Debunking the Government’s Pro-Medicaid Report

Louisiana’s Medicaid expansion helped far too few people obtain good, affordable health coverage and actually cost Louisiana desperately needed jobs. But a taxpayer-funded report released by the Louisiana Department of Health on April 10 claims that the state’s Medicaid expansion – by opening the program to able-bodied adults – will generate billions of dollars in economic activity and thousands of jobs. The report’s flawed perspective cannot mask the state’s poor track record at growing the economy and jobs the past few years – an environment which current proposals for tax increases would only further undermine.

I. The Louisiana Department of Health’s report is factually inaccurate. The Louisiana Department of Health’s pro-Medicaid report discusses “net federal money” gained from the state’s Medicaid expansion, but in reality, it only looks at Medicaid-specific dollars. This perspective ignores the fact that people were dropping Obamacare Exchange coverage to enroll in the Medicaid expansion – and losing federal subsidy dollars in the process.

Over the past two years, subsidized enrollment on Louisiana’s health insurance Exchange has fallen nearly in half—from 170,806 in March 2016 to 93,865 earlier this year. The dramatic drop in enrollment illustrates that many individuals qualified for federal Exchange subsidies prior to expansion taking effect, and then switched to Medicaid.

The report’s discussion of “net new federal dollars” inaccurately ignores the substantial funding in federal Exchange subsidies that at least some expansion enrollees gave up by enrolling in Medicaid. In 2012, CBO noted that, for similarly situated low-income individuals, Exchange subsidies would average about $9,000 per year, but Medicaid coverage would cost $6,000. For those individuals who would have qualified for discounted Exchange policies, their Medicaid coverage may have actually cost Louisiana additional federal dollars – and jobs – because Medicaid could cost less than federal insurance subsidies.

Moreover, the Legislative Fiscal Office in 2015 assumed that approximately 20 percent of the enrollees in expansion would give up other private coverage to enroll in Medicaid. If Medicaid enrollees dropped employer-sponsored coverage to enroll in expansion, the supposedly “new” federal subsidy dollars would instead supplant existing coverage subsidies provided by the employer. The report does not acknowledge this trade-off.

II. Money doesn’t grow on trees – and tax hikes caused by Medicaid expansion actually cost Louisiana jobs. The report only examines federal spending on Medicaid, and not the tax increases used to finance that federal spending. Those tax increases cause job losses, but the report makes no attempt to count them. However, as others have noted, Christina Romer, one of former President Barack Obama’s chief economic advisers, believes that, on an economic impact basis, tax increases used to fund federal spending far outweigh that federal spending.

III. Medicaid creates a disincentive for work. The Congressional Budget Office concluded that Obamacare would, as a whole, reduce the workforce by the equivalent of 2.5 million jobs; Medicaid expansion provides some of the reason for that net job reduction. CBO analysts note that, because an extra dollar of income would cause individuals to lose Medicaid eligibility – subjecting them to sizable premiums and deductibles for Exchange coverage – expansion “effectively creates a tax on additional earnings” that “reduces the incentive to work.”

IV. Health care is not a jobs program. Those words come from none other than Zeke Emanuel, a former White House adviser who helped craft Obamacare. In a 2013 article in The New York Times, Emanuel noted that “the more we can control health care costs, the more Americans will prosper.” Other researchers from Harvard University have made the same point: “It is tempting to think that rising health care employment is a boon, but if the same outcomes can be achieved with lower employment and fewer resources, that leaves extra money to devote to other important public and private priorities.”

Taking the Governor’s report to its logical conclusion, to maximize the generous federal match rate for Medicaid expansion, Louisiana should, for instance, start paying doctors $5,000 for a simple office visit. That added Medicaid spending would create even more jobs and economic growth—as would a government program paying individuals to dig ditches and fill them in again. But, as the Harvard researchers note, neither approach would represent the most efficient use of taxpayer resources. And the report makes little attempt to argue that Medicaid expansion represents the best and most efficient source of economic activity.

V. Asking Washington for more funding isn’t a solution. The report argues for more reliance on federal dollars to support Louisiana, even though, according to the Pew Charitable Trusts, the state budget remains the most dependent on spending from Washington. As of 2015 – even before Medicaid expansion took effect in Louisiana – fully 42.2 percent of the state budget came from Washington. With the federal government facing a $21 trillion (and rising) debt, making Louisiana even more dependent on Washington’s largesse represents a recipe for fiscal ruin.

VI. If Medicaid is a job creator, why is Louisiana still down jobs year over year? If Medicaid expansion has created so many jobs, why has Louisiana lost a net of 200 jobs in the past year? According to the most recent Bureau of Labor Statistics data, the Louisiana workforce shrank from February 2017 to February 2018. With a shrinking workforce, the second-lowest economic growth rate in the country, and the largest decrease in incomes nationwide in 2016, if Louisiana receives any more “prosperity” from Medicaid expansion, the current malaise in the state could turn into a full-fledged economic crisis.

Conclusion

At a time when Louisiana faces its own “fiscal cliff,” the Department of Health should have better things to do with taxpayers’ hard-earned dollars than commission what amounts to a misleading propaganda campaign claiming that more government can grow Louisiana’s economy. Rather than spending time growing the public sector, policy-makers should instead focus on giving businesses the tools they need to create jobs in the private sector.

This post was originally published by the Pelican Institute.

House “Doc Fix” Bill Makes Things Worse, Medicare Analysis Finds

Proponents of the “doc fix” legislation the House passed before Congress’s Easter recess have argued that it would permanently solve the perennial issue of physician reimbursements in Medicare. But an analysis by Medicare’s nonpartisan actuary all but cautions: “Not so fast, my friends!

The estimate of the legislation’s long-term impacts by Medicare’s chief actuary is sober reading. The legislation provides for a bonus pool that physicians can qualify for over the next 10 years but applies only in 2019 to 2024. The budgetary “out-years” provide for minimal increases in reimbursement rates. Beginning in 2026, physicians would receive a 0.75 percent annual increase if they participate in some alternative payment models or a 0.25 percent annual increase if they do not. Both are significantly lower than the normal rate of inflation.

Such paltry increases could have daunting effects over time. “We anticipate that payment rates under [the House-passed bill] would be lower than scheduled under the current SGR [sustainable growth rate formula] by 2048 and would continue to worsen thereafter,” the report said. By the end of the 75-year projection, physician reimbursements under the House-passed bill would be 30% lower than under the SGR. Critics have called the current system unsustainable, but over time the House bill’s “fix” would result in something worse.

The actuary said that the inadequacies of the House-proposed payment increases “in years when levels of inflation are higher.” Under the House-passed bill, physicians would receive a 2.3% increase in reimbursements over a three-year period. According to the Bureau of Labor Statistics, the inflation rate was 11.3% in 1979, 13.5% in 1980, and 10.3% in 1981. If high inflation returned, doctors could effectively receive a pay cut after inflation.

While physician groups are clamoring to avoid the 21% cut that would take effect this month if some sort of “doc fix” is not enacted, the House’s “solution” could result in larger real-term cuts in future years. Medicare’s chief actuary explains the results of these reimbursement changes over time:

While [the House-passed bill] addresses the near-term concerns of the SGR system, the issues of inadequate physician payment rates are ultimately greater….[T]here would be reason to expect that access to physicians’ services for Medicare beneficiaries would be severely compromised, particularly considering that physicians are less dependent on Medicare revenue than are other providers, such as hospitals and skilled nursing facilities.

In sum, “we expect that access to, and quality of, physicians’ services would deteriorate over time for beneficiaries.”

The House “doc fix” legislation involved increasing the deficit by $141 billion, purportedly to solve the flaws in Medicare’s physician reimbursement system. But Medicare’s actuary thinks this legislation will make the long-term problem worse. When will Congress figure out that if you’re in a fiscal hole, it’s best to stop digging?

This post was originally published at the Wall Street Journal Think Tank blog.