Author photo

Daily Journal

A Meltdown Over Medicaid

Feb. 20th, 2013
More |

RALEIGH — Furious that Gov. Pat McCrory and the Republican-led legislature has turned down the Affordable Care Act’s Medicaid expansion, Democratic lawmakers, liberal scholars, and left-wing activists have resorted to insults, illusions, and illogical arguments to express their indignation.

It’s not hard to understand why. Government-run health care is a goal they have pursued for many years, even decades. They saw private health-insurance exchanges as a necessary evil to attract support for Obamacare from medical providers, health insurers, and centrist Democrats. But the core of the bill, the expansion of Medicaid, is what they were really after. It is projected to account for a majority of the newly insured. And it sets the stage for ending private plans altogether in the future, once the bill’s new federal regulations unravel the health insurance market (as they are intended to do, by guaranteeing issuance regardless of medical condition, suppressing risk-based premiums, and discouraging consumer-driven health plans).

But North Carolina and many other states have said no. In some cases, their leaders recognize exactly what the Left is up to in the long run – Medicare/Medicaid for all, combined with large hospital/physician monopolies – and want no part in helping to socialize a large swath of the American economy. In other cases, state leaders are simply acting on short-run considerations about health care costs and budgetary balance.

Stymied for now, advocates of Medicaid expansion aren’t giving up – thus the string of insults, illusions, and illogic. I’ll leave the insults alone and discuss some of the rest.

One illusion is that Medicaid expansion would have no effect on rates of private insurance because virtually everyone eligible for the expansion would otherwise be uninsured. The “crowd out” phenomenon in government health insurance has been extensively studied for years. The best evidence suggests that Medicaid expansions involve significant crowding out. In the past, half or more of the tax money spent has supplanted what would have been private spending on medical services, rather than funding new services to the uninsured.

For those new to the issue, the analytical problem lies in assuming that the only way Medicaid crowds out private insurance is by inducing previously insured people to drop their coverage and enter Medicaid. That’s not the only crowd-out mechanism. Keep in mind that health insurance status for low-income people is fluid, not static. A young woman gets pregnant, for example, and goes on Medicaid. After the child is born and past infancy, she gets a job or marries, pushing her income above the Medicaid threshold and perhaps making her eligible for an employer-sponsored plan. Or she then purchases a Blue Cross plan on the individual market. But if Medicaid is expanded, her family might be eligible to stay on the program for free. This is the kind of crowding-out that does not involve a recent stint on private insurance. And it has been common under past Medicaid expansions.

Here’s an example of an illogical argument: If North Carolina doesn’t expand Medicaid, then money that North Carolinians send to Washington as federal taxes will just go to fund health care in other states that choose to participate.

No. Under the Affordable Care Act, state Medicaid expansion is formulaic. Its terms and funding don’t vary according to what others do. If every state but Vermont said no to Medicaid expansion, Vermont would get precisely the same amount of money for the expansion as it would if every other state said yes. To pass on Medicaid expansion is to reduce projected federal spending on Obamacare – period.

In 2009-10, President Obama and Congress chose to construct a wobbly health-care bill with a dangerous goal. There is absolutely nothing illusory or illogical about fiscal conservatives using every means at their disposal to limit its pernicious effects and pressure Washington to produce a better reform plan, one that preserves and expands private health care while using tax credits to reduce the ranks of the uninsured and limiting Medicaid to its safety-net function.

Conservatives might not succeed. But they are not going to be bamboozled or bullied into capitulating.

Hood is president of the John Locke Foundation and a contributor to First in Freedom: Transforming Ideas into Consequences for North Carolina.