Medicaid Expansion? Not so fast

While upholding the massive federal health care law known as ObamaCare, the US Supreme Court led by Justice John Roberts also held that individual states can opt out of the state-operated, federally funded Medicaid program. Supporters of Medicaid view this decision as a “no-brainer.”

If individual states accept this provision to expand Medicaid, the federal government will cover the total cost for Medicaid expansion for three years. States that consent to the Medicaid expansion will receive funds to pay their residents’ health care bills, which could also reduce the number of hospitals and physicians left with uninsured patient bills. The 100 percent match rate from the federal government will decrease after the first three years: in 2017, the federal government will pay 95 percent of the cost, and in 2020, the federal government will cover only 90 percent of the bill. Sounds like a great deal, right? Who could pass up “free” money (provided by further indebtedness on the part of the US federal government).

For starters, even though the feds will pick up a large percentage of the Medicaid bill into the future, the expansion would cost New Mexico taxpayers more than $300 million between 2014 and 2020 (once the federal match declines). The price will rise dramatically from there.

Of course, the effectiveness of Medicaid in improving health care is very much up for debate. A University of Virginia study found that surgical patients on Medicaid are 13 percent more likely to die than those without insurance of any kind. And, as Michael Cannon points out in this article, real world experience on Medicaid and whether it actually improves health outcomes is mixed at best.

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2 Replies to “Medicaid Expansion? Not so fast”

  1. To state the obvious, assuming the tab is picked up by the Feds for the first three years of the expansion, isn’t it we who are paying taxes to the Feds in the first place?

    It is also my understanding that the Feds will NOT pay for the added administrative costs incurred by states, even in the first three years. There was an article in the NY Times several weeks ago stating that NY state estimates that expansion will cost NY state one BILLION per year in added administrative costs.

    1. I don’t know about administrative costs, but I do know that New Mexico is one of the single greatest recipients of federal largesse and our Medicaid program is close to 80% federal money and only 20% from the general fund (some additional state money is in the mix). Anyway, already under that scenario, we are paying a small fraction of the bill. Not to mention that Washington is already borrowing 1/3rd of all federal spending so it is really on the national credit card.

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