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Research & Commentary: Medicaid Expansion Would Be an Expensive, Ineffective Albatross for Kansas

April 9, 2019

In this Research & Commentary, Matthew Glans examines a proposed Medicaid expansion plan that is now being considered in Kansas.

As in many states, Kansas’ Medicaid costs are steadily increasing each year. Between 2012 and 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.

Recently, the Kansas House passed a bill that would expand the state’s Medicaid program, despite overwhelming evidence showing Medicaid expansion programs have failed in other states. The new proposal emerged when a non-related bill, House Bill 2066, was stripped of its original text and replaced with an amendment containing expansion language.

The legislation, currently stalled in a Senate committee, would dramatically expand KanCare, the program through which Kansas administers Medicaid, to cover Kansans earning less than 138 percent of the federal poverty level ($17,236 for an individual, $35,535 for a family of four). Supporters estimate an additional 150,000 Kansans will be added to the program.

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 Institute warns Medicaid State General Fund (SGF) expenditures could be even higher, increasing by $625 million over a similar time period.

The bill would also require the Kansas Department of Health and Environment to refer all non-disabled adults who are unemployed or working fewer than 20 hours a week to a job training program. This program does not incorporate the work requirement standards that have been introduced several states. While job training programs are an important tool to move Medicaid recipients back into the workforce, they do not constitute a true requirement to find work.

Work requirements for able-bodied adults without dependents are vital for states to ensure the long-term viability of Medicaid. Work requirements also help people move from government dependence to self-sufficiency. A well-paying job is the best way for people to lead happy, healthy, and productive lives.

Work requirements have already proven to be successful in Kansas, helping many welfare recipients make it back into the workforce. In a 2017 study by the Foundation for Government Accountability. Nic Horton and Jonathan Ingram examined Kansas’ welfare reforms and found they caused individuals to reenter the labor force. They also determined the incomes of Kansas families exiting the Temporary Assistance for Needy Families program increased substantially, more than doubling in the first year. According to the study, as of 2017, families who left TANF are now earning $48 million more per year than they had while receiving cash assistance. In fact, the new incomes of those leaving the welfare system increased 104 percent in one year. Four years after the reforms, these same individuals’ incomes increased by 247 percent.

One important amendment was added to H.B. 2066 to address the increased Medicaid expansion costs. The amendment says the state could nullify Medicaid expansion if the federal government funds less than 90 percent of Medicaid expansion costs. Contrary to expansion supporters’ depiction of the new federal funds as “free money,” Medicaid expansion is expensive. It creates new costs the federal government doesn’t cover or won’t cover forever, leaving state taxpayers on the hook for new liabilities.

The legislation as it currently stands would likely require Kansas to apply for a federal waiver to use Medicaid expansion dollars to subsidize the new coverage. Under provisions written into the original Medicaid law, state policymakers can apply for Section 1115 waivers from the U.S. Department of Health and Human Services (HHS), which, if approved, allow states more flexibility to innovate and make significant changes to their Medicaid programs.

Although the proposed changes use the waiver process to expand coverage, there are many positive reforms Kansas could instead pursue thorough the 1115 process. Some reform proposals states can submit to the Centers for Medicare & Medicaid Services and the HHS secretary through 1115 waivers include: work requirements, payment enforcement mechanisms to encourage enrollees to pay cost sharing, incentives for enrollees to engage in healthy behaviors, time limits on coverage, monthly income verification and eligibility renewals, payment and eligibility changes, and the incorporation of health care innovations such as direct primary care.

Medicaid expansion would be disastrous. It would increase costs without improving health outcomes. Kansas lawmakers should reject Medicaid expansion. Instead, they should use Section 1115 waivers to institute free-market reforms that would increase access to high-quality, affordable health care without growing state budgets or the national debt.

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

Myth vs. Fact: A Primer on Medicaid Expansion
https://kansaspolicy.org/wp-content/uploads/2019/01/Myth-Vs-Fact.A-Primer-on-Medicaid-Expansion.pdf
In this primer on Medicaid expansion, the Sandlian Center for Entrepreneurial Government at the Kansas Policy Institute examines several myth about Medicaid expansion.

The Growing Medicaid Expansion Bubble
https://www.heartland.org/news-opinion/news/the-growing-medicaid-expansion-bubble?source=policybot
In this edition of the Consumer Power Report, Executive Editor Justin Haskins examines Medicaid expansion and all the problems it has created for states, physicians and patients. “Despite the lack of attention the issue is getting, the growing Medicaid population could lead to state government meltdowns around the country and a national health care crisis for which most Americans are completely unprepared,” wrote Haskins.

Here’s Why States Must Resist the Temptation to Expand Medicaid
http://www.forbes.com/sites/sallypipes/2015/07/27/heres-why-states-must-resist-the-temptation-to-expand-medicaid/ - 420cec6d5b80
Sally Pipes, president of the Pacific Research Institute, argues in this Forbes piece states should resist any push to expand Medicaid. Pipes recommends replacing Medicaid entitlements with block grants. “If governors and state legislatures really want to help low-income folks while keeping their budgets under control, they should insist Washington[, DC] replace the failed, open-ended Medicaid entitlement with block grants pegged to inflation,” wrote Pipes.

Government Report Finds Obamacare Medicaid Enrollees Much More Expensive than Expected
http://www.forbes.com/sites/theapothecary/2016/07/20/government-report-finds-that-obamacare-medicaid-enrollees-much-more-expensive-than-expected/ - 75a85aba2dd0
Brian Blase wrote in Forbes the costs for newly eligible adults were not decreasing as expansion supporters predicted they would. Blase says in a new report, HHS says newly eligible adult Medicaid enrollees cost about 23 percent more than the Medicaid enrollees who were eligible prior to expansion.

Work Requirements Are Working for Kansas Families: How Welfare Reform Increases Incomes and Improves Lives
https://thefga.org/wp-content/uploads/2017/07/Work-Requirements-are-Working-for-Kansas-Families.pdf
In this study, Nic Horton and Jonathan Ingram of the Foundation for Government Accountability examine Kansas’ welfare reforms and how recipients fared after leaving the program. Their results found the reforms have led to more employment, higher incomes, and less dependency on government services.

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 Health Care News, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.

The Heartland Institute can send an expert to your state to testify or brief your caucus; host an event in your state, or send you further information on a topic. Please don’t hesitate to contact us if we can be of assistance! If you have any questions or comments, contact Lindsey Stroud, a state government relations manager at The Heartland Institute, at lstroud@heartland.org or 757/354-8170.

Author
Matthew Glans joined the staff of The Heartland Institute in November 2007 as legislative specialist for insurance and finance. In 2012, Glans was named senior policy analyst.
mglans@heartland.org @HeartlandGR