An Unsustainable Path: How ObamaCare’s Medicaid Expansion is Causing an Enrollment and Budget Crisis
THE BOTTOM LINE:
STATE POLICYMAKERS MUST REJECT THE BROKEN PROMISES OF EXPANSION.
Over the past decade, state policymakers have been often tricked by lobbyists and activists seeking to expand Medicaid to a new class of able-bodied adults under ObamaCare. Leftist think tanks and government agencies continue to use bad data and worse assumptions to produce misleading and inaccurate projections. These projections grossly underestimate how many able-bodied adults would enroll if states expanded Medicaid and how much such an expansion would cost taxpayers.1-21Nic Horton and Jonathan Ingram, “How the ObamaCare dependency crisis could get even worse—And how to stop it,” Foundation for Government Accountability (2018), https://thefga.org/wp-content/uploads/2018/01/How-the-ObamaCare-dependency-crisis-could-get-even-worse-%E2%80%94-and-how-to-stop-it-1-15-18.pdf–2Jonathan Ingram and Nic Horton, “A budget crisis in three parts: How ObamaCare is bankrupting taxpayers,” Foundation for Government Accountability (2018), https://thefga.org/wp-content/uploads/2018/02/A-Budget-Crisis-In-Three-Parts-2-6-18.pdf Now, the Biden administration is attempting to bait the remaining non-expansion states into following this same path with new gimmicks and false assurances.3Hayden Dublois, “Three reasons states should reject Bidens’ ObamaCare bait,” Foundation for Government Accountability (2021), https://thefga.org/wp-content/uploads/2021/05/Three-Reasons-States-Should-Reject-Bidens-ObamaCare-Bait.pdf
But promise after promise has been broken while states have been led to believe a false reality. Now, they are paying the price.
Advocates of expansion dramatically underestimate enrollment. This is easily observed by the actual experiences of expansion states. Expansion states projected that no more than 6.5 million able-bodied adults would enroll in the expansion.4Authors’ calculations based on state government predictions of total expansion enrollment prior to implementation. Those projections were shattered as soon as enrollment opened, with many states signing up more able-bodied adults than would ever even be eligible. Today, enrollment in these states sits at more than 16.7 million—a 160 percent overage.5Authors’ calculations based on available state-level expansion enrollment data in selected expansion states.
Unsurprisingly, the projections by leftist think tanks have also been wildly off. The Kaiser Family Foundation (KFF), for example, predicted that just 8.6 million would be enrolled in Medicaid expansion in these expansion states by 2022.6Excludes selected expansion states in which coverage was offered prior to the implementation of ObamaCare, and states in which the rollout of expansion has not yet been fully completed. See, e.g., Kaiser Family Foundation, “The cost and coverage implications of the ACA Medicaid expansion: National and state-by-state analysis,” KFF (2012), https://www.kff.org/wp-content/uploads/2013/01/8384.pdf But actual enrollment has exceeded its projections by nearly 95 percent. 7Authors’ calculations based on state deviations in enrollment from KFF projections.
Estimates by other think tanks and government agencies—including the Congressional Budget Office—have also been consistently wrong.8Nic Horton and Jonathan Ingram, “How the ObamaCare dependency crisis could get even worse—And how to stop it,” Foundation for Government Accountability (2018), https://thefga.org/wp-content/uploads/2018/01/How-the-ObamaCare-dependency-crisis-could-get-even-worse-%E2%80%94-and-how-to-stop-it-1-15-18.pdf This enrollment explosion, paired with much higher per-person costs than expected, has led to skyrocketing costs for taxpayers and budget shortfalls.
Per-Person Costs Are 64 Percent Above Estimates
In 2012, before states implemented ObamaCare’s Medicaid expansion, the U.S. Department of Health and Human Services (HHS) predicted that expansion would initially cost $3,200 per person, growing to nearly $4,000 per person by 2018.9Authors’ calculations based on CMS actuarial reports on Medicaid. See, e.g., Centers for Medicare and Medicaid Services, “Actuarial report on the financial outlook of Medicaid,” U.S. Department of Health and Human Services, https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/MedicaidReport
But taxpayers were on the hook for far more than initially promised. Medicaid expansion actually cost taxpayers more than $5,500 per person in 2014. By 2018, annual expansion costs had grown to nearly $6,100 per person.10Authors’ calculations based on CMS actuarial reports on Medicaid. See, e.g., Centers for Medicare and Medicaid Services, “Actuarial report on the financial outlook of Medicaid,” U.S. Department of Health and Human Services, https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/MedicaidReport During the first five years of expansion, taxpayers spent roughly 64 percent more per person than officials from HHS initially predicted. These costs have continued to climb even higher since 2018.11MACPAC, “Medicaid benefit spending per full-year equivalent enrollee for newly eligible adult and all enrollees by state, FY 2020,” MACPAC (2020), https://www.macpac.gov/wp-content/uploads/2017/12/EXHIBIT-23.-Medicaid-Benefit-Spending-per-Full-Year-Equivalent-Enrollee-for-Newly-Eligible-Adult-and-All-Enrollees-by-State-FY-2020.pdf
Unfortunately, states have seen this harsh reality pan out as Medicaid has consumed other budget priorities.12Nicholas Horton, “The Medicaid Pac-Man: How Medicaid is consuming state budgets,” Foundation for Government Accountability (2019), https://thefga.org/wp-content/uploads/2019/10/Medicaid-Pac-Man-Paper-2.pdf As Medicaid grows and grows as a proportion of states’ budgets, other areas like education and transportation have been crowded out.13Nicholas Horton, “The Medicaid Pac-Man: How Medicaid is consuming state budgets,” Foundation for Government Accountability (2019), https://thefga.org/wp-content/uploads/2019/10/Medicaid-Pac-Man-Paper-2.pdf
Non-Expansion States Could Face Enrollment of Nearly 11.7 Million
If additional states were to expand Medicaid, they could face enrollment of at least 11.4 million able-bodied adults—well above the routinely inaccurate estimates of expansion proponents.14Authors’ calculations based on expansion enrollment error rates applied to total estimated expansion costs over ten years.
Taxpayers Could Be on the Hook for More Than $700 Billion if the Remaining States Expanded Medicaid.
These same expansion advocates produced cost estimates based on their inaccurate enrollment projections. And it is no surprise that Medicaid expansion has cost more than double what was promised, as these flawed enrollment predictions led to equally incorrect cost estimates.
Based on the actual experience of expansion states and the error rate of expansion advocates, the remaining 12 non-expansion states could face at least $700 billion in expansion costs over the next decade if they were to expand Medicaid.15Authors’ calculations based on expansion enrollment error rates applied to total estimated expansion costs over ten years.
THE BOTTOM LINE: State Policymakers Must Reject the Broken Promises of Expansion
Non-expansion states need only look to their expansion counterparts to see the trail of destruction that has been left in their wake: shattered enrollments, busted budgets, crowded-out investments, lengthy waiting lists, and more. The costs of Medicaid expansion—both for taxpayers and the most vulnerable—are simply too great to bear.
States must reject the false promises and bait offered to get them to expand Medicaid. The actual experiences of expansion states make it crystal clear that holding the line and resisting a massive expansion of welfare is the most prudent action states can take to protect their budgets, taxpayers, and the truly needy.