The False Promise Of ‘Medicaid For All’

“Medicaid for All” has suddenly become the darling of the health reform crowd. Nevada almost became the first state in the nation to adopt Medicaid for All this year — until Gov. Brian Sandoval vetoed the plan in June. Other states, including Massachusetts and Minnesota, are looking into it.

These Medicaid-for-All plans would let anyone “buy into” the program. Middle-class families could pay government-set premiums for Medicaid coverage. They would get guaranteed health benefits at government-subsidized prices. And given that the program pays healthcare providers less than private insurance, Medicaid for All might even rein in health spending — or so the thinking goes.

This argument for “Medicaid for All” might sound compelling. But Medicaid provides low-quality care to its current beneficiaries, who are generally poor and among the most vulnerable in society, at extremely high cost to taxpayers. Expanding it would only exacerbate its problems.

Medicaid started out as an anti-poverty program. But it has steadily expanded since 1966, from 4 million enrollees in 1966 to 20.7 million a decade later. Today, 68 million are on the program. Since 2000, the share of the U.S. population on Medicaid has jumped from 12.6 percent to 23 percent. In California, 31 percent of the population is on Medi-Cal, the state’s version of the program.

Thanks to Obamacare, some 14 million additional people have enrolled in Medicaid. It’s now the largest single insurance program in the country. Thirty-one states — including 17 with Republican governors — opted for the extra federal money that Obamacare gave them to expand Medicaid eligibility to all adults making less than 138 percent of poverty.

Medicaid is also supposedly very popular. Seventy-four percent of the public says that they have a favorable view of the program.

Why not expand it further? Michael Sparer, head of Columbia University’s school of public health, argued in a lengthy article for earlier this month that a Medicaid-for-all type plan “offers the most plausible path to an American version of affordable universal coverage.”

What could go wrong?

Let’s begin with the idea that Medicaid is cost-effective. Sparer says, for example, that Medicaid’s costs are 25 percent lower than private insurance because Medicaid pays providers “far less than private insurers.”

But private insurance costs are higher in part because Medicaid underpays doctors and hospitals. If Medicaid is paying doctors and hospitals less than they need to cover their costs, then someone else has to pay more for those providers to stay in business. That someone is the typical private insurer.

Many providers avoid Medicaid altogether. A Kaiser Family Foundation report found that only 45 percent of primary care doctors are willing to take on new Medicaid patients, thanks to its low reimbursement rates and heavy administrative burdens. Nearly one-third won’t see anyone on Medicaid.

By comparison, 80 percent of doctors are taking new privately insured patients.

In California, the access crisis for Medi-Cal patients is so acute that two civil rights groups are suing the state, claiming that the program’s 13.5 million beneficiaries confined in “a separate and unequal system of health care.” They are arguing for higher reimbursements, in hopes that more money will entice doctors to see them.

Medicaid patients who are unable to find a doctor end up in the emergency room. After California expanded its Medi-Cal program, for example, enrollment surged. The number of doctors in the state actually went down. Consequently, ER visits in the state exploded.

The same phenomenon has appeared in states across the country. And it’s one reason why the costs of Obamacare’s Medicaid expansion are running about 50 percent higher than expected.

Never mind that President Obama sold the expansion as a means of keeping people out of the ER.

Medicaid for All also wouldn’t necessarily improve people’s health. A comprehensive study of Oregon’s Medicaid program found that its enrollees weren’t better off in terms of their health than those who were uninsured.

Expanding Medicaid could also encourage employers to quit offering their own health benefits, which are generally of much higher quality. The Congressional Budget Office figures that Obamacare’s exchange subsidies led to 4 million people being kicked off their employer plans this year. By 2020, if Obamacare is not repealed and replaced, that number could rise to 9 million.

That’s despite Obamacare’s mandate that employers with more than 50 workers provide coverage; they would apparently rather pay the fine.

Adding millions of people to Medicaid would stretch the program’s already tight finances to the breaking point. In 2015, total spending exceeded $550 billion. Spending is projected to increase at a 5.7 percent annual clip through 2025, when it will shoot past $950 billion. And that’s just on its current trajectory.

The federal government may be able to go into debt semi-permanently to finance Medicaid. But states cannot. They currently cover a little more than one-third of the program’s costs. There’s no way they’ll be able to shake loose ever-increasing amounts of tax revenue to pay for an expanded share of the program.

Medicaid can’t adequately meet the needs of the 68 million people currently enrolled in the program. Expanding it further would just force millions more to share their fate.

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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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