GRAHAM: Montana should hit the eject button on Obamacare’s Medicaid expansion

By   /   January 10, 2013  /   No Comments

LET’S GET OUTTA HERE: The president’s health care plan is financially reckless (AP photo)

By Carl Graham | Special to Watchdog.org

BOZEMAN, Mont. — Montana Gov. Steve Bullock has decided to ignore the budget submitted last November by his predecessor and instead opt into Obamacare’s Medicaid eligibility expansion. This looks to be a patently bad idea. Even if it’s not, there’s no reason to rush Montana’s taxpayers into more unsustainable entitlement spending and to herd more of our citizens into a system that provides inferior care at great expense.

First, let’s get a little background out of the way and then I’ll explain why it’s a bad idea.

Medicaid provides health insurance — not necessarily health care, but more on that later — to families with incomes up to 133 percent of the federal poverty level (FPL). Montana’s taxpayers currently pay about 33 percent of the program’s cost, with the federal government picking up the balance.

Last summer’s Supreme Court ruling let states decide whether to increase Medicaid eligibility to 138 percent of the FPL, which Obamacare tried to mandate. Many people portray this as “free money” since Washington says it will cover almost all the costs until 2017 and then ramp down to 90 percent of the costs after that. But that promise, like so many others made during the health care reform debate, simply doesn’t match the facts on the ground.

These facts argue against expanding Medicaid eligibility for two major reasons, one of them financial and the other moral.

The financial reason is that we already know this expansion isn’t “free money” for the state. And the moral reason is that it will result in thousands of Montanans being dumped into a system that results in inferior access to care, with many of them forced out of much better private insurance plans.

Estimates of Montana’s potential share of expansion costs vary wildly but most come in between $100 million and $200 million — the equivalent of between 200 and 400 new teachers, for example.

Our costs increase for a lot of reasons, but I’ll just highlight a few obvious ones.

First, with Obamacare scheduled to cut $8 billion from Medicaid and $500 billion from Medicare, you can be sure that Montana’s health care providers will be coming to taxpayers to be made whole when their costs inevitably outpace their reimbursements under these government programs.

Next, the largest single increase will result from a dramatic increase in the number of people on Medicaid. People who are eligible for Medicaid at the 133 percent FPL rate, but not currently enrolled, will come out of the woodwork as word gets around that eligibility has been expanded. Many of these people are technically uninsured today but would be enrolled in Medicaid and receive care if they needed it. Many others, though, have their own insurance and would simply shift from private to public coverage. Since they wouldn’t meet the new 138 percent FPL threshold, about 33 percent of their insurance costs would be shifted from them or their employers to Montana taxpayers.

And finally, for anyone who believes that the federal government will continue to reimburse states at the 100 or even 90 percent level, well, I’ve got a bridge to sell you. Washington’s budget woes are going to be transferred to the states, and states like Montana — states that get from Washington much more than we give — are going to feel the pain first and most acutely.

Shifting our most vulnerable population to Medicaid is also immoral. Studies consistently show that Medicaid patients have poorer access to care than privately insured patients. Since Medicaid typically pays physicians 56 percent of the amount private insurers pay, fewer doctors are accepting new patients and they eventually wind up in hospitals with more serious conditions than those who are privately insured. In addition, there’s scant reliable evidence that Medicaid improves health outcomes at all, and zero evidence that it is the best way to improve health outcomes per dollar spent.

Expanding Medicaid will only worsen our health care system’s woes, increasing costs and decreasing access to quality care while adding a new entitlement burden on taxpayers and dumping thousands of low-income Montanans into a failing program. There’s no rush to expand. If it works for other states we can always sign on. But this is one case where we shouldn’t lead with our chin.

Carl Graham is CEO of the Montana Policy Institute, a nonprofit policy research and education center based in Bozeman. Contact him at cgraham@montanapolicy.org.

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