The Medicaid crowd-out problem

Yesterday, I wrote about how a Medicaid expansion would harm the most vulnerable Nevadans-the very people the program supposedly was intended to benefit.

That's because the network of Medicaid providers is already over capacity and results in long wait times for patients, with some patients unable to see a doctor until their symptoms become life-threatening and they are forced to visit the emergency room. The case of Deamonte Driver is just one well-known example out of thousands.

Many providers refuse to accept Medicaid because the reimbursement rates are insufficient to compensate for a physician's costs. Hence, Medicaid fits the very definition of health-care rationing: Price controls have led to a shortage of supply and so wait times have formed for appointments with the few providers who still accept Medicaid.

And although the number of providers in the Medicaid network will remain fixed (at best) due to these price controls, Nevada policymakers are considering whether to make an additional 71,000 individuals eligible for the program. That means those already enrolled in the program-the most vulnerable Nevadans, by definition-would face stiffer competition to receive an appointment with a Medicaid provider.

Allow me to provide an example of how this would play out under the proposed expansion. Meet Max: He's a 30-year-old, single, childless, able-bodied man who earns 130 percent of the poverty line. Under the proposed expansion, Max would have a claim to treatment equal to Todd's. But Todd is a 6-year-old handicapped boy whose family subsists at half of the poverty level. After expansion, the medical coverage that would have gone to Todd has an equal chance of going to Max instead.

Mock my example if you like, but this is exactly the type of scenario that will play out under a Medicaid expansion. The question to be asked here is whether the purpose of Medicaid is to provide a safety net or just a handout. Sure, an expansion might buy Max's vote, and Todd can't vote anyway (although his parents might), but is it really ethical to let Max take Todd's claim to medical care? Not only is Max capable of working...he's not even in poverty!

It's not my standard which says he isn't in poverty, it's the federal government's official standard. That's what it means to live at 130 percent of the federal poverty line. I understand that this income level still results in a very modest lifestyle and that the trade-offs one must choose with one's limited resources are substantial. But federal bureaucrats who, I'm continuously assured, are much smarter than I, have determined that Max doesn't live in poverty.

If Medicaid was designed for the poor and disabled then why should it now be taken from the poor and disabled, like Todd, and given to Max?

I'm glad this question is gaining some attention in the media. It should. But, strangely, the Las Vegas Review-Journal's Steve Sebelius argues in favor of Medicaid expansion and, yet, concludes that "Nevada's needy would give thanks for Medicaid." I agree, Nevada's needy would be thankful if policymakers protected Medicaid for them instead of giving it away to the less needy.

Sebelius does at least acknowledge the crowd-out problem, but says "a smart solution here is to make sure reimbursement rates fairly compensate doctors for their care" in order to eliminate Medicaid rationing. Okay. But, to be fair, that option's not even on the table. There aren't enough resources at any level of government to raise the reimbursement rates and expand eligibility. After all, reimbursement rates were cut, over the years, to their current levels as a cost-control measure. And this wasn't just in response to the Great Recession. Policymakers at the state and federal levels have been cutting reimbursement rates for decades, including during periods of strong economic growth.

And taxing the struggling private economy more to finance these objectives isn't realistic either. The magnitude of tax hikes that would be required to finance what Sebelius suggests would be crippling. Public agencies will always be constrained by limited resources just like everyone else on Earth. Their decisions must reflect priorities about how those resources will be deployed-will it be in favor of Max or Todd?

The only method that's been suggested, to date, for expanding the network of providers who accept Medicaid and alleviating Medicaid-rationing while also controlling costs, is the creation of Health Opportunity Accounts-an NPRI recommendation that's strangely derided by Sebelius.

Anyone who truly cares for the less fortunate in Nevada should be crowing about HOAs and downplaying eligibility expansion.

BONUS: Sebelius mentions a Harvard study that says Medicaid expansion leads to lower mortality. But, of the three case studies considered in that study, Nevada is specifically included and the study concludes that there is no impact on mortality rates in Nevada. The study's central finding is predicated an a single observation between New York and Pennsylvania. Read the full debunking here.

blog comments powered by Disqus