Arizona Medicaid Expansion Is A Warning Signal For Georgia

April 24, 2014

Georgia is coming off legislative efforts that have made it more difficult to expand Medicaid in 2014. This, however, is no reason to assume Medicaid expansion will not continue as a familiar refrain from big government advocates on the Left. And Arizona has some words of warning for states like Georgia.

Numerous studies, including a study by one of the key architects of ObamaCare, indicate that most of the people enrolled in the Medicaid expansion will have been pushed out of private insurance. It gives a different perspective on the would-be 500,000-650,000 additional Medicaid recipients in Georgia. For some populations, the portion of people “crowded out” of private insurance by Medicaid expansion may be around 80 percent. (More broadly, a RAND study and other studies suggest that more than two out of three people signing up for ObamaCare – including the exchange/HealthCare.gov – were previously insured.)

Medicaid is a broken system that provides unacceptably poor care for our country’s most vulnerable persons. As government continues to cut provider reimbursements, doctors are dropping Medicaid patients. In a recent study, one out of three doctors nationwide admitted that their practices are not accepting Medicaid patients. 

Combine large increases in the Medicaid population with a declining number of doctors, and the result will be longer waiting times for patients. In medicine, longer waiting times often mean discomfort, disability and death. Worse still, Big Government is pushing the American medical profession away from the tradition of the Hippocratic Oath and toward a brave new world in which health care will be dispensed according to a veterinary ethic.

There is a big distinction between health insurance and access to care. The two are often not correlated. Medicaid expansion supporters share stories about survivors of life-threatening illnesses crediting access to high-quality health care. We all believe that we should do everything we reasonably can to make sure that as many citizens as possible can get lifesaving and life-improving medical services when they are needed. But many Medicaid recipients find, as one surgeon in Phoenix explained,
receiving palliative surgery — surgery designed to make patients more comfortable at the end of life, rather than life-saving surgery. These are often late-stage cancer patients who were ignored or deferred by providers working within the Arizona Medicaid system. In some cases, those persons could have been saved, had they received attention sooner. But they found it very difficult to find providers — primary care physicians, oncologists, radiologists, and surgeons — who would take AHCCCS patients. Those AHCCCS patients were treated like second-class medical citizens, and became victims of deadly waiting periods.

Numerous studies show that Medicaid patients have significantly worse health outcomes than those on almost any other system, including Medicare or private insurance. What is more surprising, and profoundly disturbing, are the results of studies showing that patients with no insurance at all often get better treatment than Medicaid patients. For example, a University of Virginia study looking at 893,000 major surgical operations from 2003 to 2007 found that a patient on Medicaid was 13 percent more likely to die than the same patient — controlling for wealth, ethnicity, region and health background — without any kind of insurance. The Medicaid patient also spent 50 percent longer in the hospital and cost 20 percent more. (For information about other studies demonstrating bad outcomes in Medicaid, start here: http://tinyurl.com/gottliebwsj)

In response to such studies, some expansion proponents have cited a recent New England Journal of Medicine study purporting to show that earlier Medicaid expansions in three States, including Arizona after the voter-approved expansion of AHCCCS in 2000, led to improved mortality outcomes for the individuals who were covered. But as the authors of the NEJM study point out in their conclusion, the results from the States analyzed “are largely driven by the largest (New York), so our results may not be generalizable to other states.” Further, New Mexico was used as the control for the Arizona results, so there may be multiple confounding factors that don’t allow for an apples-to-apples comparison. Finally, as the authors state, their analysis “is a nonrandomized design and cannot definitively show causality.”

So far, the only attempt at a randomized study is the Oregon Health Insurance Experiment (OHIE), under which Oregon assigned 10,000 people at random to Medicaid. The result after the first year is that there were no improvements to objective measures of health outcomes — including mortality — for the Medicaid population, compared to the control population. As the Cato Institute’s Michael Cannon reports, that finding “is consistent with a previous study, coauthored by one of the OHIE researchers, that found no evidence that Medicare (which covers a much older and sicker population) saved any lives even ten years after its introduction.”

II. Fiscal costs are human costs

Before talking about solutions to health care problems, we should remember a point that should be obvious, but that is often forgotten in health care debates: Taxpayers are people, too. So are the purchasers of private insurance. The expansion of Medicaid would harm state and federal taxpayers, and it would do nothing to help the purchasers of private insurance.

As the Goldwater Institute’s Christina Corieri has documented, none of the promised fiscal results of Arizona’s last Medicaid/AHCCCS expansion (enacted by voters through Prop 204 in 2000) actually materialized. The proponents of Prop 204 promised that the AHCCCS expansion would save money in the state budget. The Joint Legislative Budget Committee was somewhat wiser, knowing that the expansion would cost the state money. The committee’s projection was that covering the Prop 204 population would cost $389 million in 2008. The actual cost was $1.623 billion — four times as expensive as projected. According to the Kaiser Family Foundation, while Medicaid costs nationwide grew by 6 percent per year, costs in Arizona grew 12 percent per year.

As Corieri points out, when Arizona passed Prop 204, it was estimated that roughly 129,000 people would come out of the woodwork to join the program. But by 2003, the actual number was approximately 250,000 – almost double the original estimate. State taxpayers absorbed much of the cost of the expansion. Indeed, the fiscal deficit caused by the Prop 204 AHCCCS expansion was one of the biggest factors that pushed Governor Brewer and a legislative majority to put the Prop 100 sales tax on the state ballot in May 2010.

To the extent that the federal government would subsidize the new Medicaid expansion, the borrowed money would come from future taxpayers, including our children and grandchildren. The borrowing would also crowd out job-creating private-sector investments via the loanable funds markets. Again, taxpayers are people, and heavy taxation prevents them at the margin from making certain purchases — including the purchase of high-quality private health insurance plans.

Using Congressional Budget Office cost projections, if Arizona and the other States that are currently on the fence join the 16 States that have already rejected the Medicaid expansion, the savings to federal and state taxpayers would be more than $400 billion between now and 2022. That’s real money — even in Washington, DC!

As for the purchasers of private insurance plans, expanding Medicaid/AHCCCS would do nothing to relieve their soaring insurance premiums. In pushing for this latest expansion, Governor Brewer’s office claims that uncompensated care results in a “hidden tax” of $2,000 per family per year that is added to the average Arizona family’s insurance premiums. Expansion proponents suggest that the expansion will solve the problem of uncompensated care and eliminate the “hidden tax.”

The proponents of the Prop 204 expansion also claimed that they were going to relieve the state’s uncompensated care problem. But according to a Lewin Group study, uncompensated care in Arizona increased by an average of nine percent per year during the first seven years of the Prop 204 expansion, and the average family’s health insurance premium increased from $8,972 in 2003 to $14,854 in 2011 – a 66 percent increase. And so much for relieving patient volume in hospital emergency rooms: results from Oregon’s randomized Health Insurance Experiment suggest that Medicaid expansion increases emergency room use.

(Further, Florida’s Foundation for Accountable Government, using Census data, shows that Arizona’s uninsured population hovered around 19 percent after the first Medicaid expansion — suggesting the expansion did little, if anything, to reduce the portion of uninsured persons.)

Even if Arizona policymakers decide to discount the human cost of the Medicaid expansion as it affects state and federal taxpayers, and even if they decide that it is morally permissible to make false promises of relief for the purchasers of private insurance plans, the enormous fiscal costs of the proposed Medicaid expansion should force us to confront another moral issue: Is it moral to lure vulnerable people into becoming dependent upon an increasingly insolvent federal government — a government that will cut health care costs by rationing services?

Here’s a more novel (and market-driven) approach for controlling health care costs. Medical price transparency reform that mandates health care providers provide cash prices to their customers.

By creating transparency, we would introduce greater price competition to our health care marketplace, letting the market guide consumers toward optimal health care choices. By putting downward pressure on health care prices, the reform would help local businesses that are self-insured or that depend on high-deductible medical insurance plans. Price transparency would also help to prevent fraud and over-billing.

Other ideas:

1) Reforms allowing our health insurance consumers to shop for regulated health insurance plans offered in other States.

2) A “loser pays” rule and other tort reforms to discourage frivolous medical malpractice lawsuits.

3) Allow unlimited tax deductions, calculated at Medicare coding rates, for medical professionals who provide charitable care to indigents.

4) In the medium run (i.e., beginning in 2017), Congress needs to block grant Medicaid funds to the States, and allow States to create premium support systems and health savings accounts to give low-income citizens access to high-quality, low-cost private health plans.

5) In the medium run (i.e., beginning in 2017), Congress needs to remove government-created obstacles to the creation of a nationwide free-market health insurance marketplace. It should start by repealing the entire corpus of the ObamaCare/PPACA legislation.

These are common sense reforms that can move Georgia and the nation in the direction of quality, affordable health care. If Arizona’s Medicaid expansion is instructive in any way, it shows that expanding a failed program is no way to fix the problem. It only exacerbates it.

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