Congress is proposing a major expansion of Medicaid as a primary
vehicle to reduce the number of people without health
But this idea would balkanize families based on arbitrary income
levels, history, and geography. While it might theoretically be a
cheaper alternative, it would not necessarily serve the best
interests of families inside or outside of Medicaid. Further
expansion of Medicaid would create new inequities among
individuals, even within families.
Medicaid Eligibility. Not all poor people are
eligible for Medicaid, and not all people on Medicaid are poor.
Medicaid is based not only on income but also on other criteria,
such as disability or whether the household includes a dependent
Federal law requires states to cover certain populations
(including parents of children on Medicaid at old welfare
eligibility levels), allows states to cover additional
"optional" populations (including parents of children on Medicaid
with higher family income levels), and refuses to pay for
other populations (childless, non-disabled adults).
For children, there is no upper income eligibility limit. Thus,
children in Maryland in families of four with income of $66,150 are
eligible for Medicaid, while a childless adult in Virginia making
$5,000 is not.
Health Status and Coverage. Being uninsured does
not mean an individual is in poor health. According to a recent
report by the Kaiser Commission on Medicaid and the Uninsured, 50
percent of uninsured adults below the poverty level report that
they are in excellent or very good health, and another 33 percent
report that they are in good health. Only 17 percent of the "poor"
(below 100 percent of the federal poverty level [FPL]) and 11
percent of those considered "near poor" (100-199 percent FPL)
consider themselves to be in poor or fair health.
So why send healthy but uninsured adults to Medicaid? If these
individuals were connected to the private sector pools, they would
help lower costs by spreading risk among healthy populations.
Putting these and other healthy Medicaid lives back into the
private health insurance pool would help reverse the "crowd out"
effect and lower costs for everyone.
Undermining Private Pooling. According the
Congressional Budget Office (CBO), under the House bill, the number
of uninsured individuals will be reduced by 37 million by 2019. Of
these, 11 million, or 30 percent, will be moved into Medicaid.
Combining the CBO estimates of the Medicaid baseline under current
with the new expansion reveals that more than 85 million
people--approximately 25 percent of the entire U.S.
population--will be on Medicaid for at least some period of time in
The Census Bureau projects total population will grow from 310.2
million individuals in 2010 to 338.2 million in 2019. So
adding 11 million people to Medicaid is approximately equal to half
of the population growth in the next 10 years, or approximately the
current population of Michigan.
A Medicaid expansion undermines the logic for having an
individual mandate. The individual mandate is necessary, according
to its congressional advocates, to ensure that everyone is in the
insurance pool so that risk can be spread across everyone and
thereby lower costs. But keeping 64 million children and
non-disabled adults (53 million "moms and kids" currently on
Medicaid plus 11 million newly eligible) on Medicaid rather than in
the rest of the insurance pool dilutes the effectiveness of the
High Costs. According to the CBO March 2009
Medicaid Baseline, the benefits payments for children and
non-disabled adults under current law will total over $1 trillion
in the period 2010-2019. With the state share, total spending will
be approximately $1.8 trillion.
The House bill would increase federal Medicaid spending by $438
billion for a combined total of $2.2 trillion. Spending $2.2
trillion to keep generally healthy individuals outside the rest of
the insurance pool is counterintuitive as well as
Growing Government. CBO estimates that it costs
less to expand Medicaid than to provide subsidies that can be used
to buy into private health plans. But why is Medicaid cheaper?
Because of Medicaid's low provider reimbursement rates and limited
access to health care providers, particularly medical specialists.
People on Medicaid are served in medical and surgical specialty
offices at about half the rate of those on private insurance.
The policy of expanding Medicaid also ignores the reality that
people move on and off Medicaid. For continuity of care, families
would be better served by remaining in private coverage. Treating
individuals differently based on income level will also result in
the creation of new inequities among and even within families.
For example, in a family with an income of 175 percent FPL, the
child may be eligible for Medicaid while the parent will receive a
subsidy to be in private coverage. Under the Senate HELP Committee
proposal, a child on SCHIP can access private health plans through
the Gateway while someone on Medicaid cannot. Because SCHIP starts
at 100 percent FPL in many states, a child in a lower-income family
may be in the private sector while an adult with higher income can
only be served by Medicaid. Such a scenario is likely to occur
across states and could occur even within the same family.
Playing Games to Hide the Costs. While the
Administration and Congress insist that "[t]here are too many lives
and livelihoods at stake" to delay consideration of legislation, it
will take four years for benefits to begin. Under the House bill,
the Medicaid expansion will cost $438 billion, even though it will
not take effect until 2013.
While it will take some time for the creation of the new federal
bureaucracy called for under other parts of the legislation,
expanding Medicaid could be easily accomplished in a matter of
months. It is therefore unclear why the 11 million uninsured
Americans are required to wait four years for coverage. Presumably
the delay is to avoid another $200-$300 billion in cost. The delay
would appear to weaken proponents' argument as to the urgency of
immediate passage of legislation.
Concentrating Power. The Senate HELP Committee has
included in its bill a new voluntary program to provide benefits to
individuals with limitations in their activities of daily living.
The "Community Living Assistance Services and Supports" (CLASS)
program will provide a cash benefit of at least $50 per day to
qualifying individuals who paid into the program for at least 60
In the period 2010-2019, CBO estimates that CLASS will generate
savings of $58 billion, due principally to the fact that no
benefits will be paid out in the first five years. Over time, however,
CBO determined that benefits would exceed premiums. To make the
program solvent, CLASS gives the secretary of health and human
services the power to raise premiums and lower benefits at will.
CBO not only acknowledges this authority but expects a future
secretary to use it.
Giving a federal official such awesome power to increase
contributions and lower benefits would be unthinkable in Social
Security, Medicare, Food Stamps, the Earned Income Tax Credit, or
any other benefit program. While some may argue that contributions
are voluntary, it is not hard to imagine the protests against a
private insurance company that changed premiums and benefits at
A Bad Deal All Around. Congress's proposal to
expand Medicaid as part of its health care reform effort is
misguided and wrongheaded. It would subsidize coverage for people
who do not need it while diluting the effects of other reform
Congress could achieve more coverage and save money by
transitioning those on Medicaid into private insurance. But such
ideas are unlikely to emerge in this political climate.
G. Smith is Senior Fellow in the Center for Health
Policy Studies at The Heritage Foundation.