Pandemic Exposes Multiple Follies of Medicaid Expansion

We’re getting mixed messages on health care these days.

At both the federal and state levels, the response to the COVID-19 pandemic required turning to the private sector. Governments suspended unnecessary regulations so patients could access the care they needed and providers could innovate to meet the crisis.

Paradoxically, some politicians continue to pitch the idea that the answer to our health care problems is more government, through expansion of Medicaid or even so-called Medicare for All (which, as health care policy experts have noted, would operate more like Medicaid for All).

Medicaid is an important part of the safety net, but it should be focused on those most in need, not expanded to include able-bodied adults with no children. That’s even more important now, with states confronting difficult spending choices as revenues decline in the wake of the coronavirus-induced lockdowns.

Both Democratic and Republican states are facing up to that reality and are reexamining their Medicaid expansion plans. This should not come as a surprise. Even before the pandemic, Medicaid was devouring state budgets, with several spending more than a quarter of state-generated revenue on the program. But now the tough choices have become unavoidable.

Efforts by North Carolina’s Democratic governor, Roy Cooper, to expand Medicaid have hit a wall as the pandemic turned a surplus into a multibillion-dollar revenue shortfall almost overnight.

In Kansas, a Republican state with a Democratic governor, a deal to use the Affordable Care Act to expand Medicaid coverage to those earning up to 138 percent of the federal poverty level was put on hold.

Next door in Oklahoma, Republican Governor Kevin Stitt vetoed what he considered an inadequate funding package for his own “SoonerCare” plan to expand Medicaid, though voters will decide the issue at the end of the month.

Similar cuts are being debated in New York, Ohio, and other states that expanded their Medicaid rolls after the last recession. Many of these states face deep shortfalls despite receiving billions in coronavirus and recession related emergency aid from Washington, including a $36 billion boost in no-strings federal Medicaid funding. But this unprecedented federal aid is temporary and states cannot rely on it. Instead, they must make responsible budget decisions independent of Washington and consistent with what their taxpayers can afford.

Even deep-blue California is now mulling cuts to its Medicaid program to help close a $54 billion budget deficit, its biggest ever.

In Colorado, where Democrats control the governorship and the legislature, a proposed public option designed to compete with existing private insurers is off the table, with lawmakers facing cuts in every other part of the state budget. 

But cost is not the only negative effect of Medicaid expansion. Critically, the number of hospital beds per capita has fallen more than 6 percent since 2013 in states that expanded Medicaid, while non-expansion states increased bed capacity, according to the Foundation for Government Accountability. 

As pandemic – and lockdown-induced economic woes – decimate state tax collections, these challenges will only increase.

So while states are now turning away from expanding government health care on the payment side of the ledger, what have they been doing on the delivery-of-care side? Going the opposite direction, loosening some of the misguided regulations that made it harder for health care professionals to treat patients.

More than 600 regulations at the federal and state levels have been waived in response to the pandemic. Governors across the political spectrum moved swiftly to empower health care providers and patients, from easing rules on telehealth to allowing doctors and nurses to work across state lines, to suspending certificate-of-need laws that blocked expansion of needed equipment and services.

It has been a real-time demonstration project in empowering doctors, nurses, is less bureaucracy means better, faster care. Seeing these positive outcomes, lawmakers in many states are looking to make the changes permanent. Governors, state legislators, and Congress should respond accordingly.

Far from being a greenlight for more government control of health care, the coronavirus pandemic has been a clear lesson in what can be accomplished when we get bureaucracy and red tape out of the way.

Tim Phillips is president of Americans for Prosperity.