Medicaid Can Cost Taxpayers Less than ACA Plans

Source: United Healthcare Group

One of the interesting tidbits gleaned from a presentation last week on the Medicaid expansion debate was that with expansion perhaps 60,000 Virginians now enrolled in Affordable Care Act Public Exchange plans will qualify for and switch over to Medicaid.

People who have low-enough incomes to qualify for Medicaid are also eligible for subsidies for an ACA exchange plan, so both programs are costing the taxpayers. A recent report indicated Medicaid is actually costing taxpayers less than ACA plans for that population.

UnitedHealthcare Group’s report noted – not a surprise – that Public Exchange coverage has proven to be more costly and less sustainable than envisioned (or promised). Since 2014 – the first year of Public Exchange coverage – the average annual unsubsidized premium for a benchmark silver plan has increased 88 percent for a 27-year-old and 76 percent for a 40-year-old.

The original projection was that it would reach 25 million persons by now, and in 2017 it was more like 10 million.  Recent actions at the federal level will keep that from rising much beyond 12 million.

Compare that to Medicaid, which has enrolled more than 16 million additional people nationally since 2013.  These figures are national, and Virginia would vary somewhat, but the estimated average cost for the newly eligible Medicaid enrollee has been $5,400 and the average total cost for Public Exchange coverage has been $9,400.   In the case of the Exchanges, of course, much of that is coming from the consumer’s pocket.

But the low-income Exchange adult enrollees – the persons who could switch with Medicaid expansion – pay only $2,400 out of pocket and their federal share is about $7,000. That is still higher than the cost of Medicaid, which is fully government funded (state and federal combined).

This may not matter much to the Virginia voters and legislators opposed to expansion.  The state taxpayer makes zero financial contribution to the ACA health plan subsidies, and is going to be paying a share of the cost for new Medicaid enrollees.  We should find out early this week if the state Senate has a consensus on the expansion issue.

UnitedHealthcare Group (UHG) is hardly a disinterested observer in this discussion. It provides managed care for Medicaid in various states, now including Virginia, and based on its website it participates in some ACA marketplaces.  If the company has an economic incentive to prefer one approach over the other, it is unlikely to admit that in these presentations.

But it does argue the billions planned for ACA subsidies would be better spent on Medicaid.  It is unsaid but true that the future of the ACA Public Exchanges is cloudy at best, while Medicaid isn’t going anywhere, with or without expansion.

Absent from this is any discussion of quality outcomes when comparing the ACA Public Exchange plans with Medicaid, although UHG does advocate for managed care in general as providing higher quality for lower cost.  And the cost of Medicaid is hardly expected to remain stagnant.  Also absent is any discussion of which is preferred by the providers getting paid under the two approaches.

A footnote in the UHG report takes you to the most recent (2016) actuarial report on Medicaid. It was projecting federal costs would grow almost 6 percent per year, but also reported that the costs for newly-eligible adults were dipping slightly and might dip below those already eligible.  As always the most expensive Medicaid populations were the aged ($14,323 per enrollee in 2015) and disabled ($19,478).

The audit noted most states that had opted for expansion were using managed care contracts to lower the costs.  That will be the case in Virginia, and the 2017 Annual Report on Medallion 3.0, Virginia’s managed care approach, gives you a good idea of the services available.  If this is a choice open to them the lower-income ACA covered population will probably make the change.  It seems a very easy economic choice for them.

(Hat tip: Doug Gray)

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18 responses to “Medicaid Can Cost Taxpayers Less than ACA Plans

  1. Thanks Steve for your usual intelligent discussion.. and much appreciated! I mean that… you do ADD a lot of meat to the bones!

    There are still a few quibbles:

    ” The state taxpayer makes zero financial contribution to the ACA health plan subsidies, and is going to be paying a share of the cost for new Medicaid enrollees.”

    That’s not entirely true – if you consider, as has been said before, that all Virginians are ALREADY paying the special taxes that fund both the ACA and the MedicAid Expansion.

    And pretend for a moment that all of those uninsured were covered by the ACA no matter their income. In that circumstance – the State would have no cost – but taxpayers would be paying those special taxes to fund it.

    So the MORE folks who move to the expansion – the higher the cost to the State because they owe 10% of that total cost.

    so the more folks who go onto the Medicaid Expansion – the higher the cost to the state – in theory.

    Yes the state will owe the 10% but it will save MORE than that in things covered that were not before – i.e. the expansion more than pays for itself.

    Then on top of that – we have the new hospital tax(es) that will ALSO be paid for by Virginians – and actually ought to net the state additional revenues to help pay for basic MedicAid.

    Finally – the reason the ACA is not covering predicted is not because the predictions were wrong – it’s because Congress and the Trump administration are taking steps to undermine the original law – to deny coverage to people and to increase costs to others… then doing away with the insurance mandate.

    Imagine what would happen to employer-provided insurance if the law requiring coverage of older/sicker employee/workers was repealed and insurance companies could then deny coverage to older/sicker employees and retired? They’d then be in the same pickle that workers without employer-provided would be.

    Managed care is the way to go – not only for those getting assistance but for everyone because basically what that means is that people’s care is actually coordinated between providers. All your doctors see all your lab results, for instance, as well as all of your aggregate/compiled medical record.

  2. Larry, I said recent actions in Washington were impeding the growth of the ACA plans, and I noted that the legislators are fully aware that when somebody moves from an ACA plan to Medicaid, some of that bill will come to the state. You and I understand that we pay taxes in both realms, but many legislators are – rightly or wrongly – zeroed in on the state impacts.

  3. @Steve – do the legislators not believe the projections that the expansion will pay for itself by picking up costs the State was paying for prior? Isn’t that reconciled in the budget process?

    • The short answer is that those who believe it (not all do) doubt it will hold for more than a few years. FYI here is a good example of the argument on the other side. Thompson is a bright guy, a business guy:

      http://www.thomasjeffersoninst.org/files/3/MWT_Medicaidriskier2018.pdf

      Leaving fair argument behind, the following showed up in my inbox this morning. How I got on this distribution list is beyond me…..Some group out of Loudoun, encouraging more phone calls to the key state senators:

      “Sources inside the State House have told me your calls are working, but you need to keep calling to stop the Obamacare Medicaid expansion in the Commonwealth.

      “And while Speaker Kirk Cox (R), has back stabbed conservatives and President Trump, we are hearing that the State Senate is back in play, and you may yet stop the expansion of Obamacare in Virginia, but only if you call today.” It will still be Obamacare to them in 2040.

  4. Steve – the Thomas Jefferson folks – like many of the opponents are not looking for a sustainable path forward. They want to kill what they can and could care less what happens after that.

    I don’t consider them legitimate participants in how to move forward. This is a basic problem with Conservatives these days.

    there’s another sentence in your blog that I also have questions:

    ” The original projection was that it would reach 25 million persons by now, and in 2017 it was more like 10 million. Recent actions at the federal level will keep that from rising much beyond 12 million.

    Compare that to Medicaid, which has enrolled more than 16 million additional people nationally since 2013.”

    Are we treating the Expansion as the same as original MedicAid?

    I was under the impression that they are pretty different… significantly in a number of areas…

    I actually see 3 distinct tiers – ACA, Original Medicaid and MedicAid Expansion.

    One of the primary differences between the two MedicAid is abled bodied without kids. There is no coverage for them at all under the original MedicAid – even if they work full time but cannot afford or do not receive employer-provided insurance.

    I realize you’re coming at this from a different perspective – i.e. how the politics work in Virginia… but it appears that the politics is either willfully ignorant of important distinctions or they just don’t care about such distinctions anyhow.

    People that don’t have insurance – go to the ERs. People who work who don’t have insurance – and get hurt/sick – quite work and apply for disability… that’s one of the main reasons that original MedicAid costs keep going up year after year. There’s an entire cottage industry that caters to people trying to qualify for disability.

    • Let’s be clear – ANY and ALL insurance – public or private IS Rationing. It’s ALWAYS about what is covered and what is not.

      That is how costs are contained.

      The second thing to be aware of is the REALITY of universal health care when done right – and that is it costs 1/2 what we pay for health care in this country – AND all those other countries that do – also have longer life expectancies than us.

      Again – the politics are potent and without question drive the bus in this country but they’re based on willful ignorance and ideology.

      There may be some gold-plated health insurance policies owned by the super-wealthy but the rest of the 99% deal with health insurance that does have limitations.

      • Larry, if you believe that the United States would save money by moving to Universal Health Care, I’ll sell you the 14th Street Bridge. Health care in the U.S. is heavily based on crony capitalism. Taxpayer reimbursements go beyond delivering health care services and products and administering the program in a reasonably efficient manner. We have thousands of workers in jobs that would not be necessary in a single-provider system. And if taxpayers fund health care, there is no reason to compensate executives in the health care industry as they are compensated. Similarly, there would be a reduction in compensation for many doctors, etc. And despite the rhetoric from the left, activists and crony capitalists would lobby to add this or that coverage to the system irrespective of the medical need.

        To implement single payer, a hell of a lot of people would need to lose their jobs and others take great pay cuts to bring costs in line. It ain’t gonna happen. Go back to Al Gore’s reinventing government. A suggestion was made that the Social Security Administration could save hundreds of millions by staggering delivery of checks throughout the month. But the union got wind of it and lobbied against the proposal since the savings came from job cuts.

        Moving to single payer would cause economic problems that would dwarf the Great Recession.

        • TMT – do you believe the other industrialized countries cover ALL their citizens for about 1/2 what we pay?

          You’ve got a novel approach here TMT. You’re essentially arguing that we will let some folks not have health care – and die – because otherwise trying to cover them will hurt our economy.

          What we’re talking about is not less health care workers – but MORE! In Virginia alone – it is estimate the MedicAid expansion will create about 30,000 MORE jobs!

          So how do you get that it will take away jobs and hurt the economy?

          We cover MORE people AND costs are lowered – like they are in Europe, Asia, Australia, New Zealand – because care is coordinated – duplication and redundant services are reduced! When you have ONE electronic medical record – any/all providers have access to it – and because of that they do not duplicate services, treatments and drugs. That’s where the savings come from.

          You should want that guy. You should want a more efficient system that covers more people for less. That’s a fiscally conservative AND morally acceptable approach to health care. Penny-wise pound-foolish niggardly policies are more costly, less efficient, and result is lower life expectancies.

          • TooManyTaxes

            Larry – your argument just doesn’t make any sense. You note that the existing system contains uncoordinated care, duplication and redundancy. I’ll accept that as true. To eliminate that means the companies, nonprofits and people providing what I’ll call “excess” need to stop. If they do that, we necessarily need to eliminate the people and, to some extent, companies and nonprofits doing the excess. People have to lose their jobs in order to stop providing excess. Nothing else makes sense. You cannot drive out half the costs of providing health care as done today unless you eliminate people and companies.

            Now I fully agree with you that expanding Medicaid or even going to a single payer system would add some of those people back to the payroll. But to cut costs, you have to cut people.

            My point being, the people, companies and nonprofits will fight for their existence and try to stop cost-saving measures that will cost their jobs. Similarly, people with better coverage than single payer will fight to keep to keep the better coverage. Americans are not willing to accept less to give others more. You’d have to grandfather everyone who has something better and then overlay a new system to cover everyone else. The economy wouldn’t stand it.

            You simply cannot get to where you want to go without changes that will tear the nation apart.

  5. ” Hanger still must overcome a major hurdle in the Senate. Majority Leader Tommy Norment, R-James City, leads a Republican majority that opposes expanding Virginia’s Medicaid program ………….Norment also serves as co-chairman of Senate Finance, which has yet to propose its own version of the state budget or schedule a time to meet on Tuesday afternoon.”

    This pretty much sums up the GOP approach to health care these days. They got the “Repeal and Replace” message down pat but in terms of actually doing something – they’re frozen into standing firm and doing nothing.

    You’d think that their duty is to write a budget sans the MedicAid and then debate on the merits.

    There’s still some vagueness as to how and why Virginians voted at the last election but it’s becoming clear they want some clarity and stability with regard to how we do health care. All the GOP is offering is rape and pillage if they get a majority and sit and do nothing if they can’t get majority support for dismembering what is in place now. The GOP seems fine with keeping that in place but not expanding that benefit to others who work in a service economy.

    We have – more and more a service economy -and employers in a service economy and the business model does not support the cost of employer-provided insurance.

    So we have an economy where the govt provides benefits to one group and essentially denies those same benefits to others – based on nothing more than who their employer is.

  6. The Government does NOT provide benefits to one group of workers and not to another. I appreciate the argument that Medicaid should be expanded to provide broader coverage – basically to single workers — if it can reduce taxpayer and insurance premium payers less than the current systems that recovers some, but not all, of the unreimbursed care provided to uninsured people.

    But people who have employer-provided health coverage do so as part of their compensation from their employer. It is not provided by the government operating as the government. It has tax advantages, but so do many other things. The fair market value of housing is not taxable when provided by a church or other place of worship to a pastor. Tax advantage. Community associations are not subject to taxes. Tax advantage. Welfare benefits are not taxable to the recipients . Tax advantage.

    The government does provide some health care to some, but not others. Medicare is provided to older people who have made sufficient tax payments. Lines are drawn. Ditto for Medicaid or CHIPS. Lines are drawn. Some people are eligible and others are not. There is no universal right to health care in the United States. Make your arguments, but don’t suggest the government provides employer-provided health insurance. It doesn’t.

  7. re: ” But people who have employer-provided health coverage do so as part of their compensation from their employer. It is not provided by the government operating as the government. ”

    The Government is the one that waives the tax on income to purchase health insurance – not the employer.

    Why does the Govt waive the tax on income for health insurance ONLY for employers who provide the health insurance and NOT for people who buy their own health insurance?

    Second – when you get employer-provided health insurance, it’s the Government that says the insurance MUST cover ALL employees – regardless of age, sex or health status. It’s the GOvt that requires it for employer-provided but not for market insurance.

    Third – It’s the Government that REQUIRES that each employee be charged the same amount for the insurance – no matter their age, gender or health status – UNLIKE insurance purchased in the market where there is no such Government mandate.

    No the govt does not provide employer-provided but if the Govt stop subsidizing the taxes and they let the insurance company dump people they did not want to insure – THEN – employer-provided would “work” just like market insurance works.

    And if the Government did that – you can guarantee those folks with employer-provided would get a whole new perspective of how and why they get preferential treatment from the government for their insurance – and take that Govt help for granted – at the same time they oppose that same help from the govt for others.

    • The government, federal, state and local, regulates a lot of things. That doesn’t make the government a provider. There are federal, state and local regulations affecting my car and my ability to drive that car. But I buy the car. The government doesn’t provide it to me or authorize me to buy it. It requires me to register it, pay taxes and have liability insurance.

      Ditto for health insurance. It’s regulated chiefly by the federal and state government. And as you note, there are many regulations. But the government doesn’t make an employer provide it. Employers that offer insurance, like wages, bonuses and other benefits, do so to attract the best employees. It’s a business strategy.

      The reason health insurance is not taxed goes back to World War II. There were wage and price restrictions due to the War. Employers couldn’t give raises that would normally occur during a period of worker shortage. So the Administration decided that fringe benefits could be given especially health coverage and that those benefits would not be taxed. That’s the sole reason why the federal government has never taxed the value of health insurance. Similarly, it doesn’t tax life insurance payouts.

      As I recall, John McCain proposed taxing at least some of the value of health insurance and was lambasted by Barack Obama. Guess who won the election. There is strong support for expanding Medicaid coverage so long as it doesn’t cost the public more.

      • The Govt REQUIRES employers who do offer health insurance to offer it to ALL employees no matter their health or age is – UNLIKE other insurance that the govt does not require to do that – and they don’t.

        That means that some people benefit from the govt protecting them from higher premiums and/or outright denial of coverage while the same govt does not offer that protection to others who also need insurance.

        If the govt is going to protect people from insurers denying them coverage or charging them more -then it should apply to all citizens equally – as the need for health care is fundamental to all citizens…

        The same goes for income tax subsidies. If the govt is going to offer income tax subsidies for the purchase of health insurance, it should apply to all citizens regardless of where they work or what benefits the employers offer – or not.

        The germane point here is that it’s not the employers that offer these benefits – it’s the govt – and the govt is doing it ONLY for some people not everyone.

        It would be like the govt only offering Medicare to people who retired from companies that provided health insurance and not those who worked for companies that did not offer health insurance.

        There is no such discrimination for seniors who need health insurance and likewise there should be no discrimination in what help the govt offers for health insurance based on who you work for.

        The most ridiculous part of this is that – we all end up paying for people who do not have health insurance. We pretend they don’t get it and just go off and die somewhere but most do get it – for “free” because hospitals cost-shift those losses to people who do have insurance with things like $10 aspirin.

        We pay these costs – and that’s why health care in this country is twice as much as every other industrialized country that covers ALL of their citizens – up front.

        We claim that other countries achieve those lower costs with rationing – except they all live longer than us – and in this country – we DO ration health care – we don’t provide it at all to some folks from the get go but even those “covered” have restrictions on their policies. Some treatment, some drug, some procedure is simply “not covered”. Happens all the time!

  8. re: ” Medicare is provided to older people who have made sufficient tax payments.”

    That’s simply not true.

    It’s true for Medicare Part A if you paid FICA taxes.

    But it’s not true at all for Medicare PartB – which pays for Doctors and other health providers.

    Medicare Part B is 100% subsidized by the Govt and it is provided to ANY citizen 65 or older for about $134 a month
    regardless of anything else. Medicare costs taxpayers about 600 billion dollars a year that all senior are ENTITLED to – they did not earn it.

  9. re: ” As I recall, John McCain proposed taxing at least some of the value of health insurance and was lambasted by Barack Obama. Guess who won the election. There is strong support for expanding Medicaid coverage so long as it doesn’t cost the public more.”

    TMT – either you need to read more and at more objective sites or something.

    I’m quite sure you have heard the phrase “Cadillac Tax” for Obamacare. It was one of the earmarked taxes that would help fund Obamacare and the MedicAid Expansion.

    I was supposed to CAP the amount of income for health insurance that would not be taxed.

    If you actually did go out and research it from objective websites – you would have found this out:

    ” the “Cadillac tax,” is a 40 percent excise tax on employer plans exceeding $10,200 in premiums per year for individuals and $27,500 for families. ”

    I also want to point out to you that those who have employer-provided get to spend $10,000 on health insurance and if it was taxed – they’d only get $6000 RIGHT NOW TODAY – because when you add up the Fed and State and FICA tax – that’s what you get for most folks.

    I also point out that someone who worked full time and did not have employer-provided insurance and had to buy it – RIGHT NOW TODAY – they WOULD have that 10,000 cut to $6000 – effectively cutting in half what they could spend on health insurance while those on employer-provided get TWICE AS MUCH – not because of the employer – but because of the disparate way the Federal Govt taxes money spent on health insurance. ONLY those folks who get employer-provided get that tax benefit!

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