JOHN HOOD COLUMN: Medicaid expansion remains unwise

Published 2:55 pm Monday, October 25, 2021

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North Carolina lawmakers are reportedly considering some form of Medicaid expansion as part of a final budget deal with Gov. Roy Cooper that would also bring tax cuts and other free-market policy gains on key issues.

John Hood

The prospect of such a deal disappoints me. But it doesn’t shock me. Washington Democrats intent on expanding government’s role in funding and regulating medical care have long had a clear strategy and the tactical acumen to pursue it. Their Republican counterparts have had neither.

When the Obama administration and its congressional allies enacted the Affordable Care Act more than a decade ago, Medicaid expansion was its centerpiece. Yes, the bill also created insurance exchanges. But in projected enrollments and spending, Medicaid expansion was the dominant element.

Even after the U.S. Supreme Court clarified that states couldn’t be compelled to expand Medicaid, progressives believed it would be very difficult for state leaders to resist the temptation. While Medicaid pays for services for needy patients, the actual recipients of the money are powerful institutions such as hospitals and drug companies. Progressives believed these interest groups would lobby hard for expansion every year until they got it.

Progressives were right. Most states, including many with Republican governments, subsequently expanded Medicaid. Now some North Carolina lawmakers want to follow suit.

I understand their motives. Among other things, the Biden administration is threatening to bypass recalcitrant legislatures by expanding Medicaid directly in North Carolina and other holdouts. If expansion is inevitable, the argument goes, why not try to retain some state control over it, and negotiate a deal that advances other conservative causes?

It didn’t have to be this way. Expanding access to medical care for those with low incomes or severe preexisting conditions could have been accomplished in other ways: by reducing barriers to entry for lower-cost providers such as nurse practitioners and walk-in clinics, for example, and by using tax credits or even better-designed insurance exchanges to subsidize coverage without forcing taxpayers to foot so much of the bill.

In 2017-18, Republicans had a chance to do these things while rolling back or at least changing the terms of Medicaid expansion. They controlled Congress and the White House. Unfortunately, neither President Trump nor Republican leaders made these tasks a priority. So here we are.

Expansion remains a bad idea for North Carolina, although some lawmakers are trying to convince themselves otherwise with three rationalizations. First, they claim expansion will be paid for with free federal dollars. In reality, the money will be neither “free” nor collected from some netherworld that is within the United States but not within the states of the union. Virtually all the taxes spent on Medicaid in North Carolina are collected from North Carolinians. The same will be true of Medicaid expansion.

Second, they claim Medicaid expansion will reduce pressure on the state’s emergency departments. No, it won’t. While telling the uninsured they now have “coverage” may lead some to consume services outside of hospitals, others become more likely to visit hospitals. Researchers have studied this question repeatedly since the enactment of the ACA. Most studies find either no net change or an increase in ED admissions after Medicaid expansion. A 2017 paper in the journal Annals of Emergency Medicine found that “total ED use per 1,000 population increased by 2.5 visits more in Medicaid expansion states than in non-expansion states.”

Third, rationalizers make the related claim that Medicaid expansion leads to better management of costly and debilitating diseases. There is conflicting evidence on this question, but at least when it comes to diabetes and asthma a new study posted by the National Bureau of Economic Research found no measurement improvement.

Conservatives should continue to resist expansions of our already gargantuan welfare state. And if they ever regain power in Washington, they should make it a priority this time to pursue practical reforms to reduce its deleterious effects on work, growth, and personal responsibility. That’s the only sustainable way out of this mess.

John Hood is a John Locke Foundation board member and author.