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Medicaid expansion analysis: Lessons from other states

Medicaid expansion analysis: Lessons from other states

Idaho Freedom Foundation staff
July 10, 2014

Note: This is the first of a two-part analysis series examining Medicaid issues in Idaho. This analysis focuses on the unpleasant experience of Arizona and Maine in expanding Medicaid contrasted with that in Florida, which seems to have developed a plan for expanded health care that is working.

One of the pillars of the Affordable Care Act is the expansion of Medicaid to everyone making at most 138 percent of the Federal Poverty Level (FPL). It will mainly benefit childless, healthy adults. To understand possible implications in Idaho, a look at three states is useful.

Medicaid expansion proponents claim that it saves lives although the debate is far from settled. But with ever-increasing deficits and debt, can people really afford to expand this program?

Arizona expanded its Medicaid program in 2000 so people making less than 100 percent FPL would be covered. Estimates, compiled by the Foundation for Government Accountability, predicated that by 2013 some 50,000 more parents would have enrolled; more than 139,000 did. Childless adults also joined in numbers that baffled estimates: Nearly 227,000 had joined (estimate, 80,000) in 2011 before severe restrictions were put to curtail costs. Costs increased nearly five-fold from 2000 to 2011. Despite the massive cost increase, the percentage of uninsured remained nearly static at around 20 percent while private insurance found itself crowded out.


This crowding out also happened in Maine, a state that expanded its Medicaid service in 2002. Like Arizona, far more people than predicted enrolled—25,000 in two years, compared to a maximum of 11,000 during 10 years. And like the Grand Canyon State, the Pine Tree State saw its costs explode, nearly doubling from 2001 to 2013. It therefore had to put a cap to contain spending, putting 24,000 people on a waiting list.


These results—higher cost and more enrollees—shouldn’t be a surprise. A new law or regulation doesn’t just mean that government supervises more of our lives; it also changes people’s incentives. With Medicaid expansion, it means that people who didn’t have insurance (and therefore higher health care costs) are now covered for little or no out-of-pocket money. Therefore they are almost encouraged to use as many services as possible, especially the emergency room, since they don’t foot the bill.

In other words, if Arizona and Maine are any indication, Medicaid expansion in Idaho is likely to be very expensive. Considering the staggering increaseof Medicaid in the past 30 years, politicians will have to make tough choices.

The Medicaid expansion under Obamacare is riddled with severe flaws: a total lack of flexibility, ever-increasing costs and, at best, no significant improvement in patient outcome. States that have tried to expand their Medicaid services usually ended up paying much more than expected because newly covered patients use the emergency room more often than regular patients.

Beyond these bleak outcomes, a ray of light seems to have appeared: Florida. Indeed, since the Sunshine State enacted its Medicaid reform pilot project in 2006, taxpayers saved an estimated $118 million according to a joint report by the Heritage Foundation and the Foundation for Government Accountability. Both think tanks believe that expanding the program Florida-wide (it’s only available in five counties currently) would save Floridians $900 million—and $28.6 billion if it were enacted nationwide.

How can it be? To begin with, Florida patients were given a wide array of plans—up to 11 depending on the county they live in. Thus, they can choose whatever fits their needs. Many of these plans had extra services like acupuncture and preventive dental care. It has helped improve health outcomes, as measured by the Healthcare Effectiveness Data and Information Set survey, better than counties not concerned by the reform.

And yet, Florida was able to slow down the increase of medical cost compared to regular Medicaid care. That’s because it changed the way health care is paid for. With Medicaid, health care professionals and hospitals are paid directly, which leads to fraud and abuse. With the Florida plan, the state will send Medicaid funds to insurance companies, who will then pay the providers. In other words, it’s become managed care, and only so much money is spent per year.

The plan is encouraging, but not perfect. Even Heritage recognizes that it needs improvement, namely that rural areas need more plan choice and to improve the quality of care. Also, its success among health specialists is very mitigated; the Florida Medical Association seems adamantly opposed to a statewide expansion

Coming Friday: An overview of the costs associated with Medicaid, patient outcomes and the increasing role of the federal government in Medicaid expansion plans.

PG Veer is a summer intern from the Charles Koch Institute. He has written and edited for several publications in Canada and most recently interned for the Cato Institute.

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