaid expansion and say “not this policy, not right now.”

Josh Elliott-Traficante

February 2014

January saw 5,417 Granite Staters select an insurance policy on the federal exchange. Since open enrollment began in October a total of 16,863 have selected coverage.

The Department of Health and Human Services with each successive monthly report continues to add more demographic data, giving a more detailed look at the insurance pool and what type of coverage they have purchased.

Plans Purchased:

Looking at the different polices purchased (Bronze, Silver, Gold, Platinum, Catastrophic) there has been very little change in percentages of each since last month’s report. The January numbers however, seem to indicate a shift, albeit minor, towards the less expensive plans.

Bronze

Silver

Gold

Platinum[i]

Catastrophic

New Hampshire

23%

59%

18%

N/A

1%

Change over Dec

+1

+2

-3

N/A

+1

 

A Demographic Look:

A possible cause for this trend towards the lower metal levels may be a result of a marginally more youthful pool. New Hampshire pool saw small up ticks in the proportional size of the 18-25 and 35-44 cohorts, with a corresponding decrease in the 55-64 cohort over last month. The all-important 18-34 cohort saw its share of the total pool increase a single percentage point to 23%. This reflects trends nationally, which also saw the share of 18-34 cohort increase by a single percentage point to 25%. Despite this improvement, this still leaves the 18-34 cohort well behind of the intended goal of it making up 40% of the pool.

<18

18-25

26-34

35-44

45-54

55-64

>65

18-34

New Hampshire

4%

8%

15%

14%

23%

36%

0%

23%

Change over Dec[ii]

0

+1

0

+1

0

-2

0

+1

 

Subsidies?

The percentage receiving subsidies for coverage increased slight to 74%, up from 72%. That translates to 12,450 receiving a subsidy, while 7,610 are not.

For the first time, the Department of Health and Human Services has included subsidy data, cross referenced with plan level. For those who did not qualify for subsidies, there was roughly an equal distribution between the three metal plans, with a small number opting for a catastrophic plan.[iii] In contrast, those receiving subsidies overwhelming chose Silver level plans over the other three options. This is not unique to New Hampshire but a national trend.

One possible cause the Cost Sharing Subsidy, which reduces the co-pays, deductibles and out of pocket limits of the insurance plans. In order to qualify for the subsidy, one must be below 250% of the federal poverty limit and purchase a Silver level plan. This type of incentive would naturally make the Silver level plan a much more attractive option over the other three options.

New Hampshire

Bronze

Silver

Gold

Catastrophic

With Subsidies

18%

68%

13%

0%

Without Subsidies

35%

31%

31%

4%



[i] Note: Anthem does not offer any Platinum level plans in New Hampshire

[ii] Note: Percentages may not equal 100% due to rounding

[iii] Note: Catastrophic level plans are only available for purchase by those age 30 and below.

John Stephen

February 12, 2014

As originally published in the New Hampshire Union Leader

The recently announced deal in the New Hampshire Senate of a “framework” to expand Medicaid is a bad deal for our state’s future. The fundamental problem is not just that the plan implements a key component of Obamacare here, but it continues to build on a profoundly flawed Medicaid program desperately in need of reform.

Medicaid, in its current form, is a bulky, inefficient program that hasn’t kept up with the times. It was created in 1964 and, like most government programs, simply hasn’t evolved as proficiently as other market-driven products. Other than Corvettes, pretty much everything we buy today is better and less expensive than the 1964 counterparts, but Medicaid’s basic identity hasn’t changed, and that’s a real problem.

For starters, Medicaid’s incentives are poorly aligned with the reality of the marketplace.

In 1964, the program was put in place to provide some compensation to doctors and hospitals for those who couldn’t pay their bills. However, these same providers quickly viewed this new government program as a new payer. While states assumed that providers would be happy to get something for what had been charity care, the low reimbursement rates meant that many doctors would take Medicaid patients and hospitals would rapidly shuttle out Medicaid patients to make room for higher-paying customers.

That’s why no one should be surprised about the quality of Medicaid care. A study of Medicaid expansion in Oregon shows that Medicaid patients fare no better on health outcomes than the uninsured. Even more damning is a University of Virginia study that shows that Medicaid patients are 13 percent more likely to suffer serious negative outcomes as a result of surgery than the uninsured and 97 percent more likely than those on private insurance.

What keeps many from using the emergency room for routine medical issues is the high copayments that private insurance charges. Under Medicaid, though, states are not allowed to charge more than minuscule copays, which explains why a recent Harvard-MIT study showed that Medicaid patients increase their emergency room use by 40 percent over the uninsured.

The free market knows that incentives matter, and Medicaid shows us glaring examples of that, and why it should not be a model any state should follow.

There is a better way to care for the truly poor of the state than Medicaid expansion.

In 2008, I worked with Rhode Island on what remains the most innovative Medicaid waiver that the federal government has ever granted. The waiver did not expand Medicaid, but allowed the state unprecedented flexibility to manage its program — for example, spending more on community care rather than expensive nursing home care. As a result, Rhode Island has since reduced Medicaid spending by more than $2 billion.

Instead of trying to force the state to implement an outdated, expensive expansion of Medicaid that would force tens of thousands of New Hampshire residents on a program that may lower their quality of care, the state should use this opportunity to begin negotiations on a Medicaid waiver that would transform a broken program to one that could evolve with a changing health care landscape. Not only would this save considerable taxpayer money, but it would deliver higher quality outcomes for those involved.

The start of this effort is to send a clear and unequivocal announcement to the federal government that New Hampshire will not participate in Medicaid expansion under Obamacare. That is the only way that state leaders can gain leverage with a federal government that is focused on implementing President Obama’s signature policy initiative. Taking federal Obamacare funds means that we will need to continue with a broken, ineffective Medicaid program.

Then, the state must make clear that the only way in which New Hampshire will work with the federal government to offer coverage to the able-bodied adults that are covered under Obamacare is if the Obama administration is willing to give us the flexibility to find savings in Medicaid and use those funds to provide coverage for the 22,000 residents who could gain coverage in the process. Without this pressure, there is no way the federal government will back off its plans to bring a Washington solution to the Granite State.

The solution to our health care problems is not in more government, it is in bringing real innovation to a 1960s era program. It’s worked elsewhere, it can work here.

John Stephen of Manchester is the former state commissioner of health and human services and 2010 Republican nominee for governor. He is the managing partner of the Stephen Group, a health care and government solutions firm.