Misleading Arguments for Medicaid Expansion

The present conversation over Medicaid expansion, as witnessed daily in editorial pages and at the State House, is misleading because the expansion would not do what supporters think it will.

For supporters of Medicaid expansion, the decision is a no-brainer: it’s federal money paying for uninsured poor Mainers to get health care. For them, only politics could motivate the opposition. They whole-heartedly believe an expansion would simply move uninsured people onto Medicaid, thus reducing charity care costs which are ultimately passed along to those covered with private insurance.

But Maine’s own experience expanding medical welfare shows that it does not do what supporters think it does: it doesn’t affect the uninsured population and it doesn’t reduce uncompensated care costs.

Maine submitted a waiver to the federal government in 2002 to expand Medicaid eligibility to childless adults. This first expansion was passed with many of the same goals associated with the current expansion proposal: cover the uninsured and reduce charity care. New Hampshire, at the same time, decided against expansion. Comparing the experiences of the two states provides a highly relevant lesson for today’s policymakers.

Proponents of the first Medicaid expansion said it would reduce Maine’s uninsured population. Yet, in the decade that followed, the number of Mainers without insurance held steady at around 12 percent. Throughout the same timeframe, New Hampshire’s uninsured population remained at 11 percent. Despite one state pursuing expansion and the other opting out, neither saw appreciable change in the number of uninsured residents.

Maine’s uninsured population did not decrease, but the Medicaid rolls certainly swelled. So where did all those new enrollees come from?

In the years following the first Medicaid expansion, the number of people on MaineCare increased 7 percentage points and number of people with private insurance decreased 7 percentage points. Arizona, which also chose to expand their Medicaid program, saw similar results. Arizona’s insured population remained the same, but Medicaid enrollment increased by 5 percentage points and enrollment in private insurance decreased 5 percentage points. The obvious conclusion to be reached is that most new Medicaid enrollees were not previously uninsured. Indeed, the evidence suggests that expanding eligibility in Medicaid simply led many people to cancel private insurance and sign up for free, taxpayer-funded Medicaid.

The other misleading argument for Medicaid expansion is that it will reduce the cost of uncompensated care. In 2004, the first year of the first expansion, charity care cost Maine hospitals $61 million. But by 2011, that number had swelled to $215 million. If expanding Medicaid reduces charity care, then why did charity care increase by 247 percent in the years following an expansion? By comparison, in New Hampshire, hospitals paid $99 million in charity care in 2004. That number grew to $240 million in 2011, a much smaller increase of 142 percent. That Medicaid expansion did little to curb the cost of uncompensated care in Maine should be unsurprising, given the stable level of uninsured individuals who typical utilize charity care.

Providing the uninsured with access to health care and reducing charity care costs are both laudable goals. But the first expansion of Medicaid failed to accomplish either, and so would another. We agree with supporters of Medicaid expansion about the need to insure the uninsured and curb uncompensated care. But expanding eligibility for medical welfare has and will fail to accomplish these goals. Rather than repeat the failed ideas of the past, policymakers should look for new, creative ways to improve Maine’s health care system. Importantly, these reforms should be supported by empirical data, not glib assertions, fanciful forecasts and misleading talking points.