This week, another study came out on the potential cost or benefit of Medicaid expansion to Wisconsin from two economists at the University of Wisconsin. Along with providing their own model that suggested expansion would lead to savings, the paper offers a critique of a paper that I coauthored earlier this year.
While we certainly welcome additional research on this topic, it is worth pointing out some serious flaws in both their new model as well as their attempts to reanalyze the paper by the Wisconsin Institute for Law & Liberty (WILL).
The new paper attempts to estimate the costs of expansion starting with at least two questionable assumptions—the number of enrollees and the fraction of those new enrollees that will generate costs. The paper assumes that only 76,000 people will take up Medicaid under expanded eligibility.
As we noted in our previous response to biased coverage in the Milwaukee Journal Sentinel, this is likely a low-end estimate. The Robert Wood Johnson Foundation—hardly a right wing source—estimated that there would be about 176,000 new Medicaid enrollees in the state under expansion. Even Governor Tony Evers estimated 82,000. Obviously, using a higher potential enrollment figure—or even a range of potential enrollments—would increase the forecasted expansion cost.
While one could argue about which enrollment to use, the second flaw in their logic makes the new paper almost laughable. They assume that only the fraction of new enrollees who previously had private insurance will generate costs at all. The paper does not offer much justification for this choice, but it appears the underlying assumption is that those who lacked insurance previous to expansion are not forgoing any care due to their lack of insurance, meaning that insuring them is a pure benefit to the state budget.
This is, to put it mildly, absurd. Anyone who has lacked health insurance in their life can tell you that healthcare decisions are put off as long as possible due to the inordinate cost of care, and this is backed up by research from organizations such as the Kaiser Family Foundation. Changing the assumption here can radically alter the extent of projected costs under their model. While there can be legitimate questions about the model we used in our paper, the assumption made on this point is ridiculous enough to render their results meaningless.
The authors offer two new models for the WILL study as well. The first new model better accounts for time trends, and an argument can be made that it represents a viable improvement on the model we presented. But critically, this model still shows an increase in private sector healthcare costs resulting from Medicaid expansion. The second reanalysis finds the opposite result, but whether that model represents an improvement on the one we presented in February is far more debatable (and to a level of wonkiness beyond the scope of this piece).
Increasingly, our findings are backed up by results from states that have taken expansion, including new evidence from Colorado released earlier this week. In that state, healthcare prices have jumped by 60 percent in the years since expansion. The Colorado Hospital Association echoed what we projected, as reported in the Denver Post:
“The association said in a statement that costs continue to be shifted to those on commercial insurance plans, in part because government payers — such as Medicare and Medicaid — pay less than the cost of services provided. And now more Coloradans are covered by Medicaid.”
Sounds familiar, doesn’t it?
It has often been said that “If you’re taking flak, you’re over the target.” I can say for certain that this Medicaid study has been the subject of more criticism than any work that I have previously done in my career.
Liberal proponents of expansion are attempting to muddy the waters and undermine the common sense notion that there is no free lunch, even in healthcare. But we will continue to stand on the side of common sense, and our research.
Dr. Will Flanders is the research director for the Wisconsin Institute for Law & Liberty.