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Medicaid expansion and improper eligibility

Former special assistant to President Trump at the National Economic Council, Brian Blase, and University of Kentucky economics professor, Aaron Yelowitz, wrote an op-ed in the Wall Street Journal about the experience of some states who have expanded Medicaid and the problems with eligibility. Essentially, they write, the program has grown substantially without much oversight in several states who have expanded. They draw this conclusion from a recent study published by the NBER: 

It isn’t working. A study published this week by the National Bureau of Economic Research finds that in several Medicaid-expansion states most people who gained coverage have enrolled in Medicaid regardless of their income. In practice, ObamaCare has turned Medicaid into an entitlement program for the middle class.

Using data from U.S. Census Bureau’s American Community Survey, the authors assessed coverage changes from 2012-17 in nine states that expanded Medicaid vs. 12 states that didn’t. They uncovered a huge problem. In 2017 alone, in those nine states, “around 800,000 individuals . . . appeared to gain Medicaid coverage for which they were seemingly income-ineligible.”

ObamaCare is supposed to make Medicaid available to households with incomes below 138% of the poverty line, or nearly $36,000 for a family of four. In the nine states—Arkansas, Kentucky, Michigan, Nevada, New Hampshire, New Mexico, North Dakota, Ohio and West Virginia—the authors found that among households with incomes 138% to 250% of the poverty line (about $65,000 for a family of four), some 78% that gained coverage had improperly enrolled in Medicaid. That was also true of 65% of the population above 250% of poverty that gained coverage.

State Auditor Beth Woods has repeatedly warned of improper payments and improper enrollment in North Carolina’s Medicaid program. Nationally the number of improper payments is in amounts to $36 billion, according to the GAO. Taxpayers fund this program, and the shortfalls should anger all of us because we can do better. Medicaid expansion, however, will make this goal more difficult: 

There’s evidence of massive improper enrollment in other states. According to 2018 reports by the Inspector General’s Office at the Department of Health and Human Services, 25% of Medicaid expansion enrollees were likely ineligible in both California and New York.

A state audit in Louisiana found 82% of expansion enrollees were ineligible at some point during the year they were enrolled. The central problem appears to be the state’s reliance on the federal exchange website to determine eligibility. People who entered no income simply to explore their options were automatically enrolled in Medicaid. Eligibility works the same way in another seven states.

The number of ineligible enrollees in these three states alone almost certainly exceeds one million people. These findings should alarm Americans across the political spectrum. They show that complicated government programs often bear little resemblance to planners’ designs. ObamaCare has turned out to be a giant welfare program, with millions of working- and middle-class Americans improperly receiving Medicaid—a reflection of the unpopularity of the exchange policies and incompetence of government oversight. 

This study reveals some of the problems with the Medicaid program in general. Medicaid, especially in North Carolina, already has some serious issues with improper payments and poor health outcomes. Expanding the program beyond the original scope of low-income women, children, disabled, and seniors is likely to have some of the same effects in North Carolina as the other states described in this piece. 

Supporters promote Medicaid expansion as a cure for all of the health ills of North Carolina. However, it is unlikely to help the way that supporters have claimed. It will likely have negative impacts on the private insurance markets and further entrench a flawed system that already struggles to serve the intended population. There are ways that we can lower health care costs for this state that can be done at a fraction of the cost of Medicaid expansion. 

Jordan Roberts / Health Policy Analyst

Jordan joined the Locke Foundation in the summer of 2018 as Health Care Policy Analyst. He analyzes state and national health policy issues with an eye toward removing governm...

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