The coronavirus recession is no excuse for Medicaid expansion

House Democrats are looking to funnel billions of dollars into state Medicaid programs through the HEROES Act, which narrowly passed the lower chamber in mid-May.

The $45 billion they’re promising may sound like a godsend to states staring at huge budget deficits in the wake of the recession caused by the coronavirus pandemic. But Medicaid is rife with fraud and waste and doesn’t even deliver much value for its beneficiaries. Lavishing billions more on the program amounts to throwing good money after bad.

States receive at least one federal dollar for every dollar they spend on Medicaid. On average, the federal government sends states $1.50 for every dollar they spend on the program. That federal match gives states a strong incentive to expand their Medicaid programs.

The HEROES Act sweetens the pot even further. It would increase the federal government match rate by 14% for one year, beginning this July.

That infusion of federal cash will just result in more wasteful spending. Already, about one in five federal dollars is spent “improperly” — largely on people who derive benefits from the program but are not eligible. The total for all those improper payments? About $75 billion a year.

All that spending doesn’t buy much in the way of health. Medicaid beneficiaries are more likely to report poor health than people with other forms of coverage and the uninsured. A landmark study of people who received Medicaid in Oregon via lottery found that Medicaid “generated no significant improvements in measured physical health outcomes” compared to similar people who remained uninsured.

Even among government programs, Medicaid is uniquely wasteful. Taxpayers should hope that the HEROES Act and its Medicaid spending spree die in the Senate.

Sally C. Pipes is president, CEO, and Thomas W. Smith fellow in healthcare policy at the Pacific Research Institute. Her latest book is False Premise, False Promise: The Disastrous Reality of Medicare for All (Encounter 2020). Follow her on Twitter @sallypipes.

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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