Medicaid was created in 1965 to provide health coverage to impoverished Americans. But according to a new study published by the National Bureau of Economic Research, it’s the insurer of record for a significant number of middle-class Americans. The cost to taxpayers? Hundreds of millions of dollars.
The culprit for this epic amount of government waste shouldn’t be a surprise—Obamacare. The 2010 healthcare law dramatically expanded Medicaid, by making everyone with income below 138% of the federal poverty level eligible. This expansion was supposed to be mandatory starting in 2014. To help states with the cost, the federal government covered 100% of the costs of expansion from 2014 through 2016, 95% in 2017, 94% in 2018, 93% in 2019, and 90% in 2020 and thereafter.
A 2012 Supreme Court decision made it optional; 37 states plus the District of Columbia opted to follow Obamacare’s diktats. Voters in Idaho, Maine, Nebraska, and Utah have approved Medicaid expansion via ballot initiative.
On its own, this eligibility adjustment represented a substantial shift in the program’s purpose. Medicaid was established to serve the genuinely needy: low-income Americans, seniors, the disabled, andpoor children. Obamacare flooded the program with able-bodied, working-age adults—that is, people who could likely secure private insurance on their own.
By the end of 2016, some 11.5 million able-bodied adults had enrolled in Medicaid because of the expansion, more than double the original enrollment projections. This brings the total number on Medicaid to 65.6 million. The cost of the expansion has been higher than expected, too—76% more per person.
And then there’s the waste. Many of the newly enrolled should actually be ineligible because they make more than 138% of the federal poverty line. The new NBER study, co-authored by professors at the University of Kentucky and Georgia State University, calculates that more than half a million ineligible people have enrolled in Medicaid across the expansion states examined.
Some states have struggled particularly hard with eligibility issues. Consider Kentucky, which clocked in some of the biggest insurance coverage gains in the country after accepting the Medicaid expansion. In 2014, nearly four in ten Kentuckians who enrolled—about 73,000 people—weren’t actually eligible for Medicaid. And in April, the state Department of Health revealed that more than 1,600 of the new Medicaid enrollees were making at least $100,000 a year.
Importantly, the NBER analysis only covered nine expansion states—one-fourth of the total that have expanded their Medicaid programs. So the total number of ineligible enrollees is almost certainly far higher.
For proof, consider Louisiana, which was not included in the NBER study. There, officials allowed Medicaid recipients to self-report their paychecks between their initial application and the renewal of their coverage. An audit revealed that among 100 Medicaid recipients randomly selected between July 2016 and March 2018, 82 were ineligible for 47% of monthly payments made to Medicaid companies. As a result, the state may have squandered more than $85 million on these enrollees.
This rise in enrollment among ostensibly ineligible people is one illustration of how Medicaid expansion “crowds out” private insurance. People who already have coverage in the private market switch over to the public dole.
Indeed, a report from the Foundation for Government Accountability projects that among states that have yet to expand Medicaid, more than half of potential enrollees already have private coverage or have access to a low-cost exchange plan.
This crowding out burdens taxpayers. Look back at Louisiana. Adding a new enrollee to that state’s Medicaid program costs about $6,200 per year, according to the Pelican Institute. Enrolling locals who otherwise would have been covered in the private market adds up to some $460 million a year.
Given Medicaid’s history, such waste shouldn’t be surprising. The Government Accountability Office has designated the program as “high-risk” since 2003, meaning that it is “vulnerable to waste, fraud, abuse, and mismanagement” or needs “broad reform.” In 2018, about one of every ten dollars in program payments was improper. That’s equivalent to about $36 billion.
Medicaid has expanded well beyond its original mission of taking care of the most vulnerable members of society. Hundreds of thousands of people who have no business claiming taxpayer-funded health coverage are doing just that. This waste must stop.