Expanding Medicaid eligibility in Wisconsin would cost the state's economy $600 million annually, which would drive up private sector health care costs, according to a new study.
The new report – released this week by the conservative Wisconsin Institute for Law and Liberty and the Center for Research on the Wisconsin Economy, based at the University of Wisconsin-Madison – examined the impact of accepting federal dollars to expand Medicaid eligibility in Wisconsin.
Gov. Tony Evers pledged during his campaign to expand the program under a provision of the Affordable Care Act, which would increase enrollment by about 76,000 parents and childless adults.
Former Gov. Scott Walker rejected the expansion funding, arguing the state would ultimately take on the financial burden of sustaining the program over the long-term. Wisconsin is among 14 states to not participate in Medicaid expansion.
Currently, people earning up to 100 percent of the federal poverty limit are eligible for Medicaid in Wisconsin. Medicaid expansion would increase the threshold to those earning up to 138 percent of the poverty limit and increase the reimbursement rate for those expenses from the federal government.
Under that plan, private insurance consumer costs would increase $1.15 billion, while fiscal benefits to the state would be $545 million, for a net cost of $600 million, according to the report.
The report bolsters Republicans state lawmakers' opposition to expanding the program, but has also drawn criticism from some health care advocates.
"It really seems to fly in the face of the national research I've looked at, which shows that accepting Medicaid expansion dollars provides opportunity for coverage, lowers (hospitals') uncompensated care costs and helps build infrastructure," said Bobby Peterson, executive director of Madison-based ABC for Health.
According to the WILL/CROWE report, states that took Medicaid expansion under the ACA saw private sector health care costs increase by $177 per person, outpacing the rate at which health care costs rose in non-Medicaid expansion states. Wisconsin’s private sector spending in 2014 was $5,159 per person (compared to the national average of $4,544). Under Medicaid expansion, spending would increase 3.5 percent to $5,754, the report said.
A common reason for increased health care costs in Medicaid expansion states is the crowding out of private insurers as individuals drop their private insurance in favor of the entitlement, according to the report. Because Medicaid fee-for-service rates are generally lower than those negotiated with private insurers, health care providers generally pass on the costs of Medicaid coverage to their customers with private insurance, according to the report.
Given Wisconsin’s relatively low rate of uninsured residents, crowding out is more likely to occur, the report said.
“The way to contain health care costs and expand access to health care is not to move more Wisconsinites from private health insurance to a government run health care program,” said Noah Williams, director of CROWE. “It is only through market forces, competition, price transparency, and increased variety through deregulation that health care costs will decrease and access will be widespread.”
The report does not account for how Medicaid expansion would affect hospitals’ uncompensated care costs, -- the cost hospitals incur when providing services without receiving payment from the patient or insurer. Wisconsin hospitals provided $1.1 billion of uncompensated services, either as charity care or as bad debt, to patients in 2017, according to a Wisconsin Hospitals Association report.
A study from the Kaiser Family Foundation in 2018 found that Medicaid expansions resulted in reductions in uncompensated care costs for providers.
The WILL/CROWE report also claims Medicaid expansion drives up costly emergency room utilization. It said states that expanded Medicaid saw ER visits increase by about 9 per 1,000 residents, challenging supporters’ claims that increased access to Medicaid would lead to more preventative care and reduce expensive ER visits.
The report does not account for any impact of Medicaid expansion, either negative or positive, on health outcomes.
Peterson dismissed the report and the support it has garnered from Republicans as "political posturing" ahead of Evers' release of his first budget proposal next week.