Expanding Medicaid Improves Physical, Psychological, and Financial Health
States can increase Medicaid without significant revenue increases
July 24, 2012
With the Supreme Court's upholding of the Affordable Care Act this past June, it is worth considering the wisdom of the ACA's significant expansion of Medicaid coverage that is scheduled to begin on Jan. 1, 2014. For most states, Medicaid is already one of the biggest annual budgetary expenditures. Why would it make sense, therefore, to expand an already expensive federal-state health insurance program for the poor? There are two main reasons why:
First, Oregon provides a lesson in the value of expanding health insurance coverage. In 2008, state officials conducted a public lottery among the uninsured to see who would be added to a limited number of new Medicaid slots that the state was making available. The point of the lottery was to be as fair as possible, with 90,000 Oregonians vying for 10,000 application slots (of whom roughly a third were finally approved for Medicaid after meeting all the program's strict requirements and eligibility criteria). For researchers, however, the lottery provided a rare and enlightening social experiment. Finally, the health effects of having health insurance coverage could be measured. Those who received health insurance through Medicaid were followed for a year thereafter and compared to those who remained uninsured. What did researchers find? Having health insurance coverage makes one healthier physically, psychologically, and financially. Those who gained Medicaid coverage were found to have: lower out-of-pocket medical expenditures, lower rates of depression, fewer unpaid medical bills, and to have used much more preventive services such as vaccinations, pap smears, and mammograms.
Oregon's spending on Medicaid did increase with the coverage expansion, but that leads to the second point. The ACA's major increase in Medicaid coverage is paid for almost exclusively by new revenues from the federal government. In other words, states will be able to lower their number of uninsured residents—dramatically so in some states like Texas and Virginia—without having to raise significant additional state revenues.
Besides helping patients, this Medicaid expansion is valuable to many hospitals and doctors in each state who provide charity (free) care that they usually have to absorb as a financial loss. We owe it to doctors and hospital staff to make as many of their currently uninsured patients insured and capable of paying their bills as we can. And helping more people gain coverage is the right thing to do morally. Yet it is also encouraging from a purely economic perspective to recognize that having health insurance coverage enables people to lead healthier lives, which in turn makes them more capable of paying their taxes, mortgages, student loans, and myriad other living expenses. A healthy economy is dependent on working families who do not have to live with the daily stress associated with being uninsured and unprotected.