The Fact About Medicaid Expansion

By Aaron Rice
May 2, 2013

Fact 1: Medicaid harms patients by providing low-quality care

The goal of Medicaid should be to provide high-quality health care at an affordable price. Medicaid fails to do that.

  • A major study from the University of Virginia found that Medicaid patients are 97 percent more likely to die than patients with private insurance and 13 percent more likely to die than patients with no health insurance at all.
  • Numerous other studies show similar results: See here and here.

Fact 2: Medicaid is a poor economic investment

Proponents of Medicaid expansion point to the jobs created by federal funding for Medicaid expansion. One-third of these jobs will be in the health care sector. Two-thirds will be spinoff jobs in other sectors. Jobs created by public sector spending, however, come at a high cost.

  • According to state senior economist Bob Neal, "The state will not see a positive return on its investment with Medicaid expansion. It should not be considered economic development."
  • What Neal means is that while federal Medicaid funding will create jobs, the impact of these jobs on state revenue will be outweighed by the state's costs to expand Medicaid.
  • Neal's study does not account for private sector job losses that will result from any tax increases and new debt that will be needed to sustain the expansion of this massive government entitlement program.
  • According to Christina Romer, a former economic advisor to President Obama, every "tax increase of 1 percent of GDP lowers real GDP by roughly 2 to 3 percent." In other words, as health economist Chris Conover writes, "Every new Medicaid-related job actually costs the economy at least 3 to 4 jobs elsewhere."
  • Likewise, a recent study in The Cato Journal concluded that "public investment," even at the local level, does not boost labor productivity and that low taxes are likely a better means of growing the economy.

Fact 3: Uncompensated care costs will likely rise as Medicaid expands

Studies suggest Medicaid patients use the emergency room far more than the uninsured. (See here and here for details.) This, in part, explains why uncompensated care costs and under-compensated care costs will very likely increase if the state expands Medicaid.

  • As Maine expanded Medicaid, charity care costs increased from $41 million to $215 million.
  • Arizona’s Medicaid expansion resulted in a 9 percent increase in uncompensated care.
  • Doctors earn less from treating Medicaid patients than they do from treating even uninsured patients - which explains why a growing number of doctors are refusing to see new Medicaid patients.
  • Hospitals typically lose money on Medicaid patients. They make up the difference by charging more to patients with private insurance. The cost to the average American family is $1,800.

Fact 4: Expanding Medicaid will encourage people to drop private insurance coverage

The Medicaid expansion would cover able-bodied adults who are employed or presumably could be employed. Many of these people already have insurance. Others are uninsured, but choose to pay out-of-pocket for health care.

  • Studies of the uninsured have found that 23 percent to 30 percent (see here and here) live in households with incomes higher than $50,000 - and more than half of these earn over $75,000.
  • Analysts in Colorado estimate 86,000 college students will be eligible for Medicaid under the expansion - there is no reason to believe this trend won't apply to other states.
  • Connecticut recently expanded Medicaid and saw enrollment skyrocket. It seems many of the new enrollees come from households that could otherwise afford private insurance. When the state tried to limit enrollment by imposing parental income and asset tests, the Obama administration rejected this cost-saving measure.

Rather than expanding a broken system, Mississippi should reform Medicaid and look for free market solutions to help the working poor. Read more here.


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