Medicaid Expansion: Trust, but Verify

by Naomi Lopez
March 29, 2018

One of the big untold stories of the Affordable Care Act (ACA), commonly referred to as Obamacare, is that the vast majority of individuals insured through the law did not obtain private coverage; They joined the ranks of Medicaid, the federal-state health care program for the indigent and disabled.

Of the newly insured since the law was enacted, about five in six were enrolled in the Medicaid program. The law encourages states to expand Medicaid coverage to almost all uninsured people younger than 65 who have incomes up to 138 percent of the poverty level.

Both Medicaid enrollment and spending for the newly-eligible Medicaid recipients have surged well beyond the original estimates. This should surprise few: Since the program’s inception in 1965, states have consistently and woefully under-estimated the cost of the program to taxpayers.

Take Arizona, for example. It was the last state to join the program in 1982. Despite being armed with 17 years of data and lessons from other states, Arizona still managed to create a fiscal albatross. In 2005, for example, the program’s cost exceeded its estimate by almost $1 billion. But this may be only the tip of the iceberg.

Examples of ballooning numbers and cost overruns across the country have increasingly raised concerns from both lawmakers and the policy community. There is now stark evidence that backs up those concerns – and it points to something even more troubling.

A recent report from the U.S. Department of Health and Human Services (HHS) found that, in California, one-quarter of the newly eligible Medicaid recipients in the investigation’s sample of 150 individuals were ineligible or potentially ineligible for the program. According to the report:

“On the basis of our sample results, we estimated that California made Medicaid payments of $738.2 million ($628.8 million Federal share) on behalf of 366,078 ineligible beneficiaries and $416.5 million ($402.4 million Federal share) on behalf of 79,055 potentially ineligible beneficiaries.”

The implications of this investigation are staggering. While there are occasional cases of intentional fraud, this situation frequently occurs for a variety of other reasons. For example, an enrollee may move out of state, obtain private health coverage, or may no longer be eligible due to income above the eligibility threshold.

Under federal law, states are already required to determine Medicaid eligibility. But many of these processes lack robust and timely mechanisms for doing so. In 2012, Illinois lawmakers implemented the SMART Act (Save Medicaid Access and Resources Together) which required a systematic audit of Medicaid eligibility. They found that the Medicaid rolls contained more than 8,000 dead people and that 300,000 people no longer met the requirements for Medicaid eligibility.

When states are not diligent in keeping eligibility rolls current, taxpayers will be paying for care that is not benefitting anyone. Every dollar spent on an individual who is no longer eligible for the program – often not even living in the state or now covered through other insurance –  is a dollar diverted away from other state priorities and taxpayers’ wallets.

Naomi Lopez is the director of healthcare at the Goldwater Institute.