Michigan’s Obamacare Medicaid Expansion

Incentives gone awry

In 2013, the Michigan Legislature passed a bill expanding Medicaid, a core component of the federal Affordable Care Act, aka Obamacare. Given Republican control of the state House, Senate and governor’s office, the move surprised many. Two years earlier, referring to another ACA provision (the insurance exchange), Chuck Moss, then the chairman of the House Appropriations Committee, said GOP lawmakers would “rather be caught sacrificing to Satan than voting for Obamacare.”

Lost in the hubbub surrounding the expansion bill was a section requiring hospitals that were contracted by the state to provide managed care services under Medicaid to offer “healthy behavior” incentives for new enrollees. The idea was to mimic the cost-saving incentives inherent in private Health Savings Account insurance plans, which use high deductibles and copays to encourage health care consumers to shop around and avoid paying excessive prices.

But the Obama administration had refused to permit states to impose any meaningful deductible or copay requirements on Medicaid beneficiaries, so Michigan policymakers sought other incentives. Since the state couldn’t use a stick, it would try a carrot.

Recent news reports have focused on one of these carrots, $50 Wal-Mart gift cards for Medicaid clients who, in essence, “follow the doctor’s orders.”

Who Pays?

The law leaves the exact form of an incentive up to the discretion of the officials who negotiate the managed care contracts between the state and the hospitals that provide almost all Medicaid services in Michigan. While the state doesn’t itself purchase or give out any Wal-Mart gift cards, their cost is baked into the Medicaid managed care contracts.

Jennifer Smith, spokeswoman for the Michigan Department of Health and Human Services, explained that the hospitals must “provide a $50.00 gift card to … beneficiaries who earn less than 100 percent of the federal poverty level, have met with a primary care provider, and have agreed to address or maintain healthy behaviors.” She said, “We want to see the newly insured connecting with primary care providers and understanding how to use their benefits so they can take steps to improve their overall health and wellness.”

Enforcement and Nanny Statism

State Sen. Patrick Colbeck (R-Canton) was perhaps the most vocal critic of Medicaid expansion in the state Senate. Colbeck said about the gift cards, “This really is an incentive to expand participation in the program.”

He referred to the “double loss” this incentive incurs, one to the taxpayers who pay the bills and the other to the individuals who become dependent on a government welfare program. Colbeck is also concerned with the implications of the state involving itself so deeply in the personal affairs of private citizens.

In addition, he believes that what participants are really rewarded for is the information they give to the government rather than their medical lifestyle. He points to a provision of the expansion statute that requires clients to “demonstrate improved health outcomes or maintain healthy behaviors as identified in a health risk assessment. …” (emphasis added).

In other words, the state may not be incentivizing healthy behaviors as much as filling in the right answers on a form.

Longer Term Impacts on Freedom and Finances

The bill authorizing the expansion extended medical welfare to two new populations: able-bodied childless adults under 100 percent of the federal poverty level (FPL) and people between 100 and 138 percent of FPL. It also brought into the program many individuals who were already eligible for Medicaid but were not enrolled (the “woodwork effect.”)

Initially the federal government is paying for the expansion, but starting in 2020 Michigan taxpayers will be responsible for 10 percent of the cost. This was originally projected to be around $300 million annually, but could be much higher because enrollment has already far exceeded original estimates.

The Wal-Mart gift card incentives bring into focus three of the many concerns raised about the Obamacare Medicaid expansion: Increased dependency, deeper intrusions by the state into the deeply personal affairs of private citizens, and the potential for beneficiaries to “game” the system in ways that undermine its intentions.

See Also: Mackinac Center Medicaid Expansion Coverage

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.