I recently testified before the Indiana State Government in support of the Medicaid expansion. My wife even brought my daughter, so she could see how government works. I thought I’d post my testimony as prepared.
The Affordable Care Act seeks to reduce uninsurance in two ways. The first is to send people with incomes above 138% of the federal poverty line to the health insurance exchanges to buy private insurance. This will cover about half of the 30 million or so people who will newly obtain insurance in 2014. The other half, though, those in families making less than 138% of the FPL, are expected to get Medicaid.
Or they will if their states agree to expand the program. As you know, with the Supreme Court’s ruling last summer, the expansion is optional. I’d like to talk to you today about why you should expand Medicaid in Indiana.
First of all, Medicaid is good for health. Let’s start with a simple truth: having health insurance is better than not having health insurance. Not only is health insurance good for health, but it actually saves lives. Medicaid is, of course, health insurance. Therefore, it comes as no surprise that studies show Medicaid improves health. Now some people have garnered a lot of attention by claiming that Medicaid actually hurts people. They’re citing studies that show correlation, not causation. Medicaid doesn’t cause bad health; people who qualify for Medicaid are more likely to have bad health for other reasons. There’s a huge randomized controlled trial of Medicaid going on in Oregon right now, and that’s the kind of study you’d do to prove causation. It’s showing that Medicaid is good for health.
Second, many Hoosiers are poor enough to qualify for Medicaid if Indiana expands the program. It’s estimated that more than 438,000 uninsured adults in Indiana could get Medicaid next year if the state agreed to expand it. Almost 375,000 of those people would be newly eligible. That means that they don’t qualify today, but would with the new eligibility requirements. An additional 64,000 adults are currently eligible, but haven’t or can’t sign up for one reason or another.
Third, the Medicaid expansion is a hugely cost-effective way for Indiana to cover its citizens. In models that assume participation in the expansion will mirror current Medicaid usage, the vast majority of the cost of the expansion is paid for by the federal government. In Indiana specifically, if we managed to cover about 300,000 new people by Medicaid through 2019, it would cost us only $478 million over those years, versus $8.5 billion from the federal government. While Medicaid enrollment would go up by more than 29%, our state Medicaid spending will have gone up by only 2.5%.That’s an almost unheard of deal.
Fourth, Indiana will save a lot of money by allowing the expansion to occur. In 2009, it’s estimated that we spent more than $150 million on the Healthy Indiana Plan. This would no longer be needed, as many would transition into either the Medicaid expansion or the private insurance exchanges. We spent $15 million on our high risk pool plan, which would no longer be needed, as those people would get insurance elsewhere, too. We spent more than $12 million on local tax credits for businesses buying insurance which would no longer be needed as they are replaced by federal tax credits. We spent more than $125 million on uncompensated care for the indigent which would no longer be needed, as far fewer people would be uninsured. And, finally, there was a hidden tax of almost $30 million put on Hoosiers to pay for uninsured care for others through cost shifting and higher premiums. This, too, would go away. We may even be able to save more money if we petition HHS to allow us to transition some children and families from CHIP to the exchanges. But even without that, if you add all the spending I just laid out together, Indiana could have saved more than $335 million in 2009 alone, compared to the $63 million the expansion would have cost if Indiana had covered 10% that year. The savings would more than pay for the costs of the expansion moving forward.
Finally, if we don’t allow the Medicaid expansion to occur, it will cause economic harm to the health care system. Because the Affordable Care Act envisions that the number of uninsured Americans will drop drastically, it reduces federal support for uncompensated care through Disproportionate Hospital Share payments. In 2011, Indiana received almost $214 million in such payments, which went – among other things – to the HIP plan. But the Affordable Care Act significantly reduces the payments that will be going out to states. Without the Medicaid expansion, doctors, hospitals, and other providers will still be expected to care for uninsured people, but will receive far less support for it. You’ll hurt their bottom lines significantly, and impair their ability to provide care.
I understand the reluctance of some to expand a government program that already comprises a large chunk of our state budget. But it’s important to remember that we are not debating whether to give the most vulnerable Hoosiers among us a choice between Medicaid and private insurance. The choice is between Medicaid and nothing. The Affordable Care Act does not provide subsidies for people making less than the poverty line, and such people will not be able to afford private insurance. We, as US citizens, are going to pay for the Affordable Care Act whether or not you expand Medicaid. The decision before you is whether to let Hoosiers benefit from the programs we’re already paying for and that other states are benefiting from.
Forgetting the politics, expanding Medicaid is good policy. It’s good for Hoosiers who would otherwise be uninsured. It’s good for health care providers who would otherwise be forced to provide more uncompensated care. It’s good for Indiana which struggles to pay for that care.
Other states, both blue and red, are coming to this conclusion. I implore you to join them, and accept the Medicaid expansion as the Affordable Care Act prescribes.
[Cross-posted at The Incidental Economist]