Medicaid expansion is a failure: Lots of spending, little benefit

Researchers from MIT and Harvard recently released a report concluding that Obamacare had a “clearly positive effect on access to and consumption of health care.” Nearly 16 million people gained coverage through Medicaid expansion while just over 11 million purchased insurance through Obamacare’s exchanges in the past year.

But that expansion came at great cost — and may not even meaningfully improve the health of the program’s beneficiaries.

Obamacare allowed states to expand Medicaid to those who make up to 138% of the federal poverty level. The federal government initially covered the entire cost of expansion. By 2020, it will only cover 90% of the cost and leave states to cover the remaining 10%. Thirty-seven states and the District of Columbia expanded their Medicaid programs in line with Obamacare’s dictates. Voters in four of those states ratified expansion by ballot initiative.

About twice as many people enrolled under the expansion as expected, according to a report from the Foundation for Government Accountability. Each new enrollee cost about 76% more than projected.

As a result, states are drowning in Medicaid bills. In North Dakota, expansion cost 163% more than expected over a two-and-a-half-year period. In Louisiana, it cost 115% more over one year. Now, about 1 in every 3 state dollars goes to Medicaid — a jump from one in four before Obamacare.

From 2017 to 2027, Medicaid spending for adults covered under the expansion will hit $938 billion.

All that spending may not deliver much health benefit. Consider an authoritative 2013 study of Oregon’s expansion of Medicaid in 2008. Thousands of adults were selected by lottery to receive Medicaid coverage. Researchers compared their health outcomes to those who were eligible for Medicaid but did not gain coverage through the lottery. The research team found that “Medicaid coverage generated no significant improvements in measured physical health outcomes in the first two years.”

What’s more, many health providers refuse to see Medicaid patients because of the program’s low reimbursement rates. So even with coverage, these beneficiaries struggle to secure care.

Access to coverage does not always lead to better health outcomes. Mammoth costs, on the other hand, are a certainty.

–By Sally Pipes

Sally C. Pipes is the president, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is The False Promise of Single-Payer Health Care (Encounter). Follow her on Twitter @sallypipes.

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