Why Medicaid Expansion Is a Bad Deal for Virginians

Why Medicaid Expansion Is a Bad Deal for Virginians
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As the debate continues in Virginia over whether to expand Medicaid, it is crucial to look at what the outcome has been for other states that have already expanded their programs. Thirty-one states have taken this step under the provisions laid out in the Affordable Care Act. The ACA expanded Medicaid eligibility to able-bodied adults below 138 percent of the federal poverty level, and covered 100 percent of the cost of the expansion enrollees for the initial period. That percentage declines, and by the year 2020 the federal government will only cover 90 percent of the cost of expansion enrollees. With funding after that unclear, residents of Virginia will face an unknown future of Medicaid. Given the facts staring back at us, why would any Virginian support expanded coverage? 

Proponents of expansion argue that giving more people health insurance will lower costs and improve health outcomes by providing the uninsured with access to regular and preventative care before their health deteriorates and treatment becomes more expensive and less effective. Supporters also believe office visits will replace expensive emergency room and hospital care for newly insured individuals who will now have access to primary care. However, the data from states that have expanded their Medicaid programs show that this theory is unsupported by facts. 

As an example, let’s look at Oregon, a state that began expanding Medicaid in 2008. Officials there lacked funding for the total number of applicants, so they conducted a random lottery and selected enrollees from a waiting list, thus making Oregon an ideal state for study. What they found was that gaining Medicaid coverage increased health care usage and costs across a wide range of settings, and emergency room visits increased by 40 percent in the newly covered group. Proponents of the expansion argued the initial spike in ER visits was due to pent-up needs and would decrease as time went on.

That has not been the case. Oregon’s growth in Medicaid spending between 2012 and 2016 was 83.1 percent.  A follow-up study in the New England Journal of Medicine concluded the value of expansion for recipients was quite low -- 20 to 40 cents per dollar of government spending. 

Virginia should also consider that initial projections for enrollment and cost have been shown to be far below actual numbers. While advocating for Ohio’s Medicaid expansion, Gov. John Kasich predicted 447,000 Ohioans would sign up by 2020.  As of 2017, 720,000 people had enrolled under the expansion. Overall, Ohio had 3.1 million people on its rolls as of January 2017 -- more than a quarter of the state’s population. Medicaid spending has risen 35 percent in the last four years. This is a trend consistently seen in a number of expansion states -- drastically underestimated enrollment numbers, which result in spending that in some cases doubles the projections. 

Oregon and Ohio are certainly not the only states that have faced these problems. Kentucky, which has been touted as a huge success by supporters of expansion, has seen a 70 percent growth in Medicaid spending over the last four years, and its enrollment numbers have more than doubled initial projections. Medicaid spending now accounts for a third of the state budget. Nevada has seen its enrollment increase by 90 percent and spending increase by 93 percent in the past four years. The average rate of growth in expansion states from 2012 to 2016 is 42 percent; for non-expansion states that growth rate is 15 percent. States are finally starting to worry about costs. Until January of 2017, the federal government covered 100 percent of the costs. As states begin to look at paying an increasing share, they are being confronted with the reality of the budget challenges they face.  And that is not taking into account the uncertainty of future funding. 

Earlier this month, President Trump released his budget for 2019, which cuts funding for Medicaid expansion, as do the House Republican and the Senate Graham-Cassidy proposals. The message is clear from both Congress and the White House -- funding for Medicaid expansion program is unlikely to continue, and certainly not at the levels set by the ACA.  Any state considering expansion at this point should be very, very wary; and for a state like Virginia, where Medicaid spending is projected to increase nearly $300 million in 2018 and already constitutes the largest portion of the state budget, Medicaid expansion is a really bad deal.

Brooklyn Roberts is the health and human services task force director at the American Legislative Exchange Council.

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