Amend Medicaid expansion, but we should do so much more

Written by Derek Monson

January 22, 2019

Originally published in Utah Policy.

In the runup to the 2019 legislative session, legislative leaders are discussing potential amendments to the Medicaid expansion plan enacted by Proposition 3. As a matter of public policy, they are right to do so, despite the tricky politics of amending a program approved by voters.

The real opportunity for this Legislature on health care, however, is bigger – and more challenging – than that. That opportunity is to comprehensively reform health policy in Utah to reduce health care costs and protect Utah’s most vulnerable from the harms of Medicaid expansion.

Legislators are justified in their concern that Medicaid expansion could create significant budget problems for the state. It merits reforms to protect taxpayers. From blue states like Oregon to red states like Arkansas, taxpayers have been hit by the unintended consequences and costs of unexpectedly high enrollment in Medicaid expansion.

We have educated guesses, but the truth is no one knows for certain whether Medicaid expansion enrollment in Utah will be in line with projections or will bust the state budget. Such risk and uncertainty reasonably push lawmakers toward acting to protect taxpayers before a possible crisis unnecessarily harms them.

Analysis of the impact of Medicaid expansion shows it has led to more cost-shifting onto insured patients to cover the health care costs of new enrollees, since Medicaid underpays providers. The cost-shifting problem, however, is much bigger than Medicaid – arising from ever-rising costs of health care.

Part of the solution to these problems is seeking a State Relief and Empowerment Waiver under the Affordable Care Act. These waivers allow states to improve the affordability and accessibility of health care by offering freedom from some of Obamacare’s most burdensome and costly rules.

For example, Alaska, Minnesota and Oregon have all implemented such waivers and lowered insurance premiums between 7 and 23 percent, using policy mechanisms to specifically care for high-cost patients. The Trump administration has also stated its intent to increase the flexibility of such waivers. It has even gone so far as to give states specific ideas for waivers, such as authorizing lower-cost health coverage options or using federal insurance subsidy funding for programs like those in Alaska, Minnesota and Oregon.

A second part of the solution is to improve on Medicaid expansion. All Medicaid enrollees deserve a program that treats them with dignity by helping them achieve a life of self-reliance. Transforming Medicaid, via waivers, into a program that subsidizes commercial insurance coverage for as many as possible and creates work requirements for able-bodied adults would move in this direction. The financial burden of Medicaid would then be shared with private insurers – limiting taxpayers’ liability – and access to care would increase, especially for the low-income children and disabled Utahns for whom Medicaid is designed. Now may be the optimal time to begin preparing such changes, given news reports that the Trump administration wants to offer states maximum flexibility in managing Medicaid.

A third part of the solution is equipping people to be consumers, not just patients. When consumers see prices, they tend to factor them into their thinking and seek the most affordable option that meets their needs. It would only take a small proportion of health care consumers seeking more affordable alternatives to impact the bottom lines of health care providers, creating a strong market incentive to provide lower-cost, higher-quality care.

Requiring doctors and hospitals to inform patients of what they will pay for health-care services before providing those services, just like any other business does, would be a significant step in the right direction.

Lawmakers will understandably be cautious about pursuing comprehensive health care reform, and perhaps such significant reform merits consideration between the 2019 and 2020 legislative sessions to make sure that we get it right. But whether they simply fix what must be fixed with Medicaid expansion, or think bigger, it makes sense for them to consider a plan that helps everyone in the state by lowering costs and improving quality of care. If this happens, lawmakers will truly be following the will of the people.

Derek Monson is vice president of policy for Sutherland Institute, a conservative think tank based in Salt Lake City that advocates for free markets, civil society and community-driven solutions.

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