President Obama Double Downs On Medicaid’s Failures – Pacific Research Institute

President Obama Double Downs On Medicaid’s Failures

President Barack Obama is calling on taxpayers to shell out more money for his health reform law’s disastrous Medicaid expansion.

The president recently asked Congress to approve $106 billion in new Medicaid spending over the next 10 years. Nevermind that the Congressional Budget Office just concluded that, as is, Medicaid spending will add $1.3 trillion to the federal deficit by 2025. That’s $136 billion more than the agency projected last year.

And it’s not as if those dollars are being spent wisely. Obamacare’s Medicaid expansion is sticking taxpayers with a huge bill while doing little to help low-income Americans actually gain access to high-quality healthcare.

President Obama almost never mentioned the word “Medicaid” when pitching his health reform package in 2009. When he did, it was always to say that Medicaid was ballooning the federal deficit. Without Obamacare, he warned, Medicaid would “blow a hole through our budget.”

Well, the president got his reform. Yet Medicaid is still blowing a hole through the federal budget.

Last year, Medicaid spending shot up 14% — topping a spike of 10% in 2014. The CBO expects Medicaid costs to go up another 7% this year.

This year, Obamacare will add $74 billion to Medicaid’s tab — $12 billion more than the CBO projected just two years ago.

Medicaid’s costs are higher than expected because the program has enrolled more people than congressional bean-counters envisioned.

In 2014, Obamacare directed states to offer Medicaid coverage to anyone with income below 138% of the federal poverty line — or about $33,000 for a family of four. To encourage the states to comply, the federal government picked up 100% of the cost of this expansion.

That incentive expires at the end of this year. Starting in 2017, states will have to pay for 5% of the cost of Obamacare’s Medicaid expansion themselves. Their share ratchets up to 6% in 2018 and 7% in 2019. In 2020 and beyond, states will have to cover 10%.

While Obamacare originally required states to increase eligibility for Medicaid coverage, a 2012 Supreme Court decision made such expansion optional. So far, 31 states and the District of Columbia have taken the bait. It should be no surprise, then, that Medicaid enrollment shot up by 7.7 million in 2014.

Elevated Medicaid enrollment is not good news — for taxpayers or patients.

Let’s start with taxpayers. The government’s offer to cover at least 90% of expansion costs may sound appealing. But the percentage for which states are responsible could add up to a significant amount of money.

In Illinois, the state’s projected costs between 2017 and 2020 have increased from $573 million to $2 billion. Kentucky could be looking at annual costs of $363 million by 2021.

Florida Governor Rick Scott rejected a proposal to expand Medicaid in his state, which would’ve cost more than $96 million in the first two years — and an unknown amount thereafter. “It doesn’t take a mathematician to figure out that such a trajectory doesn’t bode well for our budget,” he said.

Medicaid already accounts for one of every four dollars of state spending. The program’s expenditures dwarf those for K-12 education, local colleges and roads.

Those dollars don’t necessarily buy Medicaid beneficiaries access to care. Half of all doctors are not taking new Medicaid patients, according to a recent study published in the Journal of the American Medical Association.

When enrollees can’t get access to a doctor, they often head to emergency rooms. According to a Colorado Hospital report, ER usage has gone up 5.6% in expansion states but only 1.8% in non-expansion states.

For the lucky few who are able to see a doctor, there’s no guarantee that Medicaid will improve their health. Researchers in Oregon studied a limited expansion of the state’s Medicaid program. Their conclusion? While the expansion “did increase use of health care services,” the study found that “Medicaid coverage generated no significant improvements in measured physical health outcomes.”

The White House has simply ignored such research — and is trying to browbeat the 19 states that haven’t expanded Medicaid into doing so. The president has tried to sweeten the deal for these holdouts by proposing that the feds cover the cost of the first three years of Medicaid expansion, no matter when they do it.

If federal lawmakers truly want to help low-income Americans secure access to care, they should transform Medicaid from an open-ended entitlement program into a series of inflation-indexed block grants to the states.

States could then spend their Medicaid dollars as they saw fit — and keep any savings they were able to scare up by managing their programs efficiently. Block grants would also allow state legislators to tailor their Medicaid programs to meet the unique needs of the neediest residents — without federal micromanagement.

Medicaid today is failing the very Americans it was created to help. Rather than doubling down on the status quo, Washington needs to fix the program. Absent reform, Medicaid will blow a whole lot more holes through the federal budget.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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