Obamacare Primarily Expands Medicaid

Published November 14, 2014

Four years ago, the White House argued the Affordable Care Act would make “affordable, high-quality care” accessible to an estimated 50.7 million uninsured Americans. A recent analysis by the Heritage Foundation indicates the Affordable Care Act, commonly referred to as “Obamacare,” is not living up to expectations.

The Heritage analysis, released in October, found 71 percent of the combined increase in health insurance coverage during the first half of 2014 was due to the expansion of Medicaid, not private health insurance. The study found Medicaid enrollment grew by 6.07 million individuals out of a total of 8.50 million individuals who gained coverage during those first six months.  

“Given that increased enrollment in Medicaid accounted for 71 percent of the net growth in health insurance coverage during the first half of 2014, the inescapable conclusion is that, at least when it comes to covering the uninsured, Obamacare so far is mainly a simple expansion of Medicaid,” the study concluded.

Yevgeniy Feyman, deputy director of the Center for Medical Progress at the Manhattan Institute, said the goal of health insurance reform was to increase the number of people with insurance through the private sector. “It was not so much to get people into Medicaid,” Feyman noted. “The bulk of insurance coverage is supposed to be coming through the private sector.”

State-by-State Expansion

The expansion of Medicaid to cover more of the uninsured was originally supposed to be national in scope. As the law was written, states were required to expand Medicaid coverage for low-income adults up to 138 percent of the federal poverty level or face severe penalties.

In 2012, however, the U.S. Supreme Court ruled it was unconstitutional to require states to expand the program, leaving states to decide for themselves whether to expand Medicaid. Through November of 2014, 27 states and Washington, DC have agreed to expand Medicaid, and 21 states have rejected expansion so far.

Idaho and Indiana are currently considering expansion, according to the Kaiser Family Foundation.

Both states have Republican governors. Idaho’s governor, Butch Otter, has not supported expanding the program but an advisory group appointed by him in 2012 recommended expansion. There is speculation he may try to expand the program in 2015.

In Indiana, Gov. Mike Pence has proposed expanding the state’s Healthy Indiana Plan (HIP), which allows low-income Indiana residents to purchase state-subsidized insurance with high deductibles and contributions to a savings account, similar to many private plans offered in the private sector. But critics say Pence’s proposed expansion would eliminate or curtail many of the consumer-oriented features and cost-saving measures in the original HIP, while adding an expensive new entitlement to the budget.

Michigan Expansion Debated

Medicaid expansion made front-page headlines in Michigan in June of 2013, when a GOP-controlled legislature and a Republican governor passed expansion legislation.

Jack McHugh, a legislative analyst for the Michigan think tank Mackinac Center for Public Policy, said when people apply for coverage through the federal exchange in Michigan, if they come in at or below the poverty level, they are automatically enrolled in Medicaid.

“That has consequences that can be ugly,” McHugh said. “Medicaid is notorious for being a program that pretends to offer coverage but lowballs provider reimbursements so badly that beneficiaries often can’t find care. ¬†Increasingly, the insurance policies offered through Obamacare exchanges are looking very similar. Stingy provider reimbursements and extremely narrow provider networks mean individuals often can’t find care, or can’t get the care they need.”

In Michigan, the Senate Fiscal Agency estimated the expansion would apply to people living at the federal poverty level, approximately $30,000 per year for a family of four. The state said 320,000 Michigan residents will be covered by Medicaid in the first year, 2016, and they expect that number to increase to 470,000 by 2017.

Gov. Rick Scott’s office said the federal government would cover Michigan’s 2014 Medicaid expansion costs, estimated to be $206 million. But critics of Michigan’s expansion of Medicaid said relying on federal government promises to cover the future costs of Medicaid is risky, especially with the growing U.S. debt approaching $18 trillion.

McHugh says it is more likely the federal government will renege on its promise to reimburse states for the increased costs for Medicaid expansion. “Fiscal realities and the incentives in the system make it almost certain that those promised matching amounts will be nibbled down in coming years,” McHugh said.

Poor Medicaid Access

With Medicaid paying just 47 percent of what Michigan primary care physicians get from private insurers, getting access to care is often more difficult than for those with private insurance. McHugh says it would have been better for the state to place families eligible for the Medicaid expansion in the federal exchange instead, providing them with private health insurance policies.

McHugh says simply expanding Medicaid wasn’t what proponents promised.

“People imagined they were going to get health care the same way they were through their employer,” McHugh said. “In Medicaid, there is no competition. It has a bad reputation for quality and access. It provides poor access to what is widely considered substandard health care.”

Tom Gantert ([email protected]) writes for Michigan Capitol Confidential.