Medicaid Expansion: Wisconsin Got It Right
October 7, 2014
In a new report from the National Center for Policy Analysis and the MacIver Institute, Devon Herrick explains why Wisconsin's method of Medicaid reform was the right approach.
The Affordable Care Act encouraged the states to expand their Medicaid programs in order to serve people up to 138 percent of the Federal Poverty Line (FPL). In return, expansion states would receive federal funding for 100 percent of the costs for the first three years, dropping to 90 percent in 2020 and thereafter. States that didn't expand to this population would not receive the enhanced federal funding, rather they would receive their historical funding rate. In Wisconsin, that rate is 58 percent.
Instead of expanding Medicaid to 138 percent of the FPL, Wisconsin chose to take a different route. The state already had a generous Medicaid program for which Wisconsin residents earning up to 200 percent of the FPL were eligible. However, budget constraints forced the state to halt enrollment, and many eligible residents were nonetheless unable to enroll in Medicaid. Wisconsin decided to make Medicaid available to all residents earning up to 100 percent of the FPL. All others would be transitioned into the health exchanges where they could buy private, subsidized coverage.
Why does Wisconsin's plan make sense?
- It moves more people into private coverage. This is important, because Medicaid enrollees have trouble accessing doctors. One-third of physicians do not accept new Medicaid patients, and doctors are four times as likely to turn away a new Medicaid patient as they are to refuse to treat an uninsured patient.
- Medicaid pays doctors very low reimbursement rates, which is part of the reason that they are often unwilling to treat Medicaid patients. Were Wisconsin to have expanded Medicaid to the level desired by the federal government, Herrick explains that the swelling Medicaid rolls would have resulted in even more doctors refusing to treat them.
- Crowd-out (dropping private insurance for a public option) occurs when the privately insured have the option to access public insurance, and states that expand Medicaid are likely to see crowd-out. Estimates vary, but a study by David Cutler and Jonathan Gruber which analyzed Medicaid expansion in the 1990s determined that an expansion in Medicaid eligibility resulted in 50 percent to 75 percent of new enrollees dropping private coverage in favor of the public option.
Herrick explains that while Medicaid appears to offer comprehensive coverage with low cost-sharing, in practice Medicaid enrollees far worse than those with private coverage.
Source: Devon Herrick, "Medicaid Expansion: Wisconsin Got It Right," National Center for Policy Analysis and the MacIver Institute, October 2014.
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