Commentary

Obamacare Created a Medicaid Time Bomb

The good news, if you want to call it that, is that roughly 1.6 million Americans have enrolled in ObamaCare so far.

The not-so-good news is that 1.46 million of them actually signed up for Medicaid. If that trend continues, it could bankrupt both federal and state governments.

With ObamaCare adding to Medicare spending, we are picking up speed on the road to insolvency.”

Medicaid is already America’s third-largest government program, trailing only Social Security and Medicare, as a proportion of the federal budget. Almost 8 cents out of every dollar that the federal government spends goes to Medicaid. That’s more than $265 billion per year.

Indeed, already Social Security, Medicare and Medicaid account for 48% of federal spending. Within the next few years, those three programs will eat up more than half of federal expenditures.

And it’s going to get worse. Congress has shown no ability to reform Social Security or Medicare. With ObamaCare adding to Medicare spending, we are picking up speed on the road to insolvency.

The Congressional Budget Office projects that, in part because of ObamaCare, Medicaid spending will more than double over the next 10 years, topping $554 billion by 2023.

And that is just federal spending.

State governments pay another $160 billion for Medicaid today. For most states, Medicaid is the single-largest cost of government, crowding out education, transportation and everything else.

New York spent more than $15 billion on Medicaid last year, roughly 30% of all state expenditures. The Kaiser Foundation projects that over the next 10 years, New York taxpayers will shell out some $433 billion for the program.

But none of these projections foresaw that so many of ObamaCare’s enrollees would be Medicaid eligible.

To be sure, the health-care law’s designers saw the expansion of Medicaid as an important feature of their plan to expand coverage for the uninsured. Still, they expected most of those enrolling in ObamaCare to qualify for private (albeit subsidized) insurance.

It’s beginning to look like that was just another miscalculation, one that could have very serious consequences for the program’s costs.

Moreover, any projection of Medicaid’s future cost to New York taxpayers assumes that the federal government keeps its promise to pay 100% of the cost for Medicaid’s expansion over the next three years and 90% thereafter. But given the growing burden that Medicare will put on a federal budget already facing high debt levels, how likely is it that changes in the federal share of Medicaid will stay off the table?

In fact, as part of last December’s fiscal-cliff negotiations, the Obama administration briefly considered changing to a “blended” reimbursement rate, somewhere between the current and promised rates. The administration quickly backed away from the offer, but it’s likely to come back in the future. If it does, it would cost New York tens of millions of dollars.

Every bit as bad as the cost is the fact that for all this money, recipients are going to get pretty lousy health care.

Of course, one might say that even bad health care is better than no health care. But, unfortunately, for Medicaid, that’s not true.

The Oregon Health Insurance Exchange study, the first randomized controlled study of Medicaid outcomes, recently concluded that, while Medicaid increased medical spending increased from $3,300 to $4,400 per person, “Medicaid coverage generated no significant improvements in measured physical-health outcomes.”

Other studies show that, in some cases, Medicaid patients actually wait longer and receive worse care than the uninsured.

While Medicaid costs taxpayers a lot of money, it pays doctors very little. On average, Medicaid only reimburses doctors 72 cents out of each dollar of costs. ObamaCare does attempt to address this by temporarily increasing Medicaid reimbursements for primary-care doctors, but that increase expires at the end of next year.

Because of the low reimbursement, and the red tape that accompanies any government program, many doctors limit the number of Medicaid patients they serve, or even refuse to take Medicaid patients at all. An analysis published in Health Affairs found that only 69% of physicians accept Medicaid patients. A study published in the New England Journal of Medicine found that individuals posing as mothers of children with serious medical conditions were denied an appointment 66% of the time if they said that their child was on Medicaid (or the related CHIP), compared with 11% for private insurance — a ratio of 6 to 1.

Even when doctors do still treat Medicaid patients, they often have a harder time getting appointments and face longer wait times. One study found that among clinics that accepted both privately insured children and those enrolled in Medicaid, the average wait time for an appointment was 42 days for Medicaid compared to just 20 days for the privately insured.

That’s one reason why so many Medicaid patients show up at the emergency room for treatment. They can’t find a doctor to treat them otherwise.

This not only increases the strain on already overburdened emergency room doctors, but increases the wait for those who arrive with real emergencies.

As bad as this is now, ObamaCare will make it worse by increasing the number of people on Medicaid without doing anything to increase the number of doctors treating them.

We don’t know yet whether the rush to Medicaid will continue. It may be that the troubles with the ObamaCare website might have skewed the early signups. But if ObamaCare really does lead to a massive expansion of this costly and inefficient program, that’s bad news for taxpayers, providers and patients.

Michael Tanner is a senior fellow at the Cato Institute.