NCPA - National Center for Policy Analysis


September 18, 2009

Public option plans, health care rationing, and new surtaxes and fines -- health care "reform" is receiving significant attention from a concerned public.  Yet one major aspect of health care plans being developed on Capitol Hill has received relatively scant attention.  House and Senate Democrats are planning on significantly expanding Medicaid to help decrease the rolls of the uninsured.  In fact, about 30 percent of the people newly covered by the leading House bill -- about 11 million individuals -- would receive coverage via Medicaid, says Kristina Rasmussen, Executive Vice President of the Illinois Policy Institute.

Ongoing Medicaid expansion negotiations in Congress will determine at what level benefits are set, when they take effect and whether the federal government or the states will shoulder the cost.  In the meantime, it is possible to get a sense of what an expansion could cost and by how much Medicaid enrollment in Illinois could grow.  The numbers are not comforting, says Rasmussen.

According to a report from the Federal Funds Information for States:

  • The additional "state share" cost to Illinois for immediately expanding Medicaid to uninsured individuals who earn up to 133 percent of poverty level would cost $1.391 billion (FY 2009 numbers, at regular Medicaid reimbursement rates).
  • It would take Illinois's Medicaid enrollment from 2.4 million enrollees to 3 million enrollees, a 25 percent increase.

However it's fashioned, a large-scale expansion of Medicaid will come with a significant price tag, which will be difficult to reconcile with the looming deficits in the federal government's budget and Illinois's state budget, explains Rasmussen.

Illinois is already having a hard time paying for its current Medicaid obligations -- the state's significant payment backlog is clear proof of this.  An expansion -- even one partially or temporarily funded by the federal government -- would make the outlook for balancing Illinois's budget and honoring current commitments much more gloomy than it already is.  This doesn't bode well for taxpayers or current Medicaid recipients and providers, says Rasmussen.

Congress should instead focus on a patient-centered approach to health care reform that empowers the patient and the doctor to make effective and economical health policy choices, says Rasmussen:

Patient-centered reforms include:

  • Increasing competition among health care insurers by allowing the purchase of health insurance plans across state lines.
  • Expanding the adoption of health Savings accounts.
  • Ending the tax penalization of individually-purchased insurance plans.
  • Reducing the number of costly benefit coverage mandates and pursuing tort reform.
  • Encouraging medical price transparency and rethinking licensing laws to encourage greater competition among providers.

Source: Kristina Rasmussen, "The Devil Is in the Details: How a Sleeper Provision in ObamaCare Could Bust Illinois's Budget," Illinois Policy Institute, September 2008.

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