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Research & Commentary: Medicaid Expansion is not the Only Way to Improve Medicaid in Kansas

January 10, 2020

In this Research & Commentary, Matthew Glans examines the latest effort to expand Medicaid in Kansas and why Kansas lawmakers should consider other options.

Over the past decade, Medicaid rolls have expanded much faster than many states can handle. From 2013 to 2018, the number of Medicaid enrollees increased by nearly 28 percent, to more than 67 million. In 2017, the cost of Medicaid reached $581.9 billion.

As in many states, Kansas’ Medicaid costs are steadily increasing each year. From 2012 to 2016, total Medicaid spending in Kansas increased 22.75 percent. In fiscal year 2017 alone, federal and state spending for Kansas’ Medicaid program totaled approximately $3.2 billion, according to the Kaiser Family Foundation.

A new proposal recently introduced in Kansas would extend Medicaid coverage on Jan. 1, 2021, to Kansas residents earning up to 138 percent of the federal poverty level, or $29,435 for a family of three. The plan also includes a reinsurance plan that would help insurance companies cover people who accrue the highest medical bills.

The proposal does not include work requirements yet does include a strengthened work referral program. The proposal also allows the state to charge new Medicaid participants a premium of up to $25 per individual and $100 per family. Those unable to pay the premiums would be assisted from a new special fund.

While both popular and an effective tool for managing costs, reinsurance programs only serve to stabilize Medicaid, and do little to address the real issues with the program. Reinsurance creates a high-risk pool for insurers so they can cover claims from higher-cost individuals, reduce premiums, and attract healthier people. They do not address the unnecessary mandates, rules, and continually-growing costs involved with Medicaid.

This proposal, like many of the faux free market plans passed in other states, allows for the expansion of a failed program and all the costs and waste it will create. The lack of a work requirement, an essential reform, is concerning, as is the lack of any penalty for those failing to pay the premium when they are able make it useless.

Estimating the true cost of Medicaid expansion has proven to be a difficult task for states, with many significantly underestimating both enrollment and long-term costs. One estimate from the Kansas Health Institute predicts the yearly net impact on the state budget would range from $47.4 million to $58 million, with a total cost of $520.8 million for the decade. The Mercatus Center warns Medicaid State General Fund (SGF) expenditures could be even higher, increasing by $625 million over a similar time period.

State policymakers can propose their own reforms through the Section 1115 and Section 1332 waiver processes. These waivers give states the ability to institute free-market reforms that would increase access to high-quality, affordable health care without breeding government dependency, raising taxes, growing state budgets, or adding to the $23 trillion (and counting) national debt.

The Trump administration has encouraged states to submit such waivers to reform their Medicaid and Obamacare exchange programs. Moreover, the Department of Health and Human Services (HHS) has also offered guidance to help states looking to craft these waivers.

There are two major reform paths state legislators can follow using Section 1115 waivers.

The first path would allow the state to enact reforms to contain the growing costs of their Medicaid programs while ensuring Medicaid serves those truly in need. 

Millions of Medicaid recipients can work but choose not to. More than 60 percent of Medicaid recipients are able-bodied, working-age adults, yet half of them do not work, according to a 2018 study by the White House Council of Economic Advisors. Fortunately, many states have successfully implemented work requirements for enrollees in the Supplemental Nutrition Assistance Program (SNAP). In SNAP, low-income, able-bodied adults without dependents are limited to receiving food stamps for three months in a three-year period under federal rules unless they fulfill work requirements, which typically entail employment or participation in a training program for at least 20 hours per week.

States that have enacted work requirements have enjoyed significant success in reducing their Medicaid rolls and associated costs. For example, after Maine imposed work requirements in 2014, its Medicaid rolls for able-bodied adults without dependents decreased by about 80 percent during the first year the reforms went into effect.

States can also decrease Medicaid fraud and abuse by establishing a robust eligibility verification system. After the Illinois Department of Healthcare and Family Services launched the Illinois Medicaid Redetermination Project in 2012, the Prairie State removed 400,000 ineligible recipients and saved an estimated $350 million per year.

Adding accountability to Medicaid is also crucial to containing costs and preventing abuse. State legislators can discourage patients from using costly and unnecessary health care services by imposing a modest premium and co-payment for Medicaid plans. Small cost-sharing fees on unnecessary emergency room visits incentivizes patients to visit a primary care doctor instead of visiting the emergency room for routine health needs. Primary care visits are traditionally less expensive than visiting the emergency room.

The second reform path would allow states to use the waiver process to open their health care market to new innovations. One option for states looking to expand access to primary care while cutting costs is direct primary care (DPC), which allows patients to pay a monthly membership fee and in return receive a more generous allocation of appointments than they would under most traditional health insurance plans. A comprehensive survey of DPC in the Journal of the American Board of Family Medicine found the median monthly DPC subscription is just $75 and can be as low as $26.

States can also lower costs and improve quality by allowing physicians to consult and treat patients remotely via telemedicine. As advances in information and medical technologies accelerate, doctors are increasingly connecting with patients by phone, email, and webcam, to diagnose, treat, and prescribe medications for patients. Patients in rural areas, in particular, stand to benefit because readily available physicians are often in short supply. According to a study in Health Affairs, chronically ill patients who utilize telehealth spent 7.7 to 13.4 percent ($312-$542) less per quarter than similar patients who interacted with doctors in-person.

One state that is embracing telehealth is California; new guidelines recently released by the California Department of Health Care Services take several steps towards expanding the use of telehealth in Medi-Cal, California’s Medicaid program. The new guidelines allow health care providers to determine what type of telemedicine services to use in conjunction with Medi-Cal, so long as they meet Medi-Cal guidelines. This includes both real-time audio-visual communication or asynchronous communications where medical information is stored and forwarded to another party for evaluation. Lawmakers should also allow practitioner-patient relationships to be established remotely. This would greatly expand the availability of care to areas currently underserved and could bring real savings to state Medicaid programs.

Yet another option states should consider is providing Medicaid recipients cash incentives when they choose a cost-effective option. Fortunately, this has been successfully implemented in a few states. For example, Kentucky and New Hampshire partnered with Vitals SmartShoppers, which lets state employees compare prices for a variety of elective, non-emergency procedures across providers in their network. After their programs were launched, New Hampshire spent $5 million less on medical care for state employees in 2016 than in 2011 and Kentucky has spent $127 million less since SmartShoppers went into effect in 2013.

Kansas lawmakers should reject Medicaid expansion and choose to embrace meaningful reforms that would help increase access to high-quality, affordable health care without increasing state budgets or the national debt.

The following documents examine Medicaid reform and expansion in greater detail.
 

The Arizona Medicaid Expansion Experience: Beware the Peddlers of Cost-Shifting Claims
https://goldwaterinstitute.org/wp-content/uploads/2018/08/ArizonaMedicaidExperience_FINAL.pdf
This study, written by Naomi Lopez Bauman, Angela Erickson, and Christina Sandefur examines the effects of Medicaid expansion on health care costs and whether it has cut down on the high cost-sharing borne by the insured. The study concludes expansion increased the burden on the privately insured. “The Arizona experience is a cautionary tale for lawmakers: A program should be evaluated based on outcomes, not intentions. Arizona’s expansion not only failed to deliver on its promise to alleviate supposed cost burdens on private payers, it exacerbated them.”

The Report Every State Legislator Should Read
http://www.nationalreview.com/article/440411/obamacare-medicaid-expansion-hospitals?target=author&tid=954473
In this article published by National Review, Chris Jacobs writes about a new report issued by the Congressional Budget Office that analyzes profit margins for hospitals over the coming decade. It concludes Medicaid expansion will not make a material difference in hospitals’ overall viability.

Evidence Is Mounting: The Affordable Care Act Has Worsened Medicaid’s Structural Problems
https://www.heartland.org/publications-resources/publications/evidence-is-mounting-the-affordable-care-act-has-worsened-medicaids-structural-problems
In this Mercatus Center paper, Brian Blase examines the effect of the Affordable Care Act on Medicaid. Blase’s findings reveal Medicaid expansion has worsened many of the structural problems in the program. “The unanticipated expense casts doubt on the value of the ACA Medicaid expansion. The enhanced federal match incentivizes states to boost ACA expansion enrollment and to categorize Medicaid enrollees as ACA expansion enrollees, and also encourages states to set high fees for ser­vices commonly used by expansion enrollees and high payment rates for insurers participating in states’ Medicaid managed care programs,” wrote Blase.

Research & Commentary: States Pursue Work Requirements for Medicaid
https://www.heartland.org/publications-resources/publications/research--commentary-states-pursue-work-requirements-for-medicaid?source=policybot
Senior Policy Analyst Matthew Glans examines efforts by several states to add work requirements to their Medicaid programs. “Implementing Medicaid work requirements would be a good first step for Medicaid-expansion and non-expansion states toward helping to limit the rising costs of Medicaid,” Glans wrote.

The Oregon Experiment—Effects of Medicaid on Clinical Outcomes
https://www.heartland.org/publications-resources/publications/the-oregon-experiment--effects-of-medicaid-on-clinical-outcomes?source=policybot
This article from The New England Journal of Medicine examines Medicaid outcomes in Oregon. Oregon gave researchers the opportunity to study the effects of being enrolled in Medicaid (compared to being uninsured) based on data from a randomized controlled trial, the “gold standard” of scientific research. The results showed no improvement in health for enrollees, but it did reveal better financial protections for patients and increased medical spending.

The Value of Introducing Work Requirements to Medicaid
https://www.americanactionforum.org/research/value-introducing-work-requirements-medicaid/
Ben Gitis and Tara O’Neill Hayes of the American Action Forum examine the value of work requirements and argue more work requirements are needed in other safety-net programs, including in Medicaid.

Don’t Wait for Congress to Fix Health Care
https://www.heartland.org/publications-resources/publications/dont-wait-for-congress-to-fix-health-care
Heartland Senior Policy Analyst Matthew Glans documents the failure of Medicaid to deliver quality care to the nation’s poor and disabled even as it drives health care spending to unsustainable heights. Glans argues states can follow the successful examples of Florida and Rhode Island to reform their Medicaid programs or submit even more ambitious requests for waivers to the Department of Health and Human Services, an option the Trump administration has encouraged.

Maine Food Stamp Work Requirement Cuts Non-Parent Caseload by 80 Percent
http://www.heritage.org/welfare/report/maine-food-stamp-work-requirement-cuts-non-parent-caseload-80-percent#_ftnref36
Robert Rector, Rachel Sheffield, and Kevin Dayaratna of The Heritage Foundation examine Maine’s food stamp reforms and discuss how they could act as a model for other states. “The Maine food stamp work requirement is sound public policy. Government should aid those in need, but welfare should not be a one-way handout. Able-bodied, nonelderly adults who receive cash, food, or housing assistance from the government should be required to work or prepare for work as a condition of receiving aid. Giving welfare to those who refuse to take steps to help themselves is unfair to taxpayers and fosters a harmful dependence among beneficiaries,” the authors wrote.

Welfare Reform Report Card: A State-by-State Analysis of Anti-Poverty Performance and Welfare Reform Policies
https://www.heartland.org/publications-resources/publications/2015-welfare-reform-report-card?source=policybot
In 2015, The Heartland Institute published an updated version of its Welfare Reform Report Card. This report card compiles extensive data on five “inputs” and five “outputs” of state welfare and anti-poverty programs and assigns a final grade to each state for its welfare policies.

The Work Versus Welfare Tradeoff: 2013
https://www.heartland.org/publications-resources/publications/the-work-versus-welfare-trade-off-2013-1?source=policybot
The Cato Institute estimates the value of the full package of welfare benefits available to a typical recipient in each of the 50 states and the District of Columbia. The study found welfare benefits outpace the income most recipients can expect to earn from an entry-level job, and the income gap between welfare and work may actually have grown worse in recent years.

 

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.

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Author
Matthew Glans joined the staff of The Heartland Institute in November 2007 as legislative specialist for insurance and finance.