Medicaid expansion won’t save rural hospitals

By Steve Wilson
February 20, 2020

Medicaid expansion for the able-bodied in Mississippi will lead to more government dependence, much higher government spending, and won’t save rural hospitals, according to research from the Foundation for Government Accountability.

Mississippi is one of 14 states remaining that haven’t adopted the expansion of Medicaid under the Affordable Care Act, better known as Obamacare, for able-bodied, working adults up to 138 percent of the poverty level. 

Nic Horton is the research director of the FGA and has compiled some data on possible Medicaid expansion in the state. He says that Medicaid expansion is offensive to him because the program was originally intended to cover the health care needs of the disabled and elderly populations.

“Mississippi should really be proud that they’ve made the right decision on this for so long,” Horton said. “The states that have gone down this path have regretted it. When you go state by state, you find this is a program that can’t be controlled. There are no time limits. 

“No work requirements. It’s an unlimited, open-ended welfare program for able-bodied adults.”

There are two Democrat-sponsored bills in the Senate, SB 2499 and SB 2181 that would expand the state’s Medicaid program under Obamacare. Both have been double-referred to the Medicaid and Appropriations committees.

Listen Now: Talking Medicaid expansion with Nic Horton, research director at FGA

The price tag to expand Medicaid won’t be cheap. The FGA estimates that the part of expansion paid by Mississippi taxpayers would add up to $28 billion over the first decade. That’s a much higher cost than predicted by a 2012 study by the Institutes for Higher Learning. 

This study said Medicaid expansion would cost state taxpayers $148.7 million in 2021 in a high enrollment scenario (95 percent participation by eligible residents.

For comparison, the state’s general fund appropriations in 2020 added up to $5.746 billion.

As for claims that Medicaid expansion is the salve for the closure of struggling rural hospitals, Horton said this isn’t the case. According to FGA research of 1,700 hospitals with six years of financial data, the effects of expansion on the net finances of hospitals was close to zero. 

Expansion was also found by the FGA to be associated with higher hospital shortfalls, a fact confirmed by the Moody’s Investor Service, a bond rating firm that issues credit ratings for hospitals nationwide.

“Medicaid was never intended to be a slush fund for hospitals,” Horton said. “We have Medicaid as a safety net for people who have nowhere else to turn. Even if it were a cure-all for every hospital in the country, I don’t think it’d be worth the human cost to the safety net for the people who need it.”

Horton says the expansion will also crowd out private insurance. In Mississippi, the FGA says that 48 percent of those eligible for potential Medicaid expansion already have private coverage and 14 percent qualify for plans on the exchange.

Nationally, 13 million able-bodied adults are now on Medicaid because of Obamacare expansion and states that have expanded Medicaid have enrolled 110 percent more adults than expected.

This is one of the reasons why Medicaid’s finances are taking on water. According to a 2017 report from the actuaries at the Centers for Medicare and Medicaid Services, expenditures for Medicaid will grow by 5.7 percent each year and will expand from $370 billion in 2017 to more than $1 trillion. 

This means one out of every five dollars spent in the U.S. will be on health care. Just the cost of expanding Medicaid to able-bodied adults under Obama Care were expected to amount to $855 billion in new federal spending between 2017 and 2026.

Louisiana is an excellent example of the phenomena of massive growth in excess of predictions of both enrollees and spending. The Pelican State expanded Medicaid in 2016 and projections said that 306,000 new people would enroll. Those numbers have grown exponentially to 468,415 this year, a 53 percent increase.

In October 2014, Louisiana’s Medicaid program served 1,051,248 residents, including those on theChildren's Health Insurance Program. By October 2018, the program was serving 1,462,452 residents.

Indiana is another good example of the effects of Medicaid expansion. General fund spending on Medicaid in the Hoosier State increased by 26.9 percent, growing from $1.98 billion in 2014 to $2.7 billion in the 2021 budget. 

Medicaid went from 13.7 percent of the state’s general fund budget in the 2014 and 2014 budget cycles to 14.8 percent in the 2020 and 2021 budgets.

In 2013, the Hoosier State had 1,120,674 enrolled in Medicaid and CHIP programs. By July 2019, that number swelled to 1,421,594, an increase of 26.85 percent or a difference of more than 300,000.

Expanding Medicaid would also will have fraud issues. According to the FGA, state legislative auditors in Louisiana found that 19,226 expansion enrollees did not qualify for benefits, but were still enrolled in the program, receiving between $61.6 million and $85.5 million in benefits.

In Minnesota, 15 percent of the able-bodied adults sampled earned money in excess of eligibility limits.

Numbers from the FGA show that 45 percent of potentially eligible able-bodied adults already have private insurance coverage and states that have expanded Medicaid have experienced a shift from private coverage to Medicaid.


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