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Resisting the Wave of Medicaid Expansion

Paragon Newsletter
President at Paragon Health Institute
Brian Blase, Ph.D., is the President of Paragon Health Institute. Brian was Special Assistant to the President for Economic Policy at the White House’s National Economic Council (NEC) from 2017-2019, where he coordinated the development and execution of numerous health policies and advised the President, NEC director, and senior officials. After leaving the White House, Brian founded Blase Policy Strategies and serves as its CEO.

Paragon has released a new study, Resisting the Wave of Medicaid Expansion: Why Florida Is Right, that I authored with Drew Gonshorowski. The study utilized estimates from Milliman on the coverage and spending effect if Florida expands Medicaid and applied key lessons from states that have adopted the Affordable Care Act’s expansion.

Yesterday, The Wall Street Journal published my op-ed on the study. Below are the key takeaways if Florida were to expand Medicaid.

Enrollment would skyrocket, leading to massive public welfare growth and fewer workers per enrollee.

  • Between 2.1 and 2.6 million people would be added to Medicaid by 2029, raising total state Medicaid enrollment by between 47% and 60%.
  • Approximately 30% of Floridians would be enrolled in Medicaid, up from less than 20% today.
  • There would only be 1.5 Florida workers for every Medicaid recipient, down considerably from 2.5 without expansion.

Spending would skyrocket, leading to significant improper payments, higher federal deficits, and higher state taxes or cuts in other public priorities.

  • Expansion would cost between $123 billion and $176 billion from 2025 to 2033. While most of this cost would increase federal deficits, Florida would bear about 10% of the cost.
  • Medicaid spending as a share of the state budget, inclusive of federal dollars, would increase from 31% to 40% or higher, crowding out other public priorities like education.
  • Absent significant budget cuts elsewhere, the state would need to raise significant additional revenue. If funded by the state sales tax, the tax rate would need to increase from 6.0% to 6.4%.
  • Improper payments would likely rise by billions of dollars each year, and pharmaceutical fraud and abuse would significantly increase.
  • The main economic effect would be a windfall for health insurers managing Medicaid.

Expansion will reduce health care access for traditional Medicaid enrollees and is unlikely to improve population health.

  • Of the people who gain coverage in Medicaid, 65% would replace private coverage, which offers better access to both primary and specialty care.
  • Existing Medicaid enrollees, particularly children and people with disabilities, would have a more difficult time obtaining medical appointments. As I noted in The Journal, “After expansion, Medicaid enrollees were one-third less likely to secure doctor appointments, driving more people into emergency rooms. A Mercatus Center study found that Medicaid spending stagnated for children and people with disabilities and significantly increased for able-bodied working-age adults in expansion states.”
  • Based on other state experiences (expansion states had worse mortality trends from 2014-2017 than non-expansion states), expansion would reallocate health care services away from high-need and vulnerable populations to new enrollees, and overall population health may worsen.

Florida hospitals don’t need to become more dependent on government funding, and expansion would produce significant fiscal risk for the state.

  • Florida hospitals, which have profit margins well above the national median, will become more dependent on government financing and based on other state experiences, may not even benefit.
  • Florida would be very vulnerable to a change in federal Medicaid financing with extra costs exceeding $40 billion over the 2025-2033 period if the enhanced federal reimbursement rate for the expansion population is reduced to the standard Medicaid reimbursement.

I elaborated on this last point in The Journal:

Part of a state’s calculus should be how vulnerable it would be to a change in federal Medicaid financing that lowers the ObamaCare reimbursement rate to the traditional enrollee rate, which is 30 percentage points lower for Florida. This policy change passed the House in 2017 and will undoubtedly be on the table when Washington next pursues deficit reduction. If Florida decides to expand and the enhanced match rate ends, the state’s extra costs will exceed $40 billion over the next decade, according to my estimates. North Carolina’s decision to expand creates fiscal risk for the state exceeding $10 billion over the next decade.

Here is the conclusion of the op-ed.

Leaders in 10 states have kept Medicaid a priority for those who most need it, and saved Americans from higher taxes that don’t improve health. That is the correct approach—and a courageous one, given enormous pressure from the healthcare industry and the left to expand the program.

All the best,

Brian Blase
President
Paragon Health Institute

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