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Hidden costs related to the expansion of Medicaid will likely strain, and perhaps bankrupt, states, according to Devon Herrick a senior fellow with the National Center for Policy Analysis, a conservative think tank.
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The Patient Protection and Affordable Care Act (PPACA), which was signed into law by President Obama in March of this year as part of his overall health care reform program, is expected to add up to 16 million more Medicaid enrollees and significantly expand eligibility for families with incomes up to 133 percent of the federal poverty level.
The new law, which has various provisions that will take effect over the next four years, requires states to streamline their enrollment process, thereby making it easier for eligible populations to enroll and retain Medicaid coverage.
Initially, Herrick said, the federal government will pay 100 percent of the cost of the newly eligible, newly enrolled populations and 95 percent of costs through 2019.
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“However, there are hidden costs that will strain state budgets,” he asserts.
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Herrick cites four major problems with Medicaid expansion: the cost of enrolling the already eligible; low Medicare provider payments; and lower payment to safety net hospitals.
According to various estimates, there are about 10 million to 13 million uninsured people who are already eligible for Medicaid, but not yet enrolled.
“When the individual mandate to obtain health coverage takes effect in 2014, many of the uninsured are likely to be swept up in outreach efforts,” Herrick states.
“Although the cost of enrolling newly eligible individuals will be paid by the federal government, the cost of covering those previously eligible for Medicaid must be paid for under the current federal matching formula. Many states will find the cost of their Medicaid programs higher as a result.”
For example, Herrick cites that ten years after the PPACA's implementation, the Texas Department of Health and Human Services predicts that the state's Medicaid rolls will climb by 2.4 million people. Of those, only 1.5 million enrollees will be newly eligible. About 824,000 people will be those previously eligible but not enrolled.
“The federal government will contribute a much smaller share of the cost of these previously eligible enrollees compared to newly eligible enrollees,” Herrick writes.
Moreover, he adds, on average, reimbursements for Medicaid providers are only about 59 percent of what a private insurer would pay for the same service, although it varies from state-to-state.
For instance, the state of New York pays primary care physicians only about 29 percent of what private insurers pay for primary care. The comparable figure in New Jersey is 33 percent.
California pays primary care providers 38 percent of what private insurers pay. Texas reimburses primary care physicians for about 55 percent of what private insures pay.
