Health Care

Ray Carter | June 13, 2019

Will state spend millions to insure the already insured?

Ray Carter

While supporters of Medicaid expansion tout it as a way to provide insurance to the needy, recent research and the experience of Louisiana suggests expansion would also involve Oklahoma government spending millions to provide taxpayer-funded coverage to people who already have private insurance.

“When you look at the actual data, I think you can make a pretty strong argument here that Medicaid expansion—largely, overwhelmingly, in some sense a majority of this—is not for people that are uninsured,” said Nic Horton, research director for the Foundation for Government Accountability. “It’s for people that already have insurance.”

report released in April by the Foundation for Government Accountability found that, based on Census data, “most potentially eligible adults in the remaining non-expansion states are adults who either already have private health insurance or are eligible for coverage through the ObamaCare exchange.”

The report concluded that nearly 54 percent of potential Medicaid expansion enrollees already have private coverage, and another 12 percent already have access to insurance through Obamacare exchanges, where purchases are heavily subsidized by the federal government.

“Millions of able-bodied adults could be shifted out of private insurance and into Medicaid if remaining non-expansion states expanded,” the report said.

In Oklahoma, the report found 60 percent of people who could be covered by Medicaid expansion already have private insurance or have the ability to obtain insurance with federal subsidies through a federal exchange. The report found 46 percent of Oklahomans who would be eligible for Medicaid coverage under expansion already have employer-sponsored insurance, and that another 14 percent can obtain private insurance through an Obamacare exchange.

Horton said the FGO examined Census data for expansion-eligible individuals who were 19 to 64 years old, did not have disabilities, and had incomes up to 138 percent of the federal poverty line, “and then drilled down into those numbers.”

The results of that study, he admits, catch many people off guard.

“You definitely get that almost disbelief look from folks when they hear this, because this isn’t a story that’s being told,” Horton said.

But the experience of Louisiana bolsters FGA’s conclusions.

report released this year by the Pelican Institute for Public Policy in Louisiana found that, based on Louisiana Department of Health (LDH) data, “several thousand individuals per month dropped their existing health coverage to enroll in Medicaid expansion.”

The Pelican Institute report notes that in 2015 Louisiana’s Legislative Fiscal Office assumed that if Louisiana expanded Medicaid, the state would spend between $900 million and $1.3 billion over five years providing Medicaid coverage to individuals who already had health coverage.

Chris Jacobs, a senior fellow at the Pelican Institute for Public Policy and author of the report, said the institute’s estimates show roughly 80,000 people in Louisiana now covered by Medicaid expansion previously had private insurance or the ability to obtain private insurance.

“That’s hundreds of millions of dollars per year to subsidize folks who already have insurance,” Jacobs said. “And that’s just one state like Louisiana.”

In Louisiana, the Pelican Institute report notes, state records show 13,955 individuals enrolled in Medicaid in August 2017 and 4,957 enrollees had dropped private coverage in the prior 30 days. That means up to 35.5 percent of enrollees simply shifted from private coverage to taxpayer-funded coverage.

Although it received little attention at the time, a 2013 Leavitt Partners report conducted for the Oklahoma Health Care Authority conceded that Medicaid expansion would involve the substitution of taxpayer-funded coverage for tens of thousands of Oklahomans who already have private coverage.

“Past work, based on survey data, has estimated the percent of those who substitute private for public insurance to range from 3 percent to 14 percent,” the Leavitt report stated. “For this analysis an estimate of 10 percent is used ...”

Overall, that report estimated “that approximately 628,000 adults will be eligible” for Medicaid expansion in Oklahoma.

Rep. Mark Lepak, R-Claremore, said people substituting taxpayer-funded coverage for previous private policies, referred to as “crowd out,” is “one of many” concerns he has about Medicaid expansion.

“When you say ‘crowd out’ and you’re talking about people who have private insurance that leave and go to take advantage of Medicaid when it’s available, that affects the people who are left behind too,” Lepak said.

The more people who enroll in private plans, the bigger the risk pool and lower the premiums. But when people leave private plans for taxpayer-funded coverage, Lepak noted it reduces the size of the remaining risk pools for private plans, which impacts rates.

“If they’re healthy single adults who are moving, then it’s going to drive your private insurance rates up,” Lepak said, “because that’s the population that doesn’t have a whole lot of health needs.”

Senate Majority Floor Leader Kim David, R-Porter, said the “crowd out” issue has “absolutely” been part of the discussion at the Capitol, saying the issue is one of several “you have to watch out for with Medicaid expansion.”

“By putting able-bodied, working adults on there, you really stretch the dollars for your aged, blind, and disabled,” David said. “You’ve got that big number of people that are on the exchange that are going to jump over.”

She said another group that already has access to health care that would be added to Medicaid rolls are those who obtain treatment at federal qualified health care centers. Patients at those centers pay a sliding-scale fee tied to income. While many of those patients may not have insurance, they have been receiving health care treatment, and those centers already receive an enhanced reimbursement rate to offset the cost of treating those patients.

Rep. Terry O’Donnell, R-Catoosa, also noted that money diverted from other needs to provide taxpayer-funded coverage to the already insured can have indirect but negative impacts.

“You start spending money on those people and you neglect people on the other end of the spectrum, like folks with developmental disabilities,” O’Donnell said.

While the issue has received relatively little attention, the “crowd out” problem is not a new development.

The FGA report notes that prior research by economist Jonathan Gruber, an architect of the Affordable Care Act, “concluded that Medicaid expansions in the late 1990s and early 2000s produced a crowd-out effect of roughly 60 percent. That means that for every ten new Medicaid enrollees, six left private insurance plans.”

“You want to try to minimize that,” O’Donnell said. “You’re looking to provide a safety net for people that really just can’t afford any coverage at all, but you’re going to get some people that use that as their option as opposed to a safety net.”

Jacobs said Oklahoma lawmakers have an easy way to avoid wasting millions to insure the already-insured.

“In Oklahoma, the answer is simple: Don’t expand Medicaid,” Jacobs said.

Horton said the emotional appeal of Medicaid expansion disappears when people learn millions of taxpayer dollars will be effectively wasted to duplicate existing insurance coverage.

“Taxpayers in general, I’ve found, are pretty generous,” Horton said. “They want to help the truly needy. They want to help folks that truly need help. But when you’re talking about really just an open-ended welfare program for not only people that are able-bodied and working age that should be working, but then you go even further and say, ‘Well, actually two out of three of these people already have or have access to private insurance,’ that’s a step too far for a lot of people.”

Ray Carter Director, Center for Independent Journalism

Ray Carter

Director, Center for Independent Journalism

Ray Carter is the director of OCPA’s Center for Independent Journalism. He has two decades of experience in journalism and communications. He previously served as senior Capitol reporter for The Journal Record, media director for the Oklahoma House of Representatives, and chief editorial writer at The Oklahoman. As a reporter for The Journal Record, Carter received 12 Carl Rogan Awards in four years—including awards for investigative reporting, general news reporting, feature writing, spot news reporting, business reporting, and sports reporting. While at The Oklahoman, he was the recipient of several awards, including first place in the editorial writing category of the Associated Press/Oklahoma News Executives Carl Rogan Memorial News Excellence Competition for an editorial on the history of racism in the Oklahoma legislature.

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