NCPA - National Center for Policy Analysis

Exchanging Medicaid for a Better Option

July 2, 2013

The Obama administration, health care providers and advocates for the poor have all been touting the supposed benefits of Medicaid expansion. What is missing from the proponents' claims of huge windfalls is a thorough discussion of the costs, obstacles, alternatives and potential pitfalls that make Medicaid expansion a bad deal for states, says Devon Herrick, a senior fellow with the National Center for Policy Analysis.

  • The Affordable Care Act (ACA) contains financial incentives designed to strongly encourage states to expand Medicaid eligibility to 138 percent of the federal poverty level.
  • For reference, that's nearly $16,000 for an individual and $32,500 for a family of four.
  • The federal government promises to pay most costs for those newly eligible through 2019.
  • Under the original provisions, states failing to expand Medicaid eligibility stood to lose all federal matching funds for those Medicaid enrollees already covered.
  • However, a June 2012 U.S. Supreme Court decision ruled as unconstitutional the provisions denying federal matching funds to states that refuse to expand Medicaid.

This is significant because many of the moderate-income individuals who would qualify for a newly expanded Medicaid program will now qualify for another provision in the health reform law -- generous subsidies to purchase private health insurance. Why is this important?

  • Moderate-income families, doctors and advocates for the poor should care because private insurers pay doctors about double what Medicaid pays for the same service.
  • Low provider reimbursement rates make it more difficult for Medicaid enrollees to find physicians willing to treat them -- limiting their access to care.
  • Consider this: nationally, less than one-third of physicians accept new patients enrolled in Medicaid.
  • This is nearly double the rate of doctors who have closed their practices to new Medicare patients (17 percent) and to new privately insured patients (18 percent).
  • Physicians are four times more likely to turn away new Medicaid patients than those with no insurance (31 percent versus 8 percent).

On paper, Medicaid appears far better than the health plans most Americans enjoy -- with lower cost-sharing and unlimited benefits. But by almost all measures, Medicaid enrollees fare worse than similar patients with private insurance.

Source: Devon Herrick, "Exchanging Medicaid for a Better Option,", June 28, 2013.


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