Will Medicaid expansion actually make poor people healthier?

Members of the General Assembly who oppose Governor Terry McAuliffe's proposals to expand Medicaid in Virginia under the terms of the Affordable Care Act (ACA, also called "Obamacare") may find some intellectual ammunition to bolster their case in a study published on March 24 by the Mercatus Center at George Mason University.

The Economics of Medicaid: Assessing the Costs and Consequences, edited by Jason J. Fichtner, contains a lot of wonkish economic analysis, such as Nina Owcharenko's chapter on "the state side of the budget equation," which shows the astronomical growth in Medicaid spending and enrollment over the past two decades (see the graph to the upper left), but the most significant findings may be in the book's last chapter, by Robert F. Graboyes and titled "Medicaid and Health."

Graboyes relies on previous studies in several states and on reports from the Government Accountability Office and other federal agencies to demonstrate that people who rely on Medicaid for health insurance not only have worse health comes than those who have other types of insurance, but worse than people with no insurance at all.

What's more, rather than taking patients out of emergency rooms and putting them in doctors' offices for routine health care, expansion of Medicaid coverage tends to increase emergency room visits by Medicaid recipients.

I'll let Graboyes -- a senior research fellow who was formerly an economist with Chase Manhattan Bank and the Federal Reserve Bank of Richmond, as well as a faculty member at the University of Richmond -- tell it in his own words (end notes omitted).

Pages 175-76:

A Mercatus publication I authored in 2013 stated the following: “An ideal health care system will provide better health to more peo­ple at lower cost on a continuous basis.” By this standard, Medicaid is an abject failure. For lower-income Americans, Medicaid yields poor coverage, poor care, and poor medical outcomes. While prom­ising coverage far beyond the program’s original scope, it fails to enroll millions of people who are among its intended population and who are eligible for enrollment. The data suggest that Medicaid does surprisingly little to improve its recipients’ health and in some ways may even harm them indirectly. It is a pennywise-and-pound-foolish program that, paradoxically, sends costs soaring by underpaying pro­viders. And the coverage, care, and cost elements show little or no improvement over time.

Pages 181-82:

In 2010, the University of Virginia conducted a large-scale study that suggested that an individual without insurance has better health outcomes than an individual on Medicaid.47 Even after adjusting for risk factors, Medicaid patients had higher in-hospital mortality, longer hospital stays, and higher costs—compared with the uninsured, those on Medicare, and those on private insurance plans.48 A University of Pennsylvania study examined data on patients receiving surgery for colorectal cancer; Medicaid patients had higher mortality and surgical complications than uninsured patients.49 A 2011 Johns Hopkins study found that “Medicare and Medicaid patients have worse survival after [lung transplantation] compared with private insurance/self-paying patients.”

Perhaps the most damning of all the recent studies is the Oregon Experiment. This was a rare example of a large-scale, fully ran­domized experiment in health care. In 2008, Oregon expanded its Medicaid program. Approximately 90,000 people applied for 30,000 newly available slots, and the state used a lottery to choose who got in and who did not. Afterward, the state tracked the health of 6,387 adults who were chosen and 5,842 who were not. From a standpoint of physical health, the results were devastating: “This randomized, controlled study showed that Medicaid coverage generated no sig­nificant improvements in measured physical health outcomes in the first 2 years, but it did increase use of health care services, raise rates of diabetes detection and management, lower rates of depression, and reduce financial strain.” Supporters of Medicaid point to positives that follow the word “but” in the preceding sentence.

Page 177:

Rapid expansion of Medicaid, as envisioned under the ACA, also has the potential to touch off a cycle of expansion, financial over­load, and mass cancellations of coverage. The best example of such a process is the TennCare disaster that began in 1994 in Tennessee. The state sought to convert Medicaid to managed care, assuming this would lead to enough savings (from efficiency gains) to cover children and the uninsured. In less than a decade, however, enroll­ ment swelled far beyond what had been predicted, and the savings proved elusive. The expansion threatened the state government with bankruptcy and, by 2006, the program was forced to cancel cover­age for approximately 200,000 Tennesseans. A high-profile study of Oregon’s Medicaid expansion provides powerful new evidence that expansion increases rather than decreases the use of emergency services; putting it another way, one of the principal arguments in favor of expansion now appears illusory [emphasis added].

The whole book, which is also available in a Kindle edition, is chock-a-block with nuggets like these. Even legislators who don't read bills before they vote on them should read this book.

Cross-posted from Bearing Drift (April 12, 2014).

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