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Analysis: Medicaid expansion would be costly mistake for Idahoans

Analysis: Medicaid expansion would be costly mistake for Idahoans

Idaho Freedom Foundation staff
September 20, 2012

The federally proposed Medicaid expansion would be a costly mistake, both for Idaho taxpayers and for the state's indigent population, according to an analysis released Thursday by Parrish Miller, a policy analyst for the Idaho Freedom Foundation.

Rather than establishing an enormous new subsidy funded by federal tax dollars and deficit spending, Miller argues, those who truly wish to help fund medical services for the less fortunate should reject top-down centralized health care planning and instead devote their money to efficient private-sector organizations that provide cost-effective care solutions with much greater transparency and accountability.

Supporters of the Patient Protection and Affordable Care Act (PPACA), commonly known as Obamacare, have long claimed that the law's provisions for expanding Medicaid eligibility in those states choosing to participate could rein in costs. Idaho uses a mix of state, county and local indigent health care programs to provide care.

The Spokesman-Review reported its own calculation of easily seen surface costs, suggesting that the additional amount Idaho could expect to pay during the first six years of the proposed Medicaid expansion would be $380 million less than the projected costs for treating the eligible population through Idaho's catastrophic health care program. That figure was repeated by several other news outlets, but Miller suggests the potential costs are far greater.

"Research conducted by Utah-based consulting firm Leavitt Partners at the behest of Idaho Gov. Butch Otter found that expanding Medicaid in Idaho would swell the program's rolls by more than 40 percent and result in 100,000 people joining the entitlement program," Miller writes. "While no cost estimate for Idaho has been issued yet, if the Texas estimates carry over ($16 billion-$27 billion over the next decade for 1.6 million new enrollees) the result for Idaho would be a cost of between $1 billion and $1.7 billion during the next 10 years. Of course, this is only an estimate and does not account for the potential increase that changes in the federal funding formulas could cause."

Miller also notes that administrative costs for the Medicaid expansion are left entirely to states, even during the early years in which the federal government is expected to pay 100 percent of the costs for medical services. Given that administrative costs for Idaho's existing Medicaid population amount to more than 3 percent, Miller calculates that Idaho could expect to pay nearly $30 million more per year in administrative costs alone, commencing at the start of the expansion.

Another wrinkle for the purported cost savings of a Medicaid expansion, says Miller, is that qualifying for indigent care under Idaho's current system is far more difficult than qualifying for the perpetual coverage that Medicaid provides. Indigent care programs also attempt to recover some of their costs by filing property liens, thereby discouraging overuse of the system, but Medicaid is a direct transfer of services and funds.

"In order for expanding Medicaid to save the taxpayer money, providing indigent care would have to cost more than expanding Medicaid," Miller wrote. "This would only be the case if one of two conditions were true: either more patients would have to be treated or the service rendered would have to cost more. Unless it can be demonstrated that one or both of these situations are occurring, the base conjecture is without merit. Ultimately, it seems likely that expanding Medicaid would result in the redistribution of more dollars than would just leaving the local-state indigent program in place to continue running as it does now." The same cost comparison would also hold true for emergency room care, he argues.

Ultimately, Miller suggests that the best way to help the poor and disabled population of Idaho is to bring down the costs of health care by scaling back artificial market distortions. Although Indigent populations regularly received low-cost health care through private groups and voluntary arrangements throughout the early 20th century, a series of government interventions and tax incentives restricted the supply of medical services, driving up prices; cemented employers as the primary providers of health insurance, drastically reducing plan portability and self-reliance; and sequestered health care consumers behind a wall of price ignorance, leading to overconsumption and driving prices higher still.

Miller adds that reducing costs in a realistic way is increasingly unlikely, though, when health care services are provided by a bureaucracy that divorces costs from accountability and the dominant voices for reform support much greater centralization and government control.

"Medicaid does not encourage innovation in health care and its delivery nor does it promote new strategies for transitioning people out of the government system," Miller wrote. "Medicaid also fails to provide quality care for those who use it. No one wants to live with the limitations of the program, but it has pushed most alternatives (including private charities in many cases) out of the market. Medicaid lacks accountability as the blame for its failures and shortcomings are shifted like a hot potato between states, the federal government and providers."

Note: IdahoReporter.com is published by the Idaho Freedom Foundation.


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