A new study, The Impact of Medicaid Expansion, released Tuesday shows that, contrary to what Wisconsin Democrats have been saying, accepting the federal funding to expand Medicaid would actually cost the state and Wisconsin families more in the long run.
The study, conducted by the Center for Research on the Wisconsin Economy (CROWE) at the University of Wisconsin-Madison’s economics department and the Wisconsin Institute for Law & Liberty (WILL), shows that overall private medical spending would actually go up $1.1 billion, with a net loss in benefit to the state of $600.3 million in 2020 if the state accepted Obamacare federal funding to increase Medicaid coverage.
“The net costs are substantial and the solution to containing health costs and expanding access for medical care for all is not to move people from private insurance onto government-run insurance,” said CROWE Director Noah Williams at a press conference in the Capitol on Tuesday. “But instead to provide more flexibility, to provide deregulation, to provide more variety in the private market, which will lead to transparency, incentivize people to control costs and to lower overall expenditures.”
Currently, the state-run Medicaid program Badger Care Plus covers everyone under the federal poverty line. Above that line, Wisconsinites can seek insurance on the federal Obamacare health insurance exchange, receiving subsidies for that insurance depending on income levels. According to the Kaiser Foundation, Wisconsin does not have an “insurance gap,” meaning that the non-partisan organization believes that Wisconsinites in every income bracket has access to health insurance, either private (through an employer or through the exchange) or public (Medicaid and Medicare).
Under Obamacare, states can opt to accept increased federal funding to expand Medicaid coverage to 138 percent of the federal poverty line. Republicans have been opposed to this expansion, pointing to potential costs and a possible increase in the state’s share of the financial burden for the expansion given the national debt of $22 trillion and annual federal budget deficits approaching $1 trillion.
Now new data from WILL and CROWE shows additional costs to Wisconsinites through increased insurance premiums and higher medical care costs if the state accepts the federal funding for expanding Medicaid coverage.
The study compared data from states that took the Obamacare Medicaid expansion funding with those states that did not. Controlling for other factors, the study found that private sector healthcare costs rose by $177 per person annually. Wisconsin would move from having the 7th highest healthcare costs in the nation to the 4th highest.
“One commonly cited reason for potential increases is the crowding out of private insurers,” according to the study. “Crowding out occurs when individuals in states that expand Medicaid drop private insurance to utilize the new entitlement. This can be because individuals, rationally, drop insurance that they are paying for directly in favor of newly available free Medicaid, or because employers drop insurance knowing that their employees can now be covered at no direct cost to them.”
Wisconsin is especially vulnerable because of the comparatively high rate of adults who are insured and the lack of a health insurance coverage gap. Wisconsin is currently ranked 9th in the nation for insurance coverage of adults, highest of those states that did not participate in the Obamacare Medicaid expansion, with an uninsured rate for adults of just 5.88 percent.
Another reason private insurance rates will go up with Medicaid expansion is the lower reimbursement rates for Medicaid patients.
“Because Medicaid fee-for-service rates generally lag behind those negotiated with private insurers, these costs are generally passed on the private sector consumers,” the study said. “Thus increases in public health insurance enrollment through Medicaid expansion are likely to lead to increased costs for individuals and families who remain with private insurance.”
In addition, increased Medicaid coverage would also result in more emergency room visits, contrary to what Medicaid expansion supporters claim. In states that expanded their Medicaid programs, emergency room visits increased “by about 9 per 1000 residents,” according to the study.
Four Republican legislators were at Tuesday’s press conference to thank WILL and CROWE for the study showing the increased costs to Wisconsin if Medicaid is expanded: Sen. David Craig (R-Big Bend), Sen. Chris Kapenga (R-Delafield), Sen. Duey Stroebel (R-Cedarburg) and Rep. Joe Sanfelippo (R-New Berlin).
“I’m thrilled that WILL took the time and effort to take an analytical approach to what is going on in this state and what the potential impact of the Medicaid expansion is,” said Stroebel. “For so long we just heard numbers thrown around. Hey, everybody wants federal money, right? That’s what it’s all about. As we found more and more and more, strings that come with federal money often make it not worth it and here we’ve got very credible analysis that really points that out very clearly to us.”
Sanfelippo said proponents of taking the federal money are looking at a solution in search of a problem since Wisconsin does not have an insurance coverage gap.
“You have a group of people who want the money that comes along with it,” Sanfelippo said at the press conference. “They’re addicted to spending. They want to feed that spending addiction at the expense of the health of the citizens of our state and I don’t think that we are going to stand for it.”
Kapenga said he appreciated the study because, “you can’t argue with the numbers.”
“I look at the significant cost shift, which we knew was there, but now we can actually put some numbers around it.This significant cost shift that takes place to private citizens,” Kapenga said. “And one of the number one things that we hear from constituents, and it doesn’t matter what district that you’re from, is that the cost of health care continues to go up. What are you going to do about it?”
Kapenga said he always refers those constituents back to the cost increases since the implementation of Obamacare.
“And what WILL proved out in their study is, listen, this is going to shift over to the regular citizens, the people that are out there working,” Kapenga said. “This is going to cost them and increase what they’re already struggling to pay.”
Craig said that proponents of an expanded role of the government in health care have been proven wrong over and over.
“We have to realize that as the government continues to involve itself more and more in healthcare that Reagan’s old adage that as government expands, liberty contracts, will continue to be be truer and truer as time goes on,” Craig said. “The idea that government decreasing in any way, shape or form, the cost curve in health care is now firmly laughable.”
Democrats have been calling for Wisconsin to accept the Obamacare federal funds to expand Medicaid coverage, pointing to the 90 percent reimbursement rate from the federal government. The Democrats have been relying on a Legislative Fiscal Bureau (LFB) memo that claimed Wisconsin would have had general purpose revenue savings in the state budget of $1.07 billion through the 2021 fiscal year.
However, that amount does not include the amount that would have to collected in federal taxes to cover the increase in federal spending. According to the same LFB memo, there would have been $1.15 billion in increased federal spending over the next budget cycle, compared to just $392 million in “savings,” for a net loss to taxpayers of $761.8 million. Over the entire LFB projection, Wisconsin would have had a net loss of $1.59 billion. (The study by CROWE and WILL did not address the increased costs to the federal government.)
The study’s results and past cost estimates have not stopped leftist special interest groups from pushing for Medicaid expansion in Wisconsin. In response to the study by CROWE and WILL, the leftwing Citizen Action of Wisconsin announced in an email to supporters that they have eight events scheduled around the state to organize activists to promote the expansion of Medicaid in Wisconsin.