Why Medicaid expansion is a no-brainer

By: - September 11, 2012 7:17 am

Under the Affordable Care Act (sometimes referred to as “Obamacare” and the “ACA”), the federal government has a remarkably good deal on the table for states wishing to participate in a major expansion of Medicaid – the health insurance program for low income households. A look at the facts shows that, notwithstanding the partisan rhetoric that’s flooding the airwaves and cyberspace these days, political leaders of all stripes would be foolish not to take advantage of it.

Consider the following:

During the first three years of the expansion, the federal government picks up 100 per cent of the costs. After that, it covers 90 percent on an ongoing basis, as long as the law stays in effect.

In other words, the federal law will cover millions of uninsured or under-insured low- and moderate-income families across the nation at little or no cost to state governments. When one includes the changes in the individual health insurance market, a variety of tax incentives and other subsidies and new regulatory protections, the ACA is the most far-reaching step toward universal coverage in American history.

Despite this attractive option, however, some elected officials at the state level are refusing to implement the Act, starting with the proposed Medicaid expansion. Despite the prospect of billions of dollars in “free” cash that will provide a means to offer health coverage to families who need it and the chance to save the vast expenses that result from unnecessary emergency room visits and chronic health problems left untreated, these leaders still say “no.”

This is a big mistake for a number of important substantive reasons. Consider these additional strengths of the new law:

Flexibility – Under the authority of the Act, states can use the federal monies flexibly and thereby frugally. For instance, a state can apply the new federal dollars to cut back significantly in uncompensated care, thereby saving money that they are already spending. Long-term care is another area where the states could shift money around to their benefits. Pregnancy costs, another item that is often not covered by employer insurance, is another place states can get the federal government to pick up the tab. In addition, for the first time Medicaid funding can be used for mental health services.

Frugality – Under the Medicaid expansion, states would save $66 billion on existing Medicaid enrollees and spend an additional $80 billion in spending on new enrollees. This means there is $14 billion in net state spending. However, other provisions of the ACA, such as those which reduce the costs of uncompensated care, would result in a net reduction of costs to state budgets of between $92 billion to $129 billion, according to a recent study by the Urban Institute.

Greatly expanding quality coverage – Under ACA, Medicaid enrollments would increase by 21.8 million by 2019. This will move us much closer to “universal coverage.” Moreover, because co-pays and deductibles will be subject to an annual cap, the ACA “buys” a lot of peace of mind, along with greater access to higher quality care. Previously insured citizens will pay less in premiums and out-of-pocket costs. And because it would compensate states for costs already accrued by the uninsured, the ACA will roughly halve expenditures on uncompensated care. By any stretch of the imagination, this would be a win-win for states.

Ironically, most of the “rejectionist” states tend to have the highest number of uninsured and the worst public health indicators. Southern states in particular need good health insurance for their historically impoverished citizens. Texas would turn away 1.3 million Texans who otherwise would be eligible. North Carolina would deny coverage to hundreds of thousands of people if it followed such a path.

Let’s hope that once the 2012 election has passed, sanity prevails and state leaders base their decision on the facts rather than perceived opportunities for partisan advantage. Generally speaking, opportunities to change the US health care system and advance toward universal health insurance occur roughly once a generation. They mustn’t be squandered.

“Obamacare” is a major accomplishment and offers our greatest leverage to expand coverage and contain costs.

There is an old, time-honored adage that goes like this: “if you’ve got your health, you’ve got just about everything.” The real world flipside to this truism is that universal health insurance is not just any marketplace product: it is a public good and a prerequisite for a decent society. Right now, Obamacare offers the best hope of guaranteeing this essential public good.

Our leaders should get to work implementing it as soon as possible.

William Schweke is a retired public policy professional.

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