- Ongoing debate around State Health Plan pricing exposes flaws in argument for Medicaid expansion.
- Medicaid expansion would perpetuate the imbalance in the healthcare system by adding more underpaying customers.
- Taxpayers and the privately insured would be left to foot the bill for those who are not truly needy.
For months, State Treasurer Dale Folwell has led efforts to increase transparency in the medical services purchased by the State Health Plan (SHP). SHP is the state-administered insurance plan utilized by state employees and teachers.
Folwell’s most recent proposal ties SHP payment rates to the federally-set Medicare rates, setting reimbursements at up to 235 percent of Medicare rates. For many providers, this will be less than what they currently charge the SHP for their services.
A recent NC Health News article on the issue explained, “Governmental payers such as Medicare and Medicaid both pay less than what it costs to provide care, hospitals argue, so they often depend on commercial payers, such as the State Health Plan, to pay a little more and make up the difference.”
Healthcare prices for the privately insured – as well as those on the State Health Plan – are higher due to the lower rates paid by Medicaid and Medicare. This essentially means that North Carolinians pay for those programs directly though their state and federal tax dollars, then additionally subsidize the programs through higher insurance prices that are passed on to them by their private or state health insurers.
Yet Gov. Cooper and some legislators of both political affiliations want to add an additional half a million enrollees to North Carolina’s Medicaid program through Medicaid expansion during the next legislative session. This would likely further compound the financial burden placed on those insured through the SHP or private insurance.
A second contradiction in the Medicaid expansion argument also came to light in the NC Health News piece.
Proponents of Medicaid expansion claim that it would help rural hospitals. In rural areas, hospitals may be the primary point of healthcare access for many people when other options are few and far between. As such, their interests are a powerful negotiation tool in policy discussions.
But the NC Health News article goes on describe how the Medicare-tied reimbursement rates (which are 1.5-2 times higher than Medicare payments themselves) from the State Health Plan would harm – you guessed it – rural hospitals. So, we are supposed to believe that Medicaid rates through Medicaid expansion would help rural hospitals, but Medicare-tied rates under the State Health Plan would harm them. Although Medicaid and Medicare are different programs, they each have the commonality of under-paying providers. How does one explain this contradiction?
It is reasonable to say that Medicaid rates are better for rural hospitals than a rate of zero for uninsured patients with no resources to pay their bill. This rests on the assumption that everyone covered under Medicaid expansion would be coming from the ranks of the uninsured.
There is significant reason to be skeptical of this assumption when you consider that seventy-five percent of those eligible for Medicaid under expansion would be able-bodied, working-age adults with no dependents. That population is likely to have private insurance through their employers or the Obamacare exchange already. If they opt off of their private insurance in favor of Medicaid, this perpetuates the problem of more hospital services being reimbursed at below cost, with these increased losses needing to be compensated by higher rates from privately insured patients. Insurance premiums are driven up even higher, making insurance unaffordable for more and more people.
The current debate over the State Health Plan has highlighted some inconsistencies in the argument over Medicaid expansion. Because Medicaid expansion would likely exacerbate the current turmoil in the healthcare system, we find yet another reason why Medicaid expansion is a bad idea for North Carolina.
