Problems with Access, Budgets Complicate Medicaid Expansion

Published August 12, 2015

Thirty states have expanded Medicaid under the Affordable Care Act, and Missouri, Utah, and Virginia are considering expansion.

There is a huge amount of money involved with this decision. States must decide whether to expand Medicaid eligibility to all adults with incomes up to 138 percent of the federal poverty level. From 2014 to 2015, the federal government paid for 100 percent of the expansion, and it will do so again in 2016. In 2017, the government’s share drops to 90 percent, with states supplying the rest, plus all the administrative costs of covering new enrollees and any other costs related to the expansion.

‘Crowd-Out’ Drives Costs Higher

Something lawmakers must also consider is the number of people who will trade private insurance for Medicaid when states expand eligibility to adults who are not disabled, a phenomenon called crowd-out, also known as substitution.

A study by David Cutler and Jonathan Gruber found when Medicaid eligibility was expanded to children and pregnant women in the early 1990s, approximately 50 percent of the newly enrolled dropped private coverage to go on the taxpayer-funded program. A 2007 analysis by Gruber and Kosali Simon estimated crowd-out for the Children’s Health Insurance Program averaged about 60 percent.

“People are able to drop their insurance and join 100 percent taxpayer-funded Medicaid, which obviously adds to the enormous fiscal burden of the program,” said Akash Chougule, deputy director of policy at Americans for Prosperity.

Failure to Improve Outcomes

Those cautioning against expanding Medicaid say the problems aren’t only budgetary. Although proponents of expansion frame it as a way of improving health care and saving lives, expanding the government program does not improve health care outcomes.

Gold-standard research on the 2008 Medicaid expansion in Oregon found Medicaid enrollment did not improve recipients’ health compared to being uninsured, and it increased medical spending.

Chougule says the program’s low payments to doctors discourage medical professionals from taking on new patients, thus reducing access to care.

“Medicaid is an entirely government-run program with low doctor reimbursement rates, which makes it difficult for patients to see a doctor on time,” Chougule said, noting expanding program eligibility “only makes this worse.”

Instead of adding more people to the government-funded system, Chougule recommends repealing Certificate-of-Need laws, expanding scope-of-practice laws, and expanding telemedicine.

Executive Actions

Alaska became the most recent state to embrace expansion when Gov. Bill Walker (I) announced in July he would expand the state’s program using his executive powers.

Chougule says voters should be wary of similar action in other states.

“That’s essentially the executive branch dumping a huge future load on taxpayers without permission from the legislature, which is disappointing and concerning for a number of reasons,” Chougule said. “That’s something we’re going to have to keep looking out for and something taxpayers and voters are going to have to be vigilant about.”

Ann N. Purvis ([email protected]) writes from Dallas, Texas.

Internet Info

Matthew Glans, “Research & Commentary: Alaska Medicaid Expansion Update,” The Heartland Institute, May 13, 2015:

Devon Herrick and Linda Gorman, “Medicaid and Displacement of Private Insurance,” Mackinac Center for Public Policy, June 21, 2013:

Steven D. Pizer, Austin Frakt and Lisa Iezzoni, “The Effect of Health Reform on Public and Private Insurance in the Long Run,” Health Care Financing & Economics, February 17, 2011:

Amy Finkelstein, Nathaniel Hendren, and Erzo F.P. Luttme, “The Value of Medicaid: Interpreting Results from the Oregon Health Insurance Experiment”: