Medicaid Expansion: Not Such a Great Deal After All?

Published January 31, 2013

Joseph Antos of the American Enterprise Institute writes that the expansion of Medicaid won’t help people as much as its supporters think it will – and that many of those forced into the program will find it insufficient for their needs.

A more relevant issue is how access to necessary care will change when Medicaid is significantly expanded. Rosenbaum (2011) points out that poor Americans have faced “a substantial vacuum in actual access to health care” despite Medicaid’s coverage guarantee. A major cause of that access problem is the low rates of participation in Medicaid among health care providers, which is the direct result of low payment rates and overly burdensome administrative practices that delay payment and add to the headaches of dealing with a state bureaucracy.

Putting millions of additional people into a program that has been struggling with access to care for the past forty-five years is likely to result in worsening access for those who are currently enrolled in Medicaid. Cunningham (2006) finds that Medicaid beneficiaries have between 50 and 100 percent greater use of hospital emergency rooms. Higher use in general is fostered by imposing few or no cost-sharing requirements on beneficiaries. Higher use of emergency rooms is due in part to a lack of access to office-based physicians.

The PPACA took some note of this ongoing access problem. The new law significantly increases funding for community health centers, reflecting a realization that expanded Medicaid coverage alone does not ensure access to care — particularly for the poor. In addition, Medicaid payments for primary care services furnished by primary care physicians will increase to 100 percent of the Medicare rate in 2013 and 2014, with the federal government paying the additional cost. Jost (2012) observes that “state Medicaid payments to primary care physicians [in 2008] averaged 2/3 of Medicare rates, with some states paying as little as 36 percent of Medicare rates.”

This is undoubtedly true, but the relevant comparison is with private rates. According to the CMS actuary (Shatto and Clemens 2012), Medicaid payment rates nationally will increase to 77 percent of private rates in 2014 before dropping back to 58 percent. That may have been a nice gesture that scored political points when trying to enact the PPACA, but short-term pay increases of that magnitude will not make Medicaid attractive to physicians and will not attract physicians to low-income neighborhoods.

A 2008 survey of physicians (Boukus, Cassil, and O’Malley 2009) gives a sense of how difficult it is likely to be for new Medicaid enrollees to see the doctor. Most physicians will accept all or most new patients with private insurance (86.6 percent), and many will accept those with Medicare (74.1 percent), but only about half will accept new patients on Medicaid (52.6 percent). Specialists in family practice (54.4 percent) and internal medicine (40.0 percent) are much more likely to refuse to see new Medicaid patients than those with private coverage (5.2 percent/4.7 percent) or Medicare (13.6 percent/9.5 percent).

Frakt and Carroll state that “the Medicaid expansion will make a large dent in [the] health care access problem by insuring millions of those currently uninsured.” They may become insured, but they will step to the back of an already lengthy line waiting to see a physician and will make the hospital emergency room even more crowded.

Read the rest of his piece here. One interesting piece of news from HHS is that states which don’t implement the Medicaid expansion – of which there may be many – will also exempt people in the Medicaid-eligible population from the individual mandate.

HHS clarified that the mandate doesn’t apply to people who are eligible for Medicaid but live in states that don’t take part in the law’s Medicaid expansion. That carve-out gained new importance after last year’s Supreme Court ruling on the health law, which made the Medicaid expansion optional. Until then, lawmakers had assumed that every state would take part in the expansion.

The law itself gave little consideration to the prospect of states opting out, but most Republicans governors are rejecting the expansion as they try to undermine the Affordable Care Act however possible. As a practical matter, Medicaid-eligible people were likely to fall under the law’s other exemptions. But the administration clarified a direct exemption in Wednesday’s rules implementing the mandate and its exceptions.

This makes it all the more likely that states who don’t want to raise their tax burdens in future years for a short-term monetary gain will pass on the expansion entirely.