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Research & Commentary: Wisconsin Lawmakers Should Continue to Resist Medicaid Expansion

July 6, 2021

In this Research & Commentary, Christina Herrin examines the impacts Medicaid expansion would have on the state of Wisconsin.

stethoscope and insurance docs

At face value, Medicaid expansion might be enticing to state legislators, especially when it is offered under the guise of “free federal money.” Yet, this couldn’t be further from the truth. Medicaid expansion funding from the federal government boosts state budgets temporarily. However, over the long-term, Medicaid expansion actually ends up driving higher costs for states, leaving taxpayers on the hook when funding shortfalls inevitably occur.

On May 26, Gov. Tony Evers called a special session for the Wisconsin Legislature to expand Medicaid. Like many politicians, Evers is using the COVID-19 pandemic to pull on the heart strings of Americans, while using fear to attempt to pass their legislative agenda. Fortunately for Wisconsinites, Republican Assembly Majority Leader Jim Steineke and Senate President Chris Kapenga said in a joint statement, “This is a thinly-veiled political maneuver.”

Expanding Medicaid is a poor policy decision, not backed by commonsense. What’s more, evidence demonstrates that federal funding of state-based Medicaid expansion is at best a temporary solution, which fails to address the underlying health care problems states like Wisconsin increasingly face.

Medicaid expansion and the federal money offered in the COVID-19 stimulus package would drastically expand Wisconsin’s welfare rolls. It would instantly make 91,000 more Wisconsinites eligible for BadgerCare Plus. And although the federal funding is guaranteed for two years, there is no guarantee the federal government will be able to foot the bill.

It is important to note that Wisconsin doesn’t have a health care coverage gap. Low-income patients are eligible for Medicaid or Obamacare. The real outcome of expanding Medicaid in the state would be the shift of private payers to government health care. Not to mention, other states have expanded their Medicaid programs and the results have been disastrous.

In 2008, Oregon expanded its Medicaid program by 30,000 people, selected randomly from a waiting list of 90,000.  A 2013 study published in The New England Journal of Medicine found although Oregon’s Medicaid expansion did create some improvements, such as overall health care use and financial assistance, the expansion failed to achieve the principal goal of health care reform: improving overall health.”

Medicaid expansion also raises costs for private payers. A recent study of Medicaid expansion in Arizona by the Goldwater Institute found that to be the case. “Prior to Medicaid expansion in Arizona, cost-shifting to private payers to offset underpayments and losses from Medicaid and the uninsured amounted to 14 percent more than the hospitals’ costs, or around $1.4 billion in 2007. In 2016, three years into expansion, the costs funded by private payers increased to around 27 percent above hospitals costs, or approximately $2.1 billion.”

Wisconsin lawmakers should resist Medicaid expansion and consider free-market solutions instead. Federally subsidizing health care within the states does not lower costs, and leaves taxpayers to cover the costs. Medicaid expansion is akin to a short-sighted state bailout that results in permanently expanding the welfare state, causing more patients to become dependent on the government for health care while driving costs through the roof over the long haul.

 

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

 

Don’t Wait for Congress to Fix Health Care
https://www.heartland.org/publications-resources/publications/dont-wait-for-congress-to-fix-health-care
In this Policy Brief, 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 – a suggestion the Trump administration has encouraged.

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.

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.

Why States Should Not Expand Medicaid
https://www.heartland.org/publications-resources/publications/why-states-should-not-expand-medicaid?source=policybot
Writing for the Galen Institute, Grace-Marie Turner and Avik Roy outline 12 reasons states should not expand Medicaid and should instead demand from Washington, DC greater control over spending to better fit coverage expansion to states’ needs, resources, and budgets.

Effect of Medicaid Coverage on ED Use – Further Evidence from Oregon’s Experiment
http://www.nejm.org/doi/pdf/10.1056/NEJMp1609533
Amy Finkelstein, Sarah Taubman, Heidi Allen, Bill Wright, and Katherine Baicker examine the effect Medicaid coverage has on emergency room use. They found people enrolled in Medicaid significantly increase their emergency room visits for around two years after they first sign up. “For policymakers deliberating about Medicaid expansions, our results, which draw on the strength of a randomized, controlled design, suggest that newly insured people will most likely use more health care across settings – including the [emergency department] and the hospital – for at least 2 years and that expanded coverage is unlikely to drive substantial substitution of office visits for ED use.”

Medicaid Increases Emergency-Department Use: Evidence from Oregon’s Health Insurance Experiment
https://www.heartland.org/publications-resources/publications/medicaid-increases-emergency-department-use-evidence-from-oregons-health-insurance-experiment
Sarah Taubman, Heidi Allen, Bill Wright, Katherine Baicker, and Amy Finkelstein use the Oregon Health Insurance Experiment to study emergency department use among 25,000 lottery participants over a period of about 18 months after the lottery. The authors found, “Medicaid coverage significantly increases overall emergency use by 0.41 visits per person, or 40% relative to an average of 1.02 visits per person in the control group.”

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
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.

Projecting Hospitals’ Profit Margins Under Several Illustrative Scenarios
https://www.heartland.org/publications-resources/publications/projecting-hospitals-profit-margins-under-several-illustrative-scenarios
In this Congressional Budget Office paper, Tamara Hayford, Lyle Nelson, and Alexia Diorio calculate and project hospitals’ profit margins and the share of hospitals that might lose money in 2025 under several illustrative scenarios. “The hospitals we examined would have to increase the growth of total revenues or reduce the growth of total costs by an additional 0.2 percent to 0.5 percent per year to achieve the same level of average profitability in 2025 as they obtained in 2011; whether that would be easy or difficult is unclear,” the CBO report concluded.

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!

Author
Christina Herrin is a former state government relations manager at The Heartland Institute.
cherrin@heartland.org @_Free2Choose