A South Dakota ballot measure expanding the state's Medicaid program passed with 56% of the vote earlier this month.
Expanding Medicaid may sound like a smart way to get more people insurance coverage — especially when the federal government is picking up most of the tab, as it will in this case.
But Medicaid has been failing its beneficiaries for decades.
Even with an unprecedented flood of federal dollars underwriting the program, states are still struggling to cover their share of the tab.
Medicaid was created more than a half-century ago as a safety-net program for the poor. Today, it covers more than one-fifth of the U.S. population — in no small part due to Obamacare's expansion of the program.
The 2010 health law initially required states to offer Medicaid coverage to everyone earning up to 138% of the federal poverty level — about $27,750 for a family of four.
To sweeten the deal for states, Obamacare had the federal government pick up the entire cost for this expansion population at first.
Eventually, the feds dropped their contribution to 90%.
In 2012, the U.S. Supreme Court ruled that Obamacare couldn't force states to expand Medicaid; it had to make expansion optional.
To date, 38 states and the District of Columbia have expanded Medicaid under Obamacare's terms. South Dakota is the 39th — and the seventh state to expand the program through popular vote.
It's hard for states to turn down all the cash the feds promise for expanding Medicaid. But all that money doesn't deliver much in the way of quality care.
A landmark study of a Medicaid expansion lottery in Oregon compared people covered by the program with a control group of similarly situated patients who remained uninsured.
The authors concluded that Medicaid "generated no significant improvements in measured physical health outcomes" for those that had coverage compared with those that did not.
And yet, the cost of the program is staggering.
In 2021, total spending exceeded $728 billion. That number is expected to grow 12.5% this year.
States have to cover a sizable portion of that sum.
For legacy beneficiaries, states' share of the cost ranges from 12% to 50%. In South Dakota, for instance, the state is responsible for just under 42% of the program's costs.
In 2019, nearly one in every five dollars in spending from general state funds went to Medicaid. In some states, the program accounted for as much as 36% of state spending.
As Medicaid grows ever more expensive in the years ahead, states will have less and less money available for other critical priorities like transportation, education, and law enforcement.
And then there's the disparate treatment of the program's legacy population and the people who became eligible for the program under Obamacare.
Because the federal government covers more of the cost for this expansion population, states have a stronger incentive to sign-up the members of this group than they do the poorer people who have always been eligible for the program.
Those perverse incentives run at cross purposes with the program's original intent — to take care of the least fortunate among us.
South Dakota's elected officials resisted expanding Medicaid for years until the voters did it for them this year. Spending other people's money may be popular at the ballot box.
But the new crop of Medicaid beneficiaries may soon find that the program is not worth what taxpayers are shelling out for it.
Sally C. Pipes is president, CEO, and the Thomas W. Smith fellow in healthcare policy at the Pacific Research Institute. Her latest book is "False Premise, False Promise: The Disastrous Reality of Medicare for All," (Encounter Books 2020). Follow her on Twitter @sallypipes. Read Sally Pipes' Reports — More Here.
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