There’s never been a better time for states not to expand Medicaid for able-bodied adults.
As new findings from the Foundation for Government Accountability (FGA) indicate, the Biden administration is luring states with a new federal incentive that only perpetuates dependency and fails to offset the high costs of Medicaid expansion.
With the $1.9 trillion “COVID-19 relief” legislation earlier this year, Congress added to the pressure by offering a bribe to the holdout states that give in to Medicaid expansion. The incentive — or Biden ObamaCare bait, as we’ll call it — would provide a temporary bump in federal funding for states that expand ObamaCare.
All states, regardless of Medicaid expansion status, are already receiving a 6.2 percent bump in federal funding through at least March 2022. The bait would bump federal funding another five percentage points for two years.
But this bait would push millions of Americans off of their private insurance plans and onto Medicaid while failing to cover anywhere near the long-term costs that expansion will bring.
Fortunately, states are rejecting this new bait and switch for the trick that it is. States that have rejected expansion know that this will actually hurt those it purports to help — and leave states to foot the bill.
The remaining state holdouts should learn from their example and continue to pump the brakes.
Nationwide, Medicaid spending has skyrocketed. This additional spending on Medicaid crowds out funds for education, public safety, transportation, and other important state priorities — and puts pressure on states to hike taxes.
Simply stated, states can’t afford Medicaid expansion.
As with all government welfare programs, new Medicaid expansion comes with strings attached. Under the new rules, expansion would deprive those Americans on silver exchange plans of their private health insurance coverage and move more than 9.9 billion able-bodied, working-age adults onto welfare at a cost of more than $600 billion over the next 10 years. And state taxpayers would be responsible for at least $60 billion.
Thankfully, 13 states have resisted the temptation to expand Medicaid. Considering the fiscal disasters that have happened in expansion states, they have good reason.
When California expanded Medicaid to a new class of able-bodied adults, officials predicted no more than 910,000 adults would ever sign up and the increased costs would be manageable. It’s been anything but.
That 910,000 enrollment estimate was crushed by 1.1 million new able-bodied adults enrollees signing up in the first month alone. By July 2017, that number grew to a jaw-dropping 3.8 million able-bodied adults. This led to skyrocketing costs totaling nearly $44 billion within just the first two and a half years — four times larger than expected.
And this isn’t an isolated California incident. Across the country, more than twice as many able-bodied adults signed up for expansion than officials expected. In many states, more people signed up than states thought would ever even be eligible. It’s no surprise that exploding enrollment led to massive budget overruns in state after state.
Worse yet, the dream that Medicaid expansion would somehow be an economic boom for states turned into a fiscal nightmare. The thousands of new hospital jobs that expansion lobbyists promised never materialized. Hospitals in expansion states have continued to struggle with closures, layoffs, financial losses, and even capacity shortages.
States that rejected expansion have outperformed their expansion state peers on hospital job growth. Indeed, 40 percent of all expansion states actually lost hospital jobs within a year of expanding. It’s no wonder: Medicaid expansion shifted millions of Americans out of private insurance and into Medicaid, driving up hospitals’ shortfalls in state after state.
States that implemented these policies racked up an increase in costs and a worse financial outcome. But ultimately, the real tragedy is what Medicaid expansion has done to the truly needy, for whom the program was originally intended. Expanding welfare to a new class of able-bodied adults simply diverts scarce resources away from people who need help the most.
The cost of Medicaid expansion dramatically outweighs the value of the Biden administration’s bait. The state-only costs of expansion over the next decade would exceed the temporary bump in federal funding by nearly $43.2 billion.
The bait of increased federal funding might only last two years, but the consequences — high costs and increased dependency — will likely be permanent.
If proponents of Medicaid expansion hope to support the truly needy, it stands to reason they should want more resources for them, instead of less. Medicaid is already states’ largest line item, consuming nearly one in three dollars from the budget. Policymakers are already grappling with how to deliver services to the most vulnerable in an era of skyrocketing Medicaid costs. Expansion would just add gas to the fire.
President Biden has made it clear that Medicaid expansion is a top-level priority for his administration. But the realities of Medicaid expansion are as clear as day when you look at the numbers.
The temporary sweetener in the COVID-relief package should be seen as just that: an unhealthy additive to distract from the terrible symptoms of state Medicaid expansion.
Jonathan Ingram is the vice president of policy and research at the Foundation for Government Accountability.
