Medicaid is a program jointly funded by the state and federal governments. One of its core functions includes paying medical providers for services rendered to low-income parents and children, pregnant women, the elderly, the blind, and the disabled. The federal government currently funds two-thirds of North Carolina’s $14 billion Medicaid program.
The Affordable Care Act (ACA), commonly known as Obamacare, gives states the choice to expand Medicaid eligibility to individuals earning up to 138 percent of the federal poverty level. This figure equates to an individual earning $16,242 a year or a family of four earning $33,465 a year.
If North Carolina were to expand Medicaid, the federal government promises to fully fund the cost until 2017. At that point, states will take on some of the financing, maxing out at 10 percent starting in 2020. To date, over 31 states have already gone forward with plans to expand.
- The federal government would be borrowing more money to fully fund a Medicaid expansion for three years, taxing future generations and applying a stronger choke hold on the federal deficit.
- Starting in 2020, expansion would cost North Carolina $6 billion over the next decade. In the longer term, this will either lead to a reduction in provider payments, diverting resources from other important parts of the budget such as education or transportation, or tax increases.
- At present, 25 percent of physicians in North Carolina do not accept new Medicaid patients.
- Expanding Medicaid eligibility puts traditional program enrollees at risk. They will have to compete with a half million more people for adequate access to health care — 82 percent of whom are able-bodied childless adults.
- Expanding eligibility levels for government health insurance programs crowds out access to private coverage. Studies indicate that the crowd-out effect contributes to the fact that six out of 10 people on Medicaid once had private coverage.
- The heavier the Medicaid caseload, the more providers will have to make up for being paid below market levels by negotiating higher payment through private carriers — ultimately passing on these costs to consumers in the form of higher premiums.
- Expanding Medicaid would add an additional 500,000 enrollees to our state’s Medicaid program – of which 186,000 North Carolinians with incomes between 100- 138% of the federal poverty level (FPL) would be thrown off Obamacare’s subsidized private coverage Exchange plans.
- The 2008 Oregon Health Insurance Experiment (OHIE) is known as the gold standard of studies that assess Medicaid’s overall effectiveness. Researchers randomly assigned eligible patients to the state’s Medicaid program. Two years later, the authors detected that Medicaid had no statistically significant effect on major measures of health outcomes of those who had been chosen to participate and those who had not.
- North Carolina can learn from other states that have expanded eligibility to this population in the past. Arizona’s expansion in 2002 originally projected slow enrollment growth, maintainable costs, a reduction in the number of uninsured, and reduced uncompensated care. All four of these projections were turned upside down. The expanded population (mostly childless adults) ended up costing two to four times more than low-income parents. Similar outcomes occurred in Oregon, Delaware, Maine, Washington, D.C., Utah, and Vermont.
Medicaid can be thought of as multiple programs for different types of patients. It would be wise for Congress to grant North Carolina even more flexibility with its Medicaid reform plans by reconstructing the Medicaid program in its entirety:
- Congress should allow states to have more flexibility experimenting with their long-term care Medicaid caseload.
- Offer a universal refundable tax credit to able-bodied, working Medicaid patients and their dependents to offset the cost of private health plans sold on the individual policyholder market. Shifting acute care patients onto the health insurance exchanges can reduce government dependence in the long term and instill consumer awareness and promote patient choice.
- Change Medicaid’s financial design. Historically, the federal government foots two-thirds of North Carolina’s Medicaid bill. The match rate has produced perverse incentives for states to expand optional benefits or program eligibility since the program’s inception in 1965. A federal block grant allocated to states will instead push North Carolina to budget accordingly with a defined amount of resources and take full ownership of any additional state Medicaid spending as policymakers see fit.
- Funding a Medicaid expansion won’t solve our nation’s pervasive health care access problem. Congress should focus more on relaxing regulations that make health care more affordable, and less on how to extend health insurance for all.