The myth of 'free' Medicaid expansion

Advocates of a proposed major expansion of Missouri's Medicaid program say it can be done at little or no cost to taxpayers. They are wrong.

How do you pull the wool over taxpayers' eyes and make a financial obligation totaling more than $2 billion disappear from sight?

Well, you could try the hidden ball trick. A college softball team used this ruse in advancing to the 2019 Women's College World Series. Keeping the ball in her glove, the pitcher faked a quick pickoff throw to second base. When the runner dove back to the bag, the infielders acted as if her throw had squirted into the outfield. When the runner then tried to advance, the pitcher ran over and tagged her for the game-winning out.

In promoting the idea of a cost-free expansion of Missouri's Medicaid program, the Missouri Budget Project, the Missouri Hospital Association, and others are using a similar (and equally spectacular) misdirection play to gain public support for a policy initiative that would be neither cheap nor free.

At $10.9 billion, Medicaid already accounts for 39.6 percent of Missouri's 2019 budget. That's more than education, prisons, public safety, or roads. It's the most for any service funded in part or total by Missouri taxpayers.

So how can Missouri boost the number of Medicaid participants from 850,000 to more than a million people -- and save money? It can't. If we increase Medicaid enrollment more than quarter, there has to be a similar increase in costs -- something on the order of $2 billion a year.

The hidden ball here is to treat the federal contribution in this joint state-federal program as "free money" -- a no-cost gift from Uncle Sam to the Show-Me State. But the money is not free. Like the residents of other states, Missourians are on the hook for federal Medicaid obligations, no less than state Medicaid obligations. They will pay the final bill either way -- through state and federal taxes.

Under the Affordable Care Act, the federal government set out to expand Medicaid to include people earning up to 138 percent of federally defined poverty level.

As originally written, this legislation would have required states to comply with the planned expansion of Medicaid or face the loss of all federal matching funds, split roughly on a $3-to-$2 basis between the federal government and the states. The Supreme Court struck down that part of the law in 2012. The Obama administration then agreed to a $9-to-$1 split in favor of the states if they opted to participate in the expansion. What had been a "gun to the head" (as Chief Justice John Roberts wrote) suddenly became a mouthwatering carrot.

Thirty seven states have opted for Medicaid expansion. If Missouri were to join them, it would still need to put up 10 percent of the cost. Citing a Washington University study, Medicaid expansionists think they have found a way to make even that cost disappear. But this is just one more example of cost-shifting as opposed to cost reduction.

According to the study, Missouri could re-enroll existing recipients currently classified as permanently and total disabled (PTD) based on income, rather than disability. That would trigger the new $9-to-$1 federal match -- meaning more federal funds for the same people.

But there is a problem: This maneuver appears to be against the law. So the federal Office of Inspector General said in a recent audit of New York state when it tried to do same thing.

Over the last two decades, Medicaid has been a rapidly rising cost at both the state and national levels. But it remains a deeply troubled program that is not succeeding in its basic mission of providing ready access to high-quality health care for low-income families and individuals.

When it comes to promoting needed change in health care, using feel-good, sleight-of-hand accounting to promote a false idea of something-for-nothing benefits is a step backward, not forward.

Andrew Wilson is the resident fellow and senior writer at the Show-Me Institute.