Medicaid Expansion: Even Worse Than You Thought
New data highlights reasons for Louisiana lawmakers to say “no thanks” to feds
Although Louisiana’s House of Representatives rejected a bill to expand Medicaid, a Senate committee approved a different Medicaid expansion bill and the House will be reviewing other expansion bills in the coming days.
The Pelican Institute has criticized this proposed expansion. We have noted the long history of federal programs exceeding their estimated costs; the unlikelihood of achieving market-friendly reforms when playing by Medicaid’s stifling rules; and the necessity of resisting another expansion of the modern welfare state.
New data has been released since our last analysis that makes the case for rejecting Medicaid expansion even more compelling:
1. Medicaid Spreads Wealth Without Improving Health
On Wednesday, the New England Journal of Medicine published the updated results of an extensive study of the relationship between health outcomes and health insurance delivered by Medicaid. The key finding was that “Medicaid coverage generated no significant improvements in measured physical outcomes” versus being uninsured. Other studies have reached the same conclusion but this in-depth study is considered the gold standard by many health care experts.
So not only does Medicaid place an unreasonable burden on taxpayers, it fails to deliver a significant health benefit to the poor. These outcomes could actually get worse if Medicaid is expanded, as existing beneficiaries will be forced to compete for access to medical services with the newly enrolled. While Medicaid beneficiaries do enjoy greater financial security than the uninsured, policymakers can do this without doubling down on a failing federal colossus.
2. Our Long-Term Fiscal Challenges Weigh Against More Spending Commitments
On Monday, the Government Accountability Office (GAO) released their annual outlook on the fiscal health of state and local governments. The report shows that state and local governments will struggle to balance their budgets for years – even decades – to come. The report also highlights the dramatic increase in health spending as a proportion of GDP and that total tax revenues may remain below the historical high of 2007 all the way to 2060.
This raises an obvious question: Should policymakers commit to a long-term increase in state spending when the challenge of balancing the budget already promises to be perilous? Expansion advocates tout three years of 100% federal funding but short-term inducements do not solve long-term problems. Further, circumstances may require the federal government to reduce matching payments in coming years, putting Louisiana at the mercy of Washington.
3. States Have a Rare Opportunity to Cut Federal Spending
States that decline to expand Medicaid will not see their share of the funds sent to other states. This gives state policymakers the unique opportunity to effectively veto hundreds of billions of dollars of new federal spending by not expanding Medicaid in their states.
The Goldwater Institute has estimated that federal spending for Medicaid expansion has been lowered by more than $424 billion over the next eight years due to the 18 states that have opted out. If the 12 undecided states choose to opt out, this will be another $185 billion in savings. A total of $609 billion in federal spending could be saved over the next eight years, a victory for fiscal responsibility in a time of federal profligacy.
While advocates for Medicaid expansion may be motivated by an honorable desire to protect the poor, studies continue to demonstrate poor health outcomes for Medicaid recipients. These good intentions are not enough, especially for a program that consumes ever-growing portions of federal and state budgets. Louisiana policymakers should instead act to incorporate market-based principles into our health care system. In the long run, such reforms would do more to control costs, stimulate innovation and provide access to the needy than expanding Medicaid.