Fact Check: Medicaid Expansion still a fiscal disaster

June 6, 2018

Ellen Weaver

Former President & CEO

Medicaid expansion is back in the news.

As Democrats worked to ram Obamacare through Congress in 2010, hospitals— in what they themselves called a “grand bargain”—paved the way for ACA passage by agreeing to absorb cuts in their Disproportionate Share hospital (DSH) payments in exchange for helping Congress force states to expand Medicaid to able-bodied, working age adults. The rub: the Supreme Court then ruled that Washington did not have the power to force states to do any such thing.

A furious round of debates ensued in Columbia and state capitals around the country: to expand or not to expand?

At the time we warned in our 2013 policy brief Unaffordable Care, that healthcare was outpacing education spending in the Palmetto State and if South Carolina expanded to able-bodied adults, even the state match for the program could in short order wreak havoc on the state budget.

Thankfully, Governor Haley and Statehouse leaders stood up to tough pressure from Washington and the hospital lobby and didn’t take the fool’s gold. And sadly, time has proven us right. States that chose to expand saw their rolls expand far beyond early estimates. For example, California predicted a maximum enrollment of 910,000, but by May 2016, enrollment had more than quadrupled prior maximum projections, reaching 3,842,200. Ohio predicted a maximum enrollment of 447,000 and got 714,595. In the South, West Virginia predicted a maximum enrollment of 95,000 and hit 174,999.

Now, Republicans in another state—Virginia—have caved. And a leading South Carolina gubernatorial candidate is extolling the “free money” of Medicaid expansion, claiming that we’ve “lost” $7 billion in federal money to help rural hospitals and “take care of our kids and seniors.”

A few key facts to remember:

  • Medicaid already covers the elderly, disabled and children. Seniors also have access to Medicare. Obamacare’s Medicaid expansion is solely for able-bodied, working age, childless adults.
  • Because states receive higher reimbursement for expansion populations, Medicaid expansion incentivizes states to discriminate against the most vulnerable.
  • Rural hospitals have received additional support in recent state appropriations bills, and federal Medicaid funds do not flow directly to rural hospitals without strings attached.
  • As for the $7 billion in “lost” money, those are funds from the federal government that Washington is borrowing to provide to the states. Washington is broke. The federal government does not have that money.
  • While the state matching funds requirement is low today, that rate has not been set for future years. Medicaid expansion could leave the state vulnerable to massive new outlays in state dollars when Washington backs away (as they often do). Washington can deficit spend, South Carolina cannot.
  • Medicaid enrollment (that’s “regular” Medicaid without expansion) is skyrocketing. According to the USC Institute for Families & Society, full benefit enrollees in Medicaid increased from 893,096 (2013) to 1,016,867 (2016). Nearly 25% of South Carolina citizens are currently enrolled in Medicaid. A more complete representation of the role of Medicaid to the state budget can be found here.
  • The ultimate goal of Medicaid expansion is to move us another step closer to Bernie Sanders vision of Medicare for all. The only problem? As Margaret Thatcher wisely said, eventually you run out of other people’s money.

Do we need more—and more affordable—healthcare options in South Carolina? Without doubt. One-size-fits-all Washington mandates have sent insurance and health care costs soaring. But instead of expanding a broken system that is breaking our state budget, let’s expand and protect innovations like Direct Primary Care and reform and refocus Medicaid on the truly vulnerable populations it was created to serve: children, seniors and the disabled.