More People On Medicaid Does Not Mean Obamacare Is A Success

The Affordable Care Act’s debut has gone remarkably like a terrible blind date. First, the law kept its cautiously optimistic companion—the American public—waiting well past the scheduled hour. When it finally did arrive, Obamacare blundered in awkwardly with shirt half-tucked and hair unkempt.

It’s instantly obvious that this guy is much less handsome than his Tinder profile suggests and far less interesting than his texts made him seem. As the shock wears off, the truth sinks in: This is going to be a brutal evening. And venting at the mutual friend who vouched for the klutz offers no relief: Instead of apologizing, she instructs you to soldier on—“just give the guy a chance!”—and insists there’s a silver lining. “Okay, he’s not exactly smooth. But he has the bestsense of humor.”

So it is with politics. By any fair standard, the implementation of President Obama’s signature achievement has been one big embarrassment. A litany of constitutionally dubious carve-outs may be enough to prop up its facade, but smart observers across the ideological spectrum agree thatserious cracks extend into the policy’s foundation. And just like the loser guy’s indignant friend, the ACA’s supporters are fumbling for a silver lining.

They think they’ve found it. Progressive policy wonks are rallying around one feature of the law that they insist is proceeding wonderfully. Put aside all the other issues, they say—we should still applaud Obamacare’s massive expansion of Medicaid.

Unfortunately, the facts are unkind to their dogged optimism. There is little reason to believe that Medicaid’s surging enrollment numbers are accurate. And even if they were, it is far from clear that Americans who care about the poor should celebrate them.

A joint effort of the federal government and the states, Medicaid has provided health insurance for needy Americans since 1965. The Affordable Care Act initially required states to raise the income ceiling for their Medicaid programs to 133% of the federal poverty line, but the Supreme Court took that provision from obligatory to optional. To date, 27 states have proceeded with the expansion; the remaining 23 have declined the offer.

Liberal commentators have rushed to praise the former and condemn the latter. The New Republic’s Alec MacGillis cites red states’ reluctance to expand Medicaid as proof that conservatives don’t care about the poor. Josh Barro of Business Insider writes that opposing expansion “make[s] the unemployed and marginally employed worse off.” Never to be outdone, Paul Krugman vented in November that “the truly astonishing refusal of many states to participate” can mean only one thing: Hateful Republicans will “pay a large economic and fiscal price in order to ensure that aid doesn’t reach the poor.”

In short, only a monster could oppose expanding Medicaid. It is just that important to needy Americans. Naturally, then, progressives cheered the administration’s recent announcement that 4 million Americans enrolled in Medicaidlast autumn. Ezra Klein, a sharp liberal analyst, spent an entire Bloomberg column throwing confetti:

[In] October and November alone, more than 4 million people signed up for Medicaid coverage…It’s “the biggest ACA success story that has not yet been told,” says Ron Pollack, head of Families USA, a nonpartisan health-care advocacy group…

If the point of health-care reform is covering people who need health insurance, the expansion in Medicaid coverage should be a huge win.

For starters, that number is extremely shaky. Weeks before Kathleen Sebelius blogged about the top-line figure, a lower-level administrator noted that “these numbers include new eligibility determinations and some Medicaid and CHIP renewals.” In other words, the total includes existing Medicaid recipients who just happened to renew their coverage through the new website.

And there’s another problem. Even among the brand-new enrollees, the number fails to distinguish enrollees who would have qualified for Medicaid anyway with the people who actually benefitted from Obamacare’s eligibility changes. Sean Trende dived deep into the data, and he conjectures that just 380,000 new enrollees genuinely owe their sign-ups to the ACA. That’s roughly 10% of the publicized figure.

Cutting through the spin and determining how many Americans the ACA actually helped is an important task. But another, far more fundamental question requires urgent attention: Does enrolling people in Medicaid actually help them at all?

The question sounds absurd. Of course Medicaid helps those who receive it! Everyone needs health insurance, and the program makes sure the poor are cared for.These are articles of faith not only among progressives—Klein concluded his column by lamenting that we can’t implement a new nationalized system with Medicaid at its core—but virtually all ordinary Americans.

But careful analysis shows these assumptions are rooted in more naiveté than actual evidence.

There is scant evidence that having Medicaid makes poor Americans any healthier. Healthcare expert Avik Roy literally wrote the book on this. The damning studies he cites don’t merely reveal that Medicaid patients fare worse than those with private insurance; this would come as little surprise. A host of factors make the poor disproportionately unhealthy, and the clumsy top-down controls that bureaucrats use to keep Medicaid costs from exploding are not exactly conducive to premium care.

Rather, Roy demonstrates that Medicaid patients often fare even worse than people with no insurance at all, even after controlling for potential confounds. This was the finding in a UVA report on people receiving major surgery, a UPenn study on colon cancer patients, a Columbia-Cornell analysis of patients with clogged arteries, and a Johns Hopkins study of lung transplant patients—to name a few. And therigorous new “Oregon experiment”that progressives expected would prove Medicaid’s merit? It only confirmed the bad news. Medicaid patients experienced “no significant improvements in measured physical health” relative to the uninsured control group.

To be fair, improving physical outcomes was not the only argument for passing the ACA. Imagine that extending government insurance to vulnerable Americans failed to improve their health but nevertheless increased their access to care, redirected them from inefficient emergency room trips into regular, preventative care, and/or brought greater financial security and peace of mind. Obamacare’s fans could still reasonably declare victory.

Have any of those benefits materialized?

For years, Americans were told ad nauseum that converting uninsured patients who overuse the ER into insured patients whose doctors could catch problems earlier would help contain exploding healthcare costs. But the very latest data from the ongoing Oregon study demolished this fiction. The researchers found that Medicaid enrollees landed in the ER 40% more than the uninsured control group, “including increases in visits for conditions that may be most readily treatable in primary care settings.” A central justification for the Affordable Care Act lies in tatters.

What about access to care? The news here looks little better. Like any health insurance, Medicaid functions by reimbursing doctors and hospitals at an agreed-upon rate after they perform needed services. But when state governments (like California) need to quickly cut costs, they frequently opt to slash the reimbursement rate that their Medicaid program pays out. Policymakers set arbitrary reimbursement rates that make state budgets look sounder but bear little relationship to the actual economics of medicine.

The entirely predictable result is that caregivers become reluctant to treat folks on Medicaid, knowing full well they won’t receive the going rate for their efforts. Fully a third of primary care physiciansaccepted no new Medicaid patientsat all in 2010-11, and anecdotalaccounts are piling up from cash-strapped states where vulnerable people cannot find doctors for whom it makes financial sense to treat them.

That leaves only financial security and peace of mind. Here, there is finally good news. The same Oregon experiment found that Medicaid patients experienced “lower rates of depression” and less “financial strain” relative to the uninsured.

Understandably, progressive commentators cling to this finding like a life raft. Krugman arguesthat we don’t call fire insurance a failure because it fails to prevent fires; rather, it is a financial product whose purpose is to cushion our bank accounts in case of disaster. Therefore, his comparison implies, financial and psychological benefits are all we should demand from health insurance.

This last-ditch effort to salvage a sinking narrative flunks the smell test. Since money is fungible, giving a subset of Americans free health insurance through the government effectively increases their income. And social science—not to mention common sense—clearly shows that financial gains push up happiness among low-income individuals. So any sizeable transfer of resources to relatively poor Americans is sure to reduce their financial strain and thus relieve some stress. This much is tautological.