News Story

Expert: Medicaid Expansion Means Increased Costs For Worse Service

Avik Roy: 'It's not tough to take a billion dollars at the beginning and offload the costs to your successors'

If the Michigan Legislature goes along with Gov. Rick Snyder’s plan to expand Medicaid as part of Obamacare, it will mean spending a lot more money for worse medical service, said one health policy expert.

More people would be covered but that will stretch already stressed resources for the government safety net health insurance program, said Avik Roy, a senior fellow for the Manhattan Institute in New York City who spoke to a crowd of about 70 at a Mackinac Center for Public Policy Issues and Ideas Forum on Thursday.

Roy writes a blog for Forbes called “The Apothecary,” and has been talking to legislators around the country about a provision in the Patient Protection and Affordable Care Act (more popularly known as Obamacare), which pushes states to cover citizens up to 138 percent of the poverty line.

The Supreme Court ruled last summer that this provision is optional and states are fiercely debating whether to expand the program. Roy said expanding Medicaid would be a huge mistake.

He said expanded coverage would come with a lower reimbursement rate than private insurance.

"In Michigan, for every dollar that private insurers pay a physician, Medicaid pays 47 cents," he said. "And the less you pay physicians, the less they are willing to see someone."

Because of the low reimbursement rate, some doctors already refuse to see Medicaid patients, a trend that has been happening for some time in Michigan and across the country. If Medicaid is expanded in Michigan, there would be even more patients per physicians, causing more doctors to drop citizens on the program.

As a side effect, medical care for the poor does not improve simply by expanding the government program. Roy pointed to several studies that showed people on Medicaid actually got worse service than those with no insurance at all. Fox example, a study from the University of Virginia found that surgical patients on Medicaid were 97 percent more likely to die before leaving the hospital than were similar patients with private insurance, and 13 percent more likely to die than those with no insurance at all.

"Health insurance is not the same as health care and Medicaid is not all that good," he said. "And we pay $450 billion for these results."

Meanwhile, government health care for the poor is crowding out other government services. Health care accounts for 45 percent of the budget in Michigan and expanding Medicaid will, over time, make that worse because the federal government will not cover 100 percent of the costs forever. Obamacare promises the federal government will pick up 100 percent of the initial costs, but that diminishes after a few years and by 2020, states are responsible for 10 percent of the costs.

Roy said expanding the program brings a short windfall but as the federal match goes down, states will likely pay significantly more because they added hundreds of thousands more people to the program. And when the state has to pay more to cover expanded Medicaid costs, other areas of the budget will suffer.

Roy said he knows Gov. Snyder likes to refer to himself as "one tough nerd" but that expanding Medicaid is taking the easy way out.

"It's not tough to take a billion dollars at the beginning and then offload the costs to your successors," he said.

Roy agreed that health care is too expensive, but said government mandates make it worse. Real competition and flexibility to accept programs like catastrophic care for the young, healthy and poor, or high deductible plans and health savings accounts are better solutions.

Indiana had an HSA for all state employees that 98 percent of participants liked, he said, but the Obama administration did not renew the waiver for the program, effectively shutting it down. Obamacare also limited programs in Florida and Arkansas, which had plans to provide similar coverage for less cost. Florida wants to offer an HSA plan that costs $237 million versus the $1.3 billion the federal government wants to mandate.

Roy concluded his presentation by pointing out a few myths about health care in America.

The first is the idea that people without health insurance are the ones driving up cost by going to the emergency room. In fact, most patients being served in the emergency room are those who qualify and receive Medicaid but are not able to get a doctor because the reimbursement rates are too low.

The second is what Roy called "the myth of free-market U.S. health care." In terms of money per person, the United States government spends more than every country except Norway, the Netherlands and Luxembourg. In fact, America spends nearly three times as much per person as Switzerland.

"Those countries largely have totally government-run health care, it's just that America spends so much more on those covered with public money," Roy said. "We should acknowledge that some other countries are doing it better."


To watch a video replay of the speech, click here: "Avik Roy on Michigan Medicaid Expansion."

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.