Wow, has it really been six weeks since my last post? I took a position as a Summer Organizing Fellow with the Obama campaign back in June, and my spare time sort of evaporated. But the fellowship ends this week, and I'm back and ready to vent. Let's start with something easy.....oh, forget it. Let's jump right into the complex stuff. Is the Medicaid expansion under the Affordable Care Act worth the cost? I've inserted a lot of links, to keep this from being the world's longest blog post; thanks in advance for your patience.
As part of its objective to make health care more accessible to all Americans, the Affordable Care Act (ACA) provides assistance for lower-income Americans so that health insurance is more affordable. Under the ACA, Medicaid will cover most Americans with income below 133 percent of the federal poverty level (about $15,000 for an individual, $20,300 for a couple), while tax credits will be available for individuals and families with income from 133 to 400 percent of the Federal poverty level who purchase coverage in the health insurance exchanges .
What will it cost?
Following the Supreme Court's decision allowing individual states to "opt out" of expanding Medicaid coverage for its residents, the Congressional Budget office (CBO) and Joint Commission on Taxation (JCT) now estimate that the cost to the federal government for the years 2012-2022 for Medicaid and the Children's Health Insurance Program (CHIP) will be $642 billion. This estimate is $289 billion less than the March 2012 estimate, and takes into account the fact that several states will choose to not expand their Medicaid coverage, thus will receive fewer Federal dollars for Medicaid.
In June, the Supreme Court ruled that the expansion of the Medicaid program under the ACA must be optional, allowing each state to choose whether or not to expand eligibility for coverage under its Medicaid program. Prior to the Court’s ruling, the Medicaid expansion would have been mandatory for all states that wanted to continue receiving federal matching funds for any part of their Medicaid program. Now, states will continue to receive baseline Medicaid funds if they do not expand their Medicaid coverage; they just won't receive the expanded funding.
Because of the Supreme Court's decision, the Congressional Budget office (CBO) and Joint Commission on Taxation (JCT) now estimate that the insurance coverage provisions of the ACA will have a net cost of $1,168 billion over the 2012–2022 period—compared with $1,252 billion projected in March 2012 for that 11-year period—for a net reduction of $84 billion. The projected net savings to the federal government arise because the reductions in spending from lower Medicaid enrollment are expected to more than offset the increase in costs from greater participation in the health insurance exchanges. It breaks down into a $289 billion reduction in Medicaid/CHIP costs and a $210 billion increase in spending on the health care exchanges, as persons who would have qualified under the expanded Medicaid program, had their states opted to expand it, are now put into the general insurance market.
How will it be paid for?
Coverage for the newly eligible adults will be 100% funded by the federal government for three years, beginning in 2014, and will be phased down to 90% by 2020.
Medicaid expansion, as well as the other provisions of the ACA, will be funded by several tax increases, most of which only affect those with incomes over $200,000 ($250,000 filing jointly), or those who purchase "Cadillac" health plans. They include:
A .9% increase in the Medicare tax on the incomes of those making more than $200,000, and a 3.8% tax on unearned income over $250,000 - if you've heard the inaccurate rumor of a 3.8% tax on all homes sold, it stemmed from this provision. (projected to raise $210.2 billion over 10 years)
An annual fee on health insurance providers (projected to raise $60 billion)
A 40% excise tax on insurance premiums over $10,200 for an individual or $27,500 for a family ($32 billion)
An annual fee on the manufacturers and importers of branded drugs ($27 billion)
A 2.3% excise tax on the manufacturers and importers of certain medical devices ($20 billion)
An increase from 7.5% to 10% the Ajusted Gross Income floor on medical expense deduction ($15.2 billion)
A limit on annual contributions to flexible spending accounts in cafeteria plans to $2500 ($13 billion)
The spending offsets include:
Reducing funding for Medicare Advantage plans (projected savings of $132 billion over 10 years)
Reducing Medicare home health care payments (projected savings of $40 billion)
Reducing certain Medicare hospital payments (projected savings of $22 billion)
Note that these cuts are not reducing Medicare benefits to seniors, but are designed to reduce waste, fraud, and duplication.
What's the return on investment for expanding Medicaid?
Prior to the Supreme Court ruling that Medicaid expansion must be optional for the states, the expansion was estimated to cover an additional 17 million Americans over the next ten years. So far, seven states have said that they will not participate in the Medicaid expansion. If only these seven states opt out, that number will be reduced by just over 4 milllion. Of those 4 million, only 1 million will be eligible for tax credits to help subsidize the purchase of insurance through the health insurance exchange, leaving 3 million Americans still uninsured, who would have been covered by Medicaid if their states opted into the expansion. However, even after these states opt out, 14 million more Americans will be covered by either Medicaid or subsidized private health insurance over the next ten years - people who had no insurance coverage at all prior to the ACA. 14 million people will no longer have to use the emergency room as their primary care physician, go without vital prescriptions, or suffer through illness or injury without seeking any medical care. 14 million Americans will no longer have to be terrified that they or their children will get hurt or sick. Does that seem like a small number? It isn't if you're one of them...
Expanding Medicaid coverage will result in several areas of savings. In 2010, uncompensated care cost hospitals in the US $39.3 billion. It costs Texas hospitals alone about $5 billion a year (which makes it even more ironic that it's one of the states that is opting out). It makes up nearly 6% of hospital annual expenses. Some of this is reimbursed by a federal program that provides extra Mediciad and Medicare money to hospitals with a high proportion of low-income patients. State laws regarding payment to hospitals for uncompensated care vary widely, and usually involve tax credits and not cash reimbursements. If Medicaid is already tapped to make up for uncompensated care, shouldn't that money instead be used to insure Americans?
Additional savings are directly derived from the fact that more people will get preventive health care, prompt treatment, and access to prescription drugs, meaning more serious (read, expensive) care can be avoided. Being able to have a mole removed, a wound sutured, or a lump detected early can save tens of thousands of dollars in expensive treatment per patient. And more importantly, it can save lives.
What's your point?
Is Medicaid expansion expensive? Yes. Will it be paid for? Largely. Will it result in cost savings? Yes. Will it result in better quality and more affordable health care for a large number of US citizens? Absolutely. Currently Medicaid and Medicare are already tapped to help pay hospitals for uncompensated care; it only makes sense to use that money to help lower-income people get care before they need to go to the emergency room. Currently, Americans too poor to afford insurance but too "rich" for Medicare are going without any care at all until they wind up seriously ill in an emergency room with something that could have been nipped in the bud. Currently, people with chronic illnesses are "rationing" their own prescriptions because they can't afford to have them refilled on a regular basis. Medicaid expansion should not be considered a risky financial move, or an unecessary expense in tough economic times; it should be considered vital to the health and welfare of our country especially in tough economic times.
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