September 17 2013

Medicaid’s Unintended Consequences

DoubleThink

Hadley Heath

Next year, about 28 states will expand their Medicaid programs to people earning up to 138 percent of the federal poverty level.  The Medicaid expansion alone is projected to account for one-third of the Affordable Care Act’s newly insured, or 11 million people.

This is no cause for celebration. Instead, this misguided policy will most likely result in less access to health care and worse outcomes for the expansion population. And it will hurt other struggling families by increasing the cost of private insurance.

More and more physicians are regretfully closing their doors to new Medicaid patients. A July 2013 study published in Health Affairs found that nearly a third of primary care physicians were unwilling to take any new Medicaid patients.  Even when Medicaid participants can find a doctor, they face longer waiting times. This underscores the important difference between health “insurance” and access to real health care services.

This difficulty in accessing primary care can ultimately result in worse health outcomes for Medicaid patients when they do become sick. Medicaid patients are more likely (even more likely thanuninsured people) to have late-stage prostate cancer, breast cancer, or melanoma at time of diagnosis – probably because they had to wait longer to get a screening.

Other studies show that Medicaid patients fare worse in various surgeries, vascular disease, throat cancer, and lung transplants.

Proponents of the Medicaid expansion often argue that, while Medicaid’s access to physicians and health outcomes are inferior to private insurance, having Medicaid is better than no insurance at all. Health outcomes between the Medicaid and uninsured populations do not always support this view, and in fact sometimes the uninsured population has better health outcomes.

But more importantly, we should first ask: Will a Medicaid expansion decrease the number of people without insurance?

Evidence from previous state expansions says no. Arizona, Oregon, Delaware, and Maine have all expanded their Medicaid programs, and the result has been a movement from private insurance to Medicaid. The rate of uninsured people has remained the same.

In fact, expanding Medicaid will increase costs for the rest of the population. Ignore for a moment that federal spending on Medicaid and CHIP was $260 billion in FY2012 – before expansion – and that the program typically devours about a fourth of every state’s budget.

Medicaid reimburses doctors at a rate far lower than private insurance (about 58 percent), meaning providers must do some serious cost-shifting to recoup the difference. A 2008 study from Millimanestimated that privately insured families pay an extra $1800 each year because of underpayment in Medicaid and Medicare.

This makes like harder for families at 139 percent of the federal poverty level (who earn just too much to get Medicaid, but who are now mandated to buy insurance).

As long as there is Medicaid, there will be a threshold. But those below and above it would be better off with a health policy that focused on making private health insurance more affordable, rather than regulating some to Medicaid’s poor performance and pushing the cost onto others.

Coverage rates are strongly tied to health insurance premiums.  Only market forces, not subsidies or government programs like Medicaid, can drive prices down. Less regulation and more competition would also result in better, more efficient use of resources so that people of all income levels could access the care they need.

To expand Medicaid may sound like a nice thing to do for people near the poverty line. In reality, it will raise premiums for privately insured families and move millions into a program with reduced access to care and worse health outcomes.

Is that really a compassionate thing to do?

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