••• Tax & Spending •••

KPI and THF on Obamacare and Kansas

By Nina Owcharenko, Ed Haislmaier and Patrick Parkes.

It remains one of the more contentious questions surrounding implementation of the Affordable Care Act (ACA or Obamacare) in Kansas: Should the state adopt the law’s expansion of Medicaid? Doing so would fundamentally transform the program—shifting it from one which principally covers poor children and the disabled to one which covers able-bodied, working age adults with incomes up to 138% of the federal poverty level.

Hospitals are the biggest interest group lobbying for the Medicaid expansion in Topeka. That’s because Obamacare cuts hospital reimbursements for Medicare patients. Now hospitals are looking to states to help fill the revenue gap by expanding Medicaid rolls.

While expanding Medicaid might benefit hospital bottom lines, it would further burden state taxpayers. The Kansas Policy Institute estimates that expanding Medicaid will cost the Sunflower State nearly $625 million over the first 10 years, (2014 to 2023). While Obamacare promises states extra federal funding to cover initial expansion costs, that’s something the debt-laden federal government can ill afford. Should Congress decide it must scale back that extra funding to the normal federal match rate applied to the existing Medicaid program, state taxpayers would be stuck with making up the difference.

But the high price tag is not the only problem with the Medicaid expansion.

In theory, expanding Medicaid to cover low-income, able-bodied adults who are currently uninsured would get them better health care. It would also, theoretically, reduce the need for state and federal governments to give hospitals supplement payments to offset their uncompensated care costs. Yet, the reality doesn’t match the theory.

Researchers from Harvard University, the Massachusetts Institute of Technology (MIT), and the National Bureau of Economic Research (NBER) have found Medicaid coverage to be no more likely than non-coverage to improve key health measures like blood pressure, cholesterol, and glycated hemoglobin levels used to track blood sugar stability. Moreover, Medicaid coverage aligned with an 18 percent spike in emergency room visits to treat non-emergency conditions that could have been handled in other, less expensive settings.

These findings beg the question of why Kansas should spend valuable taxpayer dollars to expand Medicaid if coverage under it fails to deliver on promised cost savings and leaves recipients no better off on key health measures than their uninsured peers. The problem is that, because of the way Medicaid is structured, simply expanding the program doesn’t provide those individuals with what they really need, which is earlier and better-coordinated primary care that reduces their reliance on episodic and expensive visits to hospital emergency departments.

There’s another problem, too. Workers enrolled under the expansion suddenly have a disincentive to work longer or take a better paying job. After all, if they earn “too much” and exceed the program’s income, they’ll lose their “free” coverage.

Today that’s simply not an issue for the vast majority of current Kansans on Medicaid beneficiaries—of whom 57 percent are children, another 20 percent are disabled and a further 10 percent are low-income retirees—since they are not expected to work. But, it does become a big problem if the program is expanded to able-bodied, working age adults.

Indeed, 78 percent of the potential new enrollees in Kansas have no dependent children, and 56 percent are between the ages of 19 and 34 years old. That is a population in need of more and better jobs, not expanded welfare benefits that incentivize them to work less.

In sum, what Topeka needs from Washington is not a bigger Medicaid program but rather relief from federal rules and regulations—especially those added by Obamacare. Excessive regulation has driven up the cost of health insurance and medical care and constrained the ability of states and the private sector to innovate and develop better, more workable solutions.

Read a version of this commentary in the Wichita Eagle here.