Medicaid Expansion and Obamacare Premiums

Of all the false economies the Obama administration touted in favor of the 2010 Affordable Care Act, the latest claim is a whopper. According to a paper published by the U.S. Department of Health & Human Services in August, states which expanded Medicaid dependency experienced lower premiums for individual health insurance offered in Obamacare exchanges than states which did not expand Medicaid—seven percent lower premiums. In fact, the increase in Medicaid dependency is a growing burden on taxpayers, while Obamacare’s exchanges are dwindling into deserved obscurity.

Some background: Medicaid is a fully subsidized welfare program, funded by taxpayers through both federal and state governments, which provides health benefits to low-income residents. As written in 2010, the Affordable Care Act forced states to increase the number of people on Medicaid, by increasing the income limit for eligibility. Health insurance offered in Obamacare’s exchanges is purchased by people above the Medicaid income limit, with a mix of their own money plus refundable tax credits.

When the law was passed, the Congressional Budget Office estimated the number of people dependent on Medicaid would increase to 52 million this year, an increase from 35 million if the law had not passed. It estimated the number of people enrolled in Obamacare exchange plans would be 21 million.

In June 2012, the Supreme Court determined (NFIB vs. Sebelius) that the law could not compel states to expand Medicaid eligibility. As a result a number to states decided not to do so. In February 2013, the CBO updated its estimate of Medicaid dependents in 2016 to just 45 million, but increased its estimate of Obamacare exchange enrollees to 24 million. However, it also dropped its estimate of the number of people with employer-based insurance this year by five million, to 154 million, and increased the estimated number of uninsured by nine million, to 31 million.

And the estimates have become worse. In March 2016, the CBO estimated the number of people dependent on Medicaid this year is 68 million, almost one-third more than it estimated before the Supreme Court made the expansion optional for states! The estimated number of people on exchanges has dropped to 12 million.

The CBO now estimates that federal spending on Medicaid this year is $279 billion, of which $64 billion is due to Obamacare’s expansion of dependency. Meanwhile, only half the originally estimated number of people are enrolled in exchange coverage. The administration is cheering that many more people became entirely dependent on taxpayers for health benefits, and many fewer received just partial subsidies, than originally estimated.

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For the pivotal alternative to Obamacare, see the Independent Institute’s widely acclaimed book, Priceless: Curing the Healthcare Crisis, by John C. Goodman.