The Next Medicaid Blowout

Democrats plan a federal program to cover childless adults. Insurers will win big but health won’t

By Brian Blase. Mr. Blase, who served as a special assistant to President Trump at the National Economic Council, is president of Paragon Health Institute. Excerpts:

"Medicaid expansion has already fueled insurer profits: A 2018 White House Council of Economic Advisers report showed insurer stock doubling the growth of the S&P 500 from 2014 through 2018. Improper Medicaid payments have grown to $100 billion annually."

"But more important, this won’t be good health coverage for the Americans who rely on it. Low Medicaid payment rates—about half of what private insurers pay for primary-care services—discourage doctors from participating. A 2019 government report found that only 70% of providers accept new Medicaid patients, versus 90% for private coverage. The disparity is more pronounced for family-practice doctors and psychiatrists.

Perhaps most notably, obstetrician-gynecologists are 20% less likely to accept Medicaid in expansion states than in non-expansion states. This statistic is especially worrisome since Medicaid pays for more than 40% of all U.S. births.

Medicaid expansion increases demand for healthcare but does nothing to increase the number of doctors or nurses who treat patients. Expansion has led to a surge in unnecessary emergency-room use, delays in care from longer appointment wait times, and longer waits for ambulances. In California, emergency room visits by Medicaid recipients surged 75% from 2012 to 2016, according to a study from a state government health-planning office. States that expanded Medicaid also suffered larger increases in opioid deaths from 2013 to 2015, according to data compiled by HHS.

A gold-standard study on Medicaid’s health outcomes came out of Oregon. It randomly assigned Medicaid enrollment to presumably lucky winners. But the winners didn’t experience a statistically significant improvement on any measure of physical health assessed.

Massachusetts Institute of Technology economist Amy Finkelstein has noted that 60% of spending to expand Medicaid to new recipients “ends up paying for care that the nominally uninsured already receive, courtesy of taxpayer dollars and hospital resources.”

Thus, it should not be surprising that a study conducted by Ms. Finkelstein and others found that Medicaid recipients value the program at only between 20 to 40 cents on the dollar. With a per enrollee Medicaid expansion cost of about $7,000, at least half of enrollees would prefer $2,800 in cash to $7,000 of government spending through Medicaid on their behalf."