Obamacare Medicaid: Facts, Figures, Background

What you don’t know can hurt you

Editor's note: Much of the following is derived and in some cases directly quoted from previous Mackinac Center articles, studies and blog posts.

--  According to the “official” state numbers, starting in 2020 the Medicaid expansion will impose $300 million in annual costs on Michigan taxpayers. That money will have to come from either tax hikes or cuts to current government services. Gov. Snyder proposes placing half of any short-term savings in a lockbox to cover these future cost increases.  >>> http://www.senate.michigan.gov/sfa/Publications/Issues/MedicaidExpansion/MedicaidExpansionProposal.pdf

--  The Mackinac Center has critiqued the simplistic “arithmetic” approach the official estimates use, because their numbers depend on shaky assumptions, the shakiest being that the feds won’t renege on delivering the 90 percent funding share they have promised: “President Obama has already signaled that increasing states' Medicaid share is in the administration's playbook. He did so by recommending a lower Medicaid ‘blended rate’ in his last two annual budget recommendations.”  >>> http://www.mackinac.org/18268

--  Congressman Paul Ryan reinforced this point in a recent interview: “It doesn’t matter if Republicans are running Congress or Democrats are running Congress — there’s no way we’re going to keep those match rates like that.” >>> http://www.mackinac.org/18561

--  According to the Heritage Foundation, Medicaid will impose $1.3 billion in net costs on Michigan taxpayers through 2022. >>> http://www.mackinac.org/18416

--  Money for the expansion doesn’t come from some “pool” of funds to be divided between the states, but goes right onto the federal government’s credit card. If Michigan legislators accept the Medicaid expansion, they will be approving an increase in the national debt of $22.5 billion through 2022. >>> http://www.mackinac.org/18582

--  Medicaid is a flawed program that serves recipients poorly. According to a 2009 survey, many specialists in metropolitan Detroit refuse to accept Medicaid patients, including: 33 percent of dermatologists, 41 percent of family practitioners, 50 percent of obstetrics-gynecology specialists and 67 percent of orthopedic surgeons. >>> http://www.mackinac.org/archives/2013/s2013-03FINAL.pdf

--  According to the most important study of the program, Medicaid “generated no significant improvement in measured physical health outcomes.” Health care policy expert Avik Roy characterized the findings this way in Forbes: “If Medicaid were a new medicine applying for approval from the Food and Drug Administration, it would be summarily rejected.” >>> http://www.forbes.com/sites/theapothecary/2013/05/02/oregon-study-medicaid-had-no-significant-effect-on-health-outcomes-vs-being-uninsured/

--  Medicaid recipients use hospital emergency rooms at twice the rate of people with no health insurance or private insurance. “The Obama Administration’s decision to push insurance coverage through a major expansion of Medicaid ensures a greater number of emergency room visits… (A)s patients grapple with even more crowded emergency rooms, what will be the negative impact on their access to life-saving care in a real emergency?” >>> http://www.politico.com/pdf/PPM170_hcr_medicaid.pdf

--  Many of those covered by the expansion won’t be “the uninsured,” but will be people who previously had private coverage taking advantage of a taxpayer-funded alternative. In some previous expansions, as many as 50 percent of the new beneficiaries dropped private coverage. “A conservative estimate (of the proposed expansion) is that Medicaid rolls might have to rise by 1.4 people in order to reduce the uninsured by 1 person — a crowd-out rate of about 29 percent.”  >>> http://www.mackinac.org/archives/2013/s2013-03FINAL.pdf

--  The Obama administration has essentially forbidden substantive state reforms of the Medicaid program (such as extending an innovative Indiana Health Savings Account alternative). (See Avik Roy, "The Arkansas-Obamacare Medicaid Deal: Far Less Than It First Appeared.") Expanding Medicaid in the context of implementing Obamacare makes the prospect of real reforms less likely, not more.

--  At this time, 19 states WILL NOT expand Medicaid, and six are leaning against. (So why do our legislators think they and this state are so unique and special in this area?)  >>> http://www.avalerehealth.net/news/spotlight/20130524_Medicaid_Expansion.pdf

--  Michigan provides medical welfare for children up to 200 percent of the federal poverty level. Any claims that the expansion is “for the children” are just demagoguery. >>> http://www.michigan.gov/documents/MIChildfullmanual_13163_7.PDF

--  Those pushing the expansion claim that Obamacare is a “done deal” and we all have to just knuckle under and pay up. This is wrong. When the law goes into effect in just six months, its complexity, internal contradictions and perverse incentives are expected to inflict tremendous damage on families, employers and the health care system. There is a strong probability this could trigger a widespread public revolt, making the law highly vulnerable to being opened up next year for major revisions by Congress, including the Democratic-controlled Reid Senate. Ways in which Obamacare is vulnerable, with evidence for each: http://www.michigancapitolconfidential.com/18723

--  Mackinac Center Senior Legislative Analyst Jack McHugh’s testimony explaining to a House committee what "vulnerable" means for Michigan families and businesses: http://www.mackinac.org/18741

--  MichiganVotes.org descriptions of the Medicaid expansion bill, House Bill 4714 (note in particular differences between the bill as "Introduced by Rep. Matt Lori" and as "Passed 76 to 31 in the House"): http://www.michiganvotes.org/2013-HB-4714

Background: Medicaid Expansion and the Obamacare “Exchange” 

Roughly speaking, there are three components to the Medicaid expansion population: Able-bodied childless adults under 100 percent of the federal poverty level (FPL), people between 100 and 138 percent of FPL, and individuals who are already eligible but are not enrolled (the “woodwork” population).

With some exceptions the first group does not get medical welfare benefits now and will continue not getting them if this state does not expand Medicaid. These individuals DO get treatment if they show up at a hospital emergency room. They also receive a bill that most aren’t able to pay, so the cost of their care is shifted to everyone else. The magnitude of this problem is greatly exaggerated by the hospitals — various measures show that uncompensated care constitutes less than 3 percent of total health care costs.

This is not a new problem, and it would be short-sighted to solve it now at the cost of further entrenching a vulnerable Obamacare. Sen. Bruce Caswell, R-Hillsdale, has introduced a bill to provide coverage to this population without expanding Medicaid. MIRS News reports it would “include a limited hospitalization benefit, likely capped between $10,000 and $15,000,” and it would also pay for preventive care services. Sen. Caswell told me this approach builds on existing programs and would probably solve 90 percent of the problem, at a cost he claims is not prohibitive. Importantly, Michigan would remain “captain of our own ship,” not trapped in an expansion roach motel, and not subject the whims of federal bureaucrats.

This below-100 percent of FPL population is also the largest source of the short-term savings this state will realize with the expansion — Michigan will be able to transfer $200 million in mental health spending from the state budget onto the federal one.

It is thought that the Obamacare individual mandate will drive many of the second group, the “woodwork” people, into Medicaid, and without the expansion Michigan taxpayers will have to pay a larger share of the cost than with it. However, according to the Snyder administration this group represents less that 10 percent of the total expansion numbers.

The 100-138 percent of FPL population is more interesting. A Mackinac Center study estimates this population will number 177,516 people in 2014, and that 124,261 of them will actually enroll in Medicaid if the expansion is adopted, costing Michigan state taxpayers $475 million over the next 10 years. Without the expansion, however, people in this group could go into the “exchange” and get a real health insurance policy at little or no cost to themselves, and at no cost to Michigan state taxpayers.

The Bottom Line: The Mackinac Center believes that Obamacare is vulnerable to serious revision next year, and this state should do nothing that reduces the chances of that outcome. This big picture is infinitely more important than "reforms" that essentially amount to marginal changes to a problematic medical welfare program. Legislators and citizens who oppose the expansion on this basis are not “bitter enders,” but are keeping their eye on what matters most.