Medicaid and the Middle Class

by Benjamin Zycher

Recent reports tell us that an obscure provision of the health-care rationing reform legislation will allow up to three million early retirees with incomes up to $64,000 to obtain health coverage under Medicaid. This purportedly might cost $450 billion in terms of federal outlays (an understatement of true economic costs for the economy as a whole). 

I think that this cost estimate is dubious, but not for the usual reasons. No one joins Medicaid unless that is the only feasible option: Reimbursements for doctors and hospitals are so low that Medicaid beneficiaries are finding it difficult to obtain actual health care. (So much for the mindless claim that “universal coverage” will bestow the blessing of modern health care upon the poor and relieve the pressures on the emergency rooms.) And that is one of the central conservative/libertarian arguments against centralization of health coverage in the Beltway: “Cost savings” inevitably will be defined as reductions in federal outlays rather than the medical services no longer obtained because of explicit or implicit rationing.

Accordingly: Those arguing that the “cost” (increased federal outlays) associated with this hidden provision in Obamacare will be high not only are likely to be incorrect (because the middle class is unlikely to opt for Medicaid in large numbers), but also are undercutting one of the central arguments in support of repeal. Not a wise stance to take.

— Benjamin Zycher is a senior fellow at the Pacific Research Institute.


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