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Are we willing to accept cost of expanding Medicaid?

The governor’s behind it, and state Department of Health and Human Services Secretary Mandy Cohen is for it. Some freshmen legislators have made it a priority, some leaders in the N.C. House think it’s a good idea, and 32 states have implemented a version of it.

Becki Gray

But does Medicaid expansion take us in the wrong direction?

We begin the 2019 legislative session with winds of transformational reforms at our backs. They’ve given us surplus revenue, more transparency, more opportunities, and a stronger economy. Do we really want more government control over health care?

Medicaid is federal- and state-run health coverage designed for vulnerable and high-risk, low-income aging and disabled adults, pregnant women, and children.

Twenty percent of North Carolinians are covered under Medicaid. State taxpayers foot about a third of the total costs of $3.6 billion. Medicaid is 16 percent and the fastest growing part of the general fund budget.

A provision in Obamacare authorized states to expand Medicaid coverage to low-income, able-bodied childless adults with an income of $16,753, or for a family of four to $34,638. Thirty-two states have expanded Medicaid, but North Carolina isn’t among them.

The federal government has promised to pay 90 percent of the costs for Medicaid expansion through 2020. But that doesn’t apply to administrative costs, and future funding isn’t guaranteed. The federal government is already $22 trillion in debt. In states that expanded Medicaid, the number of enrollees has been larger than anticipated, and costs have been higher.

Lower reimbursement rates have meant fewer doctors willing to take on Medicaid patients, limiting access and compromising outcomes for those receiving care through Medicaid. The General Assembly’s nonpartisan Fiscal Research staff estimates initial Medicaid expansion will cost about $300 million.

As a federal entitlement program, Medicaid obligations are paid first; before the first teacher or police officer. As those obligations increase, Medicaid costs will crowd out other general fund obligations.

The state’s Medicaid program has undergone significant reforms since 2011, cleaning up waste, making management changes that provide better budget predictability, and changing the model from fee for service to managed care. Before 2013, Medicaid cost overruns totaled almost $2 billion.

The General Assembly successfully reformed and restructured the program beginning in 2013, which allowed, among other things, a stable and predictable budget. From 2014 through 2018, $436 million was set aside in reserve accounts. This enabled the General Assembly to fund other parts of state government, such as five consecutive pay increases for teachers. The hope is a newly implemented managed care model will provide better care with better outcomes for Medicaid patients and lower costs for taxpayers. Money for implementation to the managed care model will be taken from the reserve accounts. The final costs and the results won’t be known for several years.

It has taken six years to bring meaningful reforms to N.C. Medicaid program. Lawmakers shouldn’t be anxious to turn it over to the folks who created so many of the problems. Despite significant improvements, Medicaid remains vulnerable, but many state lawmakers and Cooper are advocating adding 500,000 new people to the rolls. Eighty two percent of those in the proposed expansion population are able-bodied, working age, childless adults — a far cry from the vulnerable high-risk population for which Medicaid was designed in the Social Security Amendments of 1965.

The better solution for those in the “insurance gap” would be a job in which they could receive health insurance through their employer or individually through an insurance market that offered a variety of policies at affordable costs that best met individual needs. North Carolina would be better to spend that $300 million — likely more — estimated for Medicaid expansion on workforce training programs, apprenticeships, and expanding skill development opportunities. Lawmakers would be wise to reform the insurance market to encourage competition and allow individuals to choose options that best meet their needs, rather than an insurance exchange ACA regulations offer.

A lot of people have made a lot of money under the current system. Pharmaceutical and insurance companies, big hospital conglomerates, and others will have to make concessions, but the future of health care rests in decisions made in 2019.

We are at a crossroads. The current health care system is unsustainable. Costs continue to escalate, access continues to be limited, and outcomes are deteriorating. It appears we have two choices: More government control, or more patient- and market-driven solutions.

Medicaid expansion sets us on the path to more government control. First, it’s 500,000 more on the rolls. Next, it will be a statewide universal health care system for all, as was proposed in 2017 and carried a cost estimate of $101 billion — in the first year alone. If we choose to go that way, we need to be prepared to accept — and pay for — the health care government is willing to give us.

Becki Gray is Senior Vice President of the John Locke Foundation. She provides information, consultation, and publications to elected officials, government staff and other decision makers involved in the state public-policy process. Gray is a member of the first class of the John Locke Foundation’s E.A. Morris Fellows, a statewide leadership program. She serves on the North Carolina Museum of Art’s Board of Trustees.

 

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