The Campaign Spot

Why It Matters How Many Early Signups Are From Medicaid

Why does it matter that so many of the new Obamacare enrollees came from expanding Medicaid, and not from users’ purchasing plans?

Let’s begin with a quick refresher on Medicaid, as opposed to Medicare, which focuses on the elderly.

Medicaid covers pregnant women, individuals with disabilities, children of low-income households, some of the poorest elderly, and parents meeting specific income thresholds, generally those at or below the federal poverty level — $958 gross income per month for one person, or $1,963 gross income per month for a family of four. (Children above the threshold for Medicaid can qualify for a separate program, the Children’s Health Insurance Program; North Dakota’s CHIP program covers children up to 160 percent of the poverty level, and New York’s goes up to 400 percent of the poverty level.)

States are allowed to impose a usually small copayment on Medicaid recipients for non-emergency care, also determined by income level.

Medicaid is funded partially by the federal government and partially by state governments. The federal government pays for 50 percent to about 75 percent of the costs, more in poorer states, less in wealthier states. According to the Census Bureau, 48.6 million people are covered by Medicaid. In fiscal 2011, the federal government spent $275 billion and the states paid $157 billion.

Obamacare expands Medicaid to households earning 133 percent of the poverty line, but not all states have agreed to the expansion. The states that are reluctant argue that they’ll be on the hook for higher health care costs down the line.

Under Obamacare, the federal government is supposed to cover costs for the new enrollees until 2020, when states are to begin paying 10 percent of the cost. (Some governors are wary that the federal government will alter the terms of the deal as budgetary pressures grow.) The states have good reason to fear that the costs of the expansion will grow rapidly. As Medicaid’s actuarial report lays out:

Following the expiration of temporary increases in the Federal matching rate, the States’ share of Medicaid expenditures have grown rapidly over the last 2 years — nearly 40 percent — and the States have acted to reduce provider payment rates and/or optional benefits. Their actions had a substantial impact in 2012 and emphasize the difficulty in balancing Medicaid against other government programs in the context of States’ budgets. . . . Aggregate Medicaid costs will increase significantly as a result of these changes to eligibility criteria, due to the very large number of additional enrollees starting in 2014.

The basic problem with expanding Medicaid is the same as other entitlement programs: Too much money is going out, and not enough money coming in. The difference is that there is no Medicaid “trust fund,” as people believe with Social Security. The “payroll tax,” or FICA, pays for Social Security and Medicare, not Medicaid.

Expanding Medicaid from 100 percent of the poverty level to 133 percent of the poverty level will be welcomed by individuals making $1,275 per month or families of four making $2,611 per month, and let’s stipulate that those folks are having trouble getting by. Expanding the program’s coverage from the very poor to the slightly-less-very poor will stir warm, fuzzy feelings in the lawmakers who voted for it. The problem, of course, is paying for it. States have a hard time covering Medicaid costs as is, never mind an expanded program, and of course, the federal government isn’t swimming in money, either — $17 trillion debt, $670 billion deficit this year, the fifth-worst when adjusted for inflation — behind 2009 through 2012.

There were a lot of folks out there who qualified for Medicaid but who weren’t enrolled; under Obamacare in some states, they’re almost automatically enrolled. (In Oregon, the state sent out notices to about 260,000 people who already receive public benefits to notify them they qualified, requiring them only to call a phone number or return a form to the state.)

In Maryland, 82,473 of the 84,866 “new” enrollees came from the Medicaid expansion. In Oregon, 56,000 have signed up for the Medicaid expansion, and zero have bought private insurance through the exchanges. In Washington, 30,000 of the 35,000 who have signed up through the state’s exchange, are doing so through the expansion of Medicaid, not purchasing an insurance plan for themselves.

Some will see this as a good thing, as people start getting coverage they were legally entitled to but hadn’t taken action to enjoy (to the extent you can “enjoy” health coverage). But the folks who qualified for Medicaid but who weren’t collecting its benefits were kind of like the “young invincibles” — i.e., not taking anything out of an already strained system.

States and the federal government are counting the new Medicaid recipients in their figures of people using the exchanges, but a Medicaid user isn’t paying much in for their treatment — they almost always can’t afford to pay much. Counting these new additions in the total is a bit of spin to make Obamacare appear more popular than it is. As emphasized repeatedly, Obamacare absolutely requires young people to purchase plans that they pay for through premiums (and through copays and deductibles).

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