“Medicaid expansion is a public choice problem,” says JLF’s Jordan Roberts in a recent research brief. Expansion, he says, is a mix of uninformed and/or disengaged voters, self-interested politicians, and profit-maximizing special interests – the perfect formula for a public choice dilemma.
Public choice problems arise when the gains of a policy are highly concentrated for special interests and/or politicians, but the costs are highly dispersed amongst voters. Because the costs of the policy are highly dispersed, voters don’t have much individual stake in the outcome, yet politicians and special interests have immense individual incentives to pass/defeat the policy. It is called a public choice problem because, on the whole, it has higher net costs than gains for the public, yet – because the asymmetry of benefits is concentrated in powerful decision-makers – these policies often pass, and the public is ultimately the one who loses out.
In the case of Medicaid expansion, Roberts writes:
Legislators in the General Assembly are considering spending taxpayer dollars to expand a public insurance program that would benefit a small, targeted population. This policy proposal would very likely raise health care prices in the state. But those costs increases may not be enough for [the public] to notice because they have become accustomed to sizable increases and diminished benefits due to decisions made by previous officeholders.
…Special interests, namely the hospital lobby and their allies in health insurance and provider groups, have the most significant incentive to expand Medicaid because they stand to gain the most. North Carolina Democrats and Governor Cooper have proposed to pay for the 10 percent state share of Medicaid expansion with hospital taxes and taxes on prepaid health plans… [T]hese costs will be passed onto consumers in some form. In addition, hospitals, on the whole, will receive substantially more in return in the form of Medicaid payments that they will pay in the tax.
At the end of the day, Medicaid expansion will likely increase costs for people who do not qualify. By crowding out the private market and imposing a hospital tax that will likely get pushed onto patients’ bills, Medicaid expansion is the perfect example of a public choice problem making outcomes worse for the general public.