What we learned from Colorado’s mistake on Medicaid expansion
“The majority of this bill is great health care reform for North Carolina. However, the inclusion of Medicaid expansion means the costs outweigh the benefits,” Jordan Roberts, director of Government Affairs for the John Locke Foundation, said to the Raleigh Bastiat Society.
Roberts was referring to House Bill 149, which the GOP-controlled state Senate recently passed with a 44 to 2 vote. The bill would expand Medicaid to an estimated 600,000 mostly working-age, childless, able-bodied adults in North Carolina while also including some desperately needed reforms to the state’s antiquated Certificate of Need law.
First, let’s start by saying it’s bad policy to force North Carolinians into federal government-controlled health insurance that’s paid for through new state taxes on hospitals, which will be passed along to patients, and deficit spending at the federal level. No matter how much money the national government promises, North Carolinians would still pay for it – either from their left or right pocket.
Experience in the states that have expanded Medicaid under the Affordable Care Act shows that experts generally underestimate the size of Medicaid expansion enrollments, underestimate Medicaid expansion’s cost, and overestimate its health benefits. As two people who have had a front-row seat to what Medicaid expansion did to Colorado, we’ve got some lessons to share ahead of the state House’s consideration.
In 2011, Colorado’s Medicaid expansion proponents hired Gruber and Associates to estimate the cost. They predicted that by 2016 Colorado’s nondisabled, under-65 Medicaid enrollment would be 710,000. In fact, Medicaid enrollment was over 1.1 million by 2014. Medicaid caseload is now about 1.7 million out of a total population of about 6 million. Since the mid-2000s, Medicaid rolls have ballooned from roughly 1 in 12 people to almost 1 in 3 now.
That expansion was not driven by poverty. In 2010, the state’s median household income was $54,046 while the national median was $50,046. By 2019, Colorado’s median household income was $77,127, while the national median was $65,712. During this same time, Colorado’s unemployment rate has been lower than the national average.
Spending on Medicaid has always been difficult to limit. Doubling or tripling the size of its enrollment reduces available funding for other pressing public needs like schools, infrastructure improvements, and higher education. It also fuels the development of interest groups that make money from the program and seek to fatten their bottom lines by incessantly pushing for more expansion and more spending.
Despite a growing economy, Colorado’s ability to fund other priorities has generally declined since it embarked on its Medicaid expansion as a disproportionate share of revenue increases have been allocated to the Medicaid program. Inflation-adjusted spending on social assistance grew from about $3 billion in fiscal year (FY) 1999-2000 to almost $8 billion in FY 2017-18. Spending on schools, which was slightly larger than social assistance spending in FY 1999-2000, grew to just $5 billion.
Admittedly, Colorado’s state government has been under Democrat control almost exclusively since Medicaid expansion passed in 2011. Meanwhile, the opposite is true in North Carolina, which has enjoyed fiscal responsibility under Republican legislative leadership. But it won’t always be that way. Any guardrails will be removed. Budgets will be blown, and other budget priorities like roads and schools will get pushed aside.
One of the crueler aspects of Colorado’s Medicaid expansion is that it’s a case study for how expansion crowds out services for those who really need it. Although state officials can find the money to fund Medicaid coverage for adults and children who have few medical needs, the state struggles to provide more expensive care for those without other options. For instance, adults with severe intellectual disabilities in need of residential care, for whom Medicaid was originally intended, languish on waiting lists.
Prudent public officials need to weigh any possible gains from Medicaid expansion against the certain losses that will occur when the new Medicaid entitlement lays waste to a state’s budget and damages the quality and quantity of medical care available to those who must pay both for Medicaid and for their own health care.
Medicaid expansion isn’t “inevitable” unless we allow it. If North Carolina lawmakers want to improve health care outcomes in the state, they would be wise to start by expanding access through Certificate of Need repeal and increased telehealth services.
At a time when Washington, D.C. dysfunction manifests itself in historically reckless fiscal policy, it’s mind-boggling why North Carolina elected officials would believe submitting more North Carolinians to its control is good state policy.
Amy Cooke is the CEO of the John Locke Foundation and Publisher of the Carolina Journal.
Linda Gorman directs the Health Care Policy Center for the Independence Institute, a state based, free market think tank in Denver, Colorado.