Medicaid expansion is a bad long-term decision and here’s why

Greg R. Lawson Jun 11, 2013

The Buckeye Institute was recently invited to participate in a roundtable discussion with the editorial board of the Cincinnati Enquirer regarding Medicaid expansion. Along with the Buckeye Institute, Chris Littleton of Ohio Rising and Sen. Bill Seitz (R- Cincinnati) raised serious questions on the wisdom of expanding Medicaid in Ohio.

While the Enquirer gave opposing views reasonable coverage in the roundtable overview article, the accompanying editorial fails to offer the same level of balance. In especially unfortunate phrasing, the editorial argues that those in opposition were “twisting” themselves in knots in order to oppose expansion.

Given the complexity of the issue, it is understandable that some intricacies of the debate may have to be simplified, however, it does not do the public an appropriate service to allow Ohioans to entertain the mistaken impression that there are no legitimate concerns with respect to Medicaid expansion. Only after these concerns are openly discussed and debated can a fully informed decision on this issue be reached. Ohio has not really had this debate. If it had, many more Ohioans would be aware of the following:

  • Medicaid expansion transforms Medicaid from a program to help the impoverished elderly, disabled, pregnant women, and families with children into an expansive welfare program that provides benefits to adults with no dependent children. Indeed, the liberal Urban Institute indicates that 89.7% of those proposed to be covered under the expansion are adults with no dependent children. Under the Kasich Administration’s initial proposal, there were NO work requirements–just an ongoing income-based benefit. The nation’s experience with federal welfare reform demonstrates that tying work requirements to benefits is necessary to prevent long-term dependency, and to encourage individuals to become more productive members of society. Yet even current recommendations to add a work requirement to Medicaid expansion depend upon obtaining a federal waiver that by law must be temporary. Such a waiver will be subject to non-renewal in subsequent years, at which point Ohio will be obligated to continue the expanded Medicaid program, even if the waiver is denied.
  • Once you expand, you can’t get out, no matter what the Administration says. Sen. Seitz made this point clear in the roundtable. We have made this point repeatedly in testimony before the House and here is a document outlining just how much like Hotel California the expansion really is. The Supreme Court said the that federal government could not force the states into expansion with the threat of losing all Medicaid funding, BUT once a state freely agrees to the expansion, the existing law, which is the Social Security Act, applies. That allows the Secretary of HHS to withhold the first dollar of Medicaid funding if a state fails to comply with federal law. Verbal assurances are not legally binding. Q and A documents from CMS are not binding. Only a change in Federal law passed by Congress can guarantee a state could back out of the expansion.
  • The Obama administration has ALREADY proposed reducing the enhanced federal matching rates that Ohio counts on in its rosy economic projections. In the FY 2013 proposed budget, the Obama administration threatened to renege on its enhanced matching rates “promises”—a “slight” change that would have cost Ohio $2 billion over the next five years alone. The Obama administration reversed course on the proposed cuts only AFTER the Supreme Court decision gave states the option to opt out of the expansion, and admitted that the reason for the change was to incentivize states to sign up for the expansion. In other words, they went from coercing states to bribing them. Given that this promised funding level is a cornerstone of the assumption that Medicaid expansion will be economically beneficial to the state, it seems odd that the media continually omits this from its coverage of the debate. For more on the uncertainty of federal funding levels, including the previous proposal to modify rates, click here.

Imagine what will happen ten years from now should the Feds dial the flow of funds back. At this point Ohio policymakers will be put on the horns of a true dilemma: cut spending to other state priorities like education or raise taxes and risk the state’s economic competitiveness.

  • ALL individuals at 100 percent of FPL will be able to receive heavily subsidized health coverage through the Federal Health Exchanges WITHOUT Medicaid expansion. Those at 100 percent of FPL cannot be asked to pay more than 2 percent of their annual salary towards premiums.

An individual making the Ohio minimum wage of $7.85 an hour in 2013, would be over the 100 percent FPL threshold by working 30 hours a week for 50 weeks a year. Or, they could work 40 hours per week for 36 weeks per year. To reiterate, this means they would qualify for Federal subsidies under the Health care exchange WITHOUT Medicaid expansion.

  • The cuts to hospitals’ uncompensated care have been delayed. The cuts proposed by the Affordable Care Act to what is known as the DSH (or Disproportionate Share) are being delayed by one year by the Obama Administration. This severely undermines the claims of proponents and rent-seeking hospital lobbyists who claim that expansion is needed immediately, and affords more time for serious reflection.
  • Many hospitals in Ohio actually receive a very small amount of their revenue from “charity care” Reimbursements. A review by Media Trackers Ohio of publicly available tax returns for multiple Ohio hospitals indicates that most hospitals will be only slightly impacted even if the dreaded DSH cuts do materialize.
  • Studies show that Medicaid recipients have health results that are no better than, and are frequently worse than, individuals with no insurance at all. Multiple academic studies raise serious questions as to the benefit of Medicaid for those on it.

For example, a brand-new study from the prestigious New England Journal of Medicine (NEJM) validates concerns raised by the Buckeye Institute and others regarding the long-term health benefits that accrue to those on Medicaid.

The NEJM study is a randomized and controlled study looking at the health outcomes of those in Oregon who obtained Medicaid coverage through a 2008 expansion to those that were eligible for Medicaid but placed on a waiting list. In other words, it was a direct comparison of those enrolled in Medicaid vs. those without coverage.

The conclusion? From the study, “This randomized, controlled study showed that Medicaid coverage generated no significant improvements in measured physical health outcomes in the first 2 years....”

This further confirms the results of previous studies, including a University of Virginia study of nearly 900,000 major operations in the United States, which found that surgical patients on Medicaid were 13 percent more likely to die in the hospital than uninsured individuals, even when controlling for demographic factors and health status. It is not good policy to spend billions on a failing program which produces such poor health outcomes.

While reasonable people may weigh the evidence in favor of and against Medicaid expansion differently, the above concerns are far from the contortions of those seeking to oppose Medicaid expansion. They are very real concerns that the expansion may look and feel good in the short-term, but is likely to yield a painful hangover in the long run.

It is time to stop the emotional rhetoric that obfuscates the underlying challenges. In short, it is time for Ohioans to have a full understanding of BOTH the benefits AND the risks of expansion. If they understand this, they just might come to the conclusion that there is a better way to take care of those who truly need a hand up, as opposed to a hand out.