Just one day after he was inaugurated as our new governor, John Bel Edwards signed an executive order to expand the Medicaid program in our state. There was rejoicing from some, grousing from others and questions from all.
So, now that my email box is full from people asking what this means for us all, I figure this is a great time to talk it over. Let’s start at the beginning: What is Medicaid and how does it work?
With the creation of the “Great Society” during the 1960s, President Lyndon Johnson and Congressional Republicans and Democrats agreed to the greatest government healthcare program expansion in the history of the country, targeting the poor and elderly. MediCARE was created as a program funded by small payroll deductions over the lifetime of a worker that provided healthcare, with full federal funding, once the worker reached 65 years of age. MediCAID was created as a pay-as-you-go healthcare lifeline for the poor and the indigent and funded by a partnership of state money and federal money. The state portion is determined by the average household income in the state.
Today, Louisiana’s existing Medicaid program is funded by roughly 38% state money and 62% federal money. Keep that fact handy as we move on.
Medicaid coverage is powerful; almost no financial contribution at all is required once you are signed up. It literally is free health insurance for most. To be eligible for the Medicaid program, you need to fit into one of several special categories. Medicaid covers:
- low-income seniors,
- blind or disabled folks,
- low-income women while they are pregnant,
- uninsured women with breast or cervical cancer,
- children in low-to-modest income households, and
- a few other categories.
The category for expanded children’s coverage was added in the 1990s, and today, around 700,000 Louisiana children get their healthcare coverage through Medicaid, or the Medicaid-funded Children’s Health Insurance Program (CHIP or LaCHIP).
Add all the categories together, and you get 1.4 million Louisianians who are receiving their healthcare from or having their existing healthcare subsidized by the state’s Medicaid program. With 4.6 million people in the state, Medicaid today includes a little over 30% of the population. But that’s before it expands.
You might think, “What about regular low-income people who don’t fit into any of these categories?” That’s exactly what Congress thought when they wrote the Affordable Care Act in 2010. They created a new category for ANYONE with an income below 138% of the poverty line. In 2016, that’s about $16,200 in annual income for a single person or about $33,400 for a family of four.
To sweeten the deal, Congress put Medicaid on sale. Instead of the 38% state contribution we talked about above, in the expansion Louisiana can add the new folks and pay a maximum of 10% of their healthcare costs by 2020. This year, it will be almost 0%. That’s all good news.
Got a feel for how Medicaid works? Good! Let’s take a peek at the pros and cons of expansion.
On the upside, we can think of this Medicaid expansion as an economic development program in the healthcare sector. For every $1 the state invests, we can guarantee $9 back from Washington! That kind of return on investment is unheard of for any project the state has considered in recent history. So from a pure economic development perspective, the deal looks pretty attractive. That $9 of federal money from an expansion of Medicaid would go directly to the healthcare system in the state – to doctors, hospitals, pharmacies, labs, imaging centers – you name it. And many of the recipients of that new money are state tax-paying entities, so surely some of that investment would flow back into state coffers.
In addition, the state currently pays 38% of the healthcare costs for the existing 1.4 million people on Medicaid in Louisiana. At least some of them will be re-classified into the new, lower 10% match, which will save the state some money.
And let’s not forget that as Louisianians ourselves, we know there is a population of folks out there who are suffering, not getting the care they need and basically showing up at the emergency room when things get really bad. You can’t manage a chronic condition like diabetes or high blood pressure or kidney disease with emergency room visits. These people need regular healthcare, and being in Medicaid will help them get it. This program will literally be a lifesaver for them.
We could have expanded Medicaid as early as Jan. 1, 2014, but we didn’t. There must be a downside. When people talk about exercising caution in expanding Medicaid, here are the issues they typically bring up:
- Somebody has got to find and enroll more than 500,000 people into a new federal program. Then once that population is processed and enrolled, someone has to teach them how to use their coverage properly. If they just take their new Medicaid card and keep going to the emergency room, they won’t get any healthier, nor will their quality of life improve. Most expansion states saw increases in emergency room usage, not the decreases we are hoping for. Education has to go along with expansion, and that’s hard and expensive.
- This large, new population will want to go to the doctor eventually. Can the existing network of docs who accept Medicaid actually handle another 500,000 patients? Medicaid has one significant flaw, unique to federal support programs, in that it pays below cost for the services its members receive. Imagine if a person with a SNAP (food stamp) card went to the grocery store and the store was required to sell the groceries below their cost and lose money. I imagine many grocery stores would not welcome SNAP holders. But that is exactly how Medicaid operates.
- This means there are lots of primary care docs and specialists who don’t see Medicaid patients, and many of the ones who do see Medicaid patients are maxed out and not taking new patients. Whether there are enough doctors in the existing system to see everyone under expansion is a significant issue.
- The state, currently in a budget crisis, will have to figure out a way to consistently supply the 10% match by 2020, all of which is brand new state spending. Existing federal Medicaid support programs (like Disproportionate Share Hospital Funding or DSH – pronounced “dish”) are phased out as Medicaid expands. With no plan to supply the 10%, the budget problems the state has already will simply magnify.
- Finally, there are tens of thousands lower-income Louisianians who are already getting high-quality, private insurance through www.healthcare.gov with subsidized premiums around $20/month and annual deductibles of $0-$100. Once Medicaid expands, they will become eligible for that program and lose their subsidies, leaving them unable to afford their current insurance. Private insurance, with which they are well satisfied, will be taken away from them and replaced with a government program that their current primary care doctors and specialists may not accept. This population will be very surprised to learn their options have narrowed considerably and may not be too happy about it. Managing that transition for those thousands of people will be tricky.
- State numbers indicate about 180,000 people who get insurance through work will be able to walk away from their existing coverage and get free Medicaid. If more healthy people choose this option than sick people, it could have a significant impact on private insurance rates in the state as well. At this point we have no idea how many privately insured people will drop their private coverage and choose Medicaid. If I’m healthy, I’d probably choose the cheapest option, which leads one to believe healthier folks will leave private insurance. The more they leave, the more expensive insurance gets.
Certainly none of these issues may be a reason not to expand Medicaid, but going forward with the expansion is going to be a big change and a big responsibility for the state to assume. Each issue above should be dealt with and planned for accordingly if we are going to have a successful expansion that serves Louisiana well and maximizes value for our citizens. And of course, is a stable source of long-term improvements in their health and quality of life.