728 x 90
728 x 90
728 x 90
728 x 90
728 x 90

Medicaid expansion has hidden costs

by Linda Gorman

The federal Patient Protection and Affordable Care Act (Obamacare) has radically restructured federal subsidy programs for medical care. For the first time in decades, Colorado can begin bringing state expenditures in line with tax revenues by using federal money to reverse the excessive growth in its Medicaid and child health insurance programs.

Shrinking Medicaid and CHP could make a lot of people better off. Obamacare makes subsidized commercial health coverage available for a large fraction of the healthy adults and children who make up the bulk of the state’s Medicaid and CHP caseloads. The catch is that people have to be ineligible for Medicaid and CHP in order to be eligible for the federally subsidized coverage.

Compared to Medicaid, commercial policies have historically reimbursed at significantly higher rates, making it easier to find a physician and to arrange for timely care. Low reimbursements generally translate into less care. A number of recent papers in medical literature report that Medicaid coverage is an independent predictor for increased mortality, extended hospital stays and higher costs. In some cases, Medicaid patients even have worse outcomes than uninsured patients.

Obamacare annual premiums for commercial coverage for people at 100 percent of the federal poverty level ($11,170 in money income in 2012) are limited to $217 for a single person. They increase by about $75 for each additional person. Federal poverty level income refers only to cash income.

It does not take into account subsidies from programs like those that provide means-tested assistance for food, housing, transportation, child care or heat. According to the 2010 Consumer Expenditure Survey, people with under $10,000 a year in pretax income spent about $1,000 on entertainment, $1,000 on food away from home, and more than $2,000 on private vehicle transportation.

Because Medicaid puts severe limits on the price that can be charged for care, Medicaid patients often have to wait. This increases the time price of care. Unpredictable waiting times are especially burdensome for hourly workers who aren’t getting paid while they wait.

Many low-income people would rather pay nominally higher prices for care than miss work, but Medicaid rules prevent this. When North Carolina Medicaid reduced the allowable one-stop supply of Medicaid prescription medications from 100 days to 34 days and raised the co-pay from $1 to $3, raising the time price led to a much greater reduction in the needed drugs obtained by chronically ill patients than increasing the price.

Even if Obamacare didn’t offer the opportunity to make many Medicaid clients better off by switching them to private insurance plans, Medicaid expansion makes little fiscal sense. Even though the federal government promises to cover the medical costs of Medicaid expansion through 2019, it does not cover the state share of additional administrative costs, which average an estimated $2.48 for each additional $100 of state Medicaid spending.

Plus, the Obama administration’s FY 2013 budget has already proposed making states pay more.

Even without expanding the program, Colorado Medicaid costs are set by an unknown amount.

Thanks to Obamacare’s individual mandate, some fraction of the one-third of the uninsured who are already Medicaid eligible but simply have not signed up because they don’t need health care will now sign up, swelling caseloads and costs. People who are eligible for Medicaid but who currently have private coverage will add to the rolls as employers respond to Obamacare by cutting hours and dropping employer coverage.

The state budget will also face increased demands for provider subsidies. Medicaid pays most providers less than cost, so increasing Medicaid caseloads can increase uncompensated care costs.

Finally, Obamacare makes deep cuts in Medicare reimbursements, a loss that will lead to calls for more taxpayer subsidies for Colorado’s government-owned hospitals.

This article originally appeared in the Pueblo Chieftan, January 6, 2013.