10 Myths About Obamacare Medicaid Expansion

The Obamacare Medicaid expansion is going to blow a hole in the federal budget. Costs for healthcare and premiums themselves are continuing to rise, and the message needs to get out in conjunction with the philosophical debate surrounding the IRS role in administering the entitlement program. 

Alyene Senger, of the Heritage blog “The Foundry,” wrote about 10 myths surrounding the Obamacare Medicaid expansion to accompany the infograph that Heritage is always so good at dummying down for the rest of us. Senger’s numbers, however, speak for themselves as well. From Ms. Senger at Heritage:

1. Myth: Expanding Medicaid is “free money” for the states.

Reality: The expansion adds an estimated $638 billion in new government spending from 2013–2023. New spending at the federal or state level is reckless in light of the country’s trillion dollar budget deficits and over $16 trillion in national debt. As Governor Rick Perry (R–TX) stated, “[T]here is no such thing as ‘free’ money. We know there’s only money that’s collected from taxpayers, and money borrowed from other countries like China against the good credit of our children and grandchildren.”

2. Myth: Expanding Medicaid will entail little to no costs to the states.

Reality: Within three years, costs would exceed any projected savings. Heritage research shows 40 of 50 states would see increases in costs due the Medicaid expansion. If all states expand, state spending on Medicaid would increase by an estimated $41 billion by 2022.

3. Myth: Medicaid expansion can bring savings to the states.

Reality: Analysis by Heritage shows that by 2022 any projected state savings are dwarfed by costs. Moreover, these projected savings assume states will further reduce payments to hospitals and clinics for uncompensated care. But, as Heritage’s Ed Haislmaier points out, it is more likely that hospitals will lobby state legislatures for more money rather than less.

4. Myth: States can opt out of the Medicaid expansion if they change their mind later.

Reality: Some proponents of the expansion claim that states could drop out of the expansion if the federal government reneges on its commitments. But as legal experts Robert Alt and Dan Greenberg state, “[I]n fact, there is substantial reason to believe that when a state chooses Medicaid expansion, it is something like a decision to go down a one-way street” and that “legislators are mistaken to ignore the possibility that expansion cannot be abandoned as easily as it was entered.”

5. Myth: States can circumvent Medicaid requirements for the expansion population.

Reality: In its recent Frequently Asked Questions, the Centers for Medicare and Medicaid Services (CMS) clearly states that beneficiaries under any premium support arrangement would still be Medicaid beneficiaries, “entitled to all benefits and cost-sharing protections,” and that states must provide “wrap around” to fill in any gaps. As Ed Haislmaier has pointed out, “[A]ny state that agrees to the Medicaid expansion will get exactly what the term expansion implies: simply a bigger version of the same expensive and dysfunctional program.”

6. Myth: States must act quickly before Obamacare cuts hospital payments.

Reality: Hospitals are pushing states to expand Medicaid coverage because Obamacare is going to reduce their payments for uncompensated care by $56 billion over 10 years. However, the President’s latest budget proposes delaying the Medicaid disproportionate share hospital (DSH) payment reductions until 2015, which raises questions over the future of the cuts. But regardless, as Heritage’s Nina Owcharenko points out, “[m]aybe it is time for the states to tell the hospitals to shift their attention to the real problem: Obamacare.”

7. Myth: Hospitals will go out of business if states do not expand Medicaid coverage.

Reality: Hospitals have been lobbying hard on the idea that without expansion, the Obamacare uncompensated care payment cuts will be unsustainable for their business. But according to Ohio Media Trackers, about 80 percent of Ohio hospitals would still net millions in profits if their charity care was cut.

8. Myth: States can trust the federal government to keep its funding promises.

Reality: “Although Obamacare stipulates the federal government will pay at least 90 percent of the benefit costs of the Medicaid expansion,” Heritage explains, “state lawmakers have no guarantee future Congresses will keep that promise.” In fact, the Obama Administration has already proposed changing the deal in its fiscal year 2013 budget proposal.

9. Myth: Medicaid expansion will help low-income workers out of poverty.

Reality: Medicaid expansion actually locks low-income workers in poverty because of its backward incentives that discourage work. As Dan Greenberg explains for Advance Arkansas, “[E]mployees who earn too much money—or who work too many hours—face a set of unpleasant choices. They can quit. They can work fewer hours. They can decline raises. Realistically, a large number of employees who face such choices will opt to preserve Medicaid coverage by reducing the hours they legally work.”

10. Myth: Medicaid is quality health coverage.

Reality: Research has consistently shown that Medicaid produces worse access and health outcomes than private insurance. As Heritage’s Kevin Dayaratna writes, “By further expanding this broken program, Obamacare only exacerbates the situation by adding millions of low-income Americans to a failing program.”

Alyene Senger