Obama’s Medicaid Debacle

The Argument Against the Affordable Care Act

By Matt Hershey

The Patient Protection and Affordable Care Act (PPACA) is perhaps the most polarizing issue in politics today, and for good reason. The law is both vilified by conservatives and lauded by liberals. To the former, it embodies a vast expansion of the entitlement state. To the latter, it represents a long awaited move to rectify inherent inequalities which disproportionally affect the poor and sick. One way the PPACA seeks to meet this goal is by dramatically expanding Medicaid. This increase has sparked criticism by many conservatives, whose issue is not that it expands a crucial safety net, but rather that it builds upon a system that accomplishes the opposite of what it is intended to do.

Medicaid’s fiscal issues are ample and worrisome. To understand why, one must first understand whom the PPACA will add to Medicaid’s rolls—already some 60 million Americans. There are currently 12 million Americans who are technically eligible but not on Medicaid’s rolls, some 70 million people who ought to be on the program. Apart from these individuals, the PPACA will add about 16 million others to Medicaid and fully intends to pay for these costs through federal taxes. However, the other 12 million people who are currently eligible but not enrolled will be mandated to join Medicaid. These costs will not be matched by the PPACA. Rather, they will remain the responsibility of the states, costing them billions of dollars. Bankrupt California will be liable for billions of additional dollars annually; Florida will spend $1.2 billion on coverage by 2019; Texas will face an increase in costs to the tune of $27 billion by 2023. It will also cost the federal government $452 million over the next decade. By 2016, one in four Americans will be a recipient of Medicaid.

The most compelling argument against the PPACA’s expansion of Medicaid, however, is that it provides inadequate care for those who use it. Under the current system, Medicaid offers a uniform entitlement package to all states and reimburses doctors who see Medicaid patients, a hardly generous 50 cents on the dollar. Tragically, reimbursements are so low that most Medicaid patients are either frequently denied care or receive vastly substandard treatment. The Center for Studying Health System Change found that internists were 8.5 times more likely to turn down patients who relied on Medicaid, The New England Journal found that two-thirds of children on Medicaid were denied doctor’s appointments, and Health Affairs found that over 30 percent of the Nation’s doctors are unwilling to accept Medicaid patients, all patently due to low reimbursement rates. To be fair, the PPACA does temporarily increase reimbursements for doctors who accept Medicaid—about 80 cents on the dollar—but this is ephemeral at best, as it only lasts from 2014 through 2015.

Ironically, it is even less expensive for doctors to treat the uninsured than those on Medicaid. A study by MIT Economists Nathan Gruber and David Rodriguez reported that for 60 percent of the physicians surveyed, Medicaid fees were two-thirds less than those paid by the uninsured. Interestingly enough, Gruber and Rodriguez also found that uninsured Americans pay more than their privately insured counterparts for care—receiving price discounts less than .8% of practical revenues. Medicaid users also suffer from even worse care than their uninsured counterparts. A study in the Annals of Surgery followed 863,658 individuals under going surgical operations between 2003 and 2007 found that Medicaid patients were 13 percent more likely to die than the uninsured. They also stayed in the hospital 50 percent longer and cost 20 percent more than those without any insurance. For clarification, length of hospital stay is another indicator used by experts to measure quality of care. This study is hardly an outlier. The University of Pennsylvania, Columbia-Cornell, and the American Journal of Cardiology have come to similar conclusions.

The PPACA is reckless in that its increase in coverage is a ruse. It offers a solution that is hardly desirable or feasible. For millions of Americans, Medicaid is healthcare only by name. Even the New York Times laments this fact in an April 2011 article, quoting a Medicaid patient who refers to her Medicaid card as a “useless piece of plastic.” Complicating matters further, Medicaid is also responsible for crowding out private insurance. A 2012 study in the Health Services Research found an inverse correlation between an increase in Medicaid and a decrease in private insurance. The numbers are compelling as the ratio is almost 2 to 1.

So what is there to do? One possible solution is restructuring the program similar to how congress restructured the AFDC (American Families with Dependent Children) in 1996, giving states block grants and allowing them flexibility in implementation of Medicaid programs. Block grants could at least provide states with an incentive to control Medicaid costs, because as it stands now, the dollar-match guarantee ensures the opposite. Some people even estimate that fraud and waste comprise up to 40 percent of the program. A voucher system is another possibility, where states could be given lump sum Medicaid grants and doll vouchers accordingly. Alternatively, Medicaid recipients could also partake in subsidized exchanges similar to those that the PPACA will put into effect, but this solution is hardly cost effective.

It is irresponsible for the PPACA to use Medicaid as a crutch to get more people health insurance. Instead of expanding the program and kicking the can down the road, the president ought to make some tough choices and help those he claims to be helping.

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