Fiscally conscious lawmakers are rightfully concerned about the costs of expanding the state’s Medicaid program. Most states that have expanded experience cost overruns within the first years of the program. The ever-increasing federal deficit and debt problems make it a good bet the inflated 90 percent federal match is almost certain to be on the chopping block in the coming years.
However, the direct cost of Medicaid expansion is not the only reason to be skeptical of the policy. In fact, the direct cost is actually the least of the problems associated with expansion in the long run. Expanding government intervention in healthcare further distorts the market, a trend that has contributed to ever-increasing prices in the U.S healthcare market. Medicaid expansion does just that.
Medicaid reimburses providers at a lower rate than private insurance. An estimated 63 percent of the expansion enrollees would be coming to the program from private insurance. So while the hospitals may receive some marginal benefit from individuals who previously would have received uncompensated care, the benefits may be outweighed by the reduction in reimbursement rates from those who previously had private insurance. This is especially likely in rural areas, where a higher percentage of the population is likely to be newly eligible for Medicaid under expansion.
Healthcare policy expert Jordan Roberts, from the John Locke Foundation, had this to say about the high costs of healthcare:
“Asking who will pay for those costs — public or private insurers — is the wrong question. We should question the cost-drivers themselves. Costs are artificially high because state laws and rules give medical professionals very little flexibility and prevent patients from having more choices.”
Roberts reports that the average amount spent by American families on heath expenditures in 2018 is more than the average family paid in taxes that year. With those types of staggering numbers, it is no surprise that misguided support is growing for proposals such as “Medicare for All.” The current trajectory of US healthcare is not sustainable.
Adding more government into the healthcare market – through federal Medicare for All or state Medicaid expansion – is like accelerating a car down a path hoping that going faster will change the destination. In his piece, Roberts highlights tangible policy changes that could actually help the state move in a better direction. Civitas Executive Vice President Brian Balfour has called for similar reforms in healthcare this session. North Carolina lawmakers have plenty of options that could move the needle in the right direction – including the elimination of the state’s restrictive Certificate of Need laws, allowing Direct Primary Care arrangements, or expanding scope of practice for certain providers.
Medicaid expansion’s indirect costs will be felt by all consumers of healthcare in North Carolina. Non-financial costs must also be accounted for when evaluating the total impact of expansion. For example, current Medicaid patients are already struggling to find providers that will accept their insurance. North Carolina doctors lack the capacity to take on 500,000 new Medicaid enrollees. The increased wait times, longer commutes, or missed care for the current Medicaid population are all non-financial costs of providing Medicaid insurance to able-bodied, working age adults under expansion.
The short-term or long-term direct costs of Medicaid expansion are reason enough for concern. However, the much bigger concern is the trajectory of healthcare costs overall as well as the non-financial implications of the policy. The legislature should instead pursue the array of free-market reforms that will move the state’s healthcare sector in the right direction.
