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Medicaid Expansion Can Backfire: Witnesses

Cautionary tales of how two states expanded their Medicaid programs in the past and lived to regret it made a big impression on members of the Florida Senate Select Committee on the Patient Protection and Affordable Care Act.

"You've given us some scary information," Sen. Aaron Bean told Tarren Bragdon, president and CEO of the conservative Foundation for Government Accountability in Naples.

Bragdon showed graphs displaying how fast the enrollment and expenses went up in Arizona and Maine after those states extended coverage to childless adults under the poverty level.  Covering those adults turned out to be 2 1/2 times more costly than the forecast, he said.

"Projections by advocates are historically way off," Bragdon said. "Costs will go way up."

Appearing by video via Skype, an Internet 2-way communication program, a Maine official added her tale of woe. Mary Mayhew, secretary of Health and Human Services there, said that state's expansion in 2001 was supposed to be "cost-neutral," paid for through a tobacco tax and an increase in federal funds.

But those funding sources didn't begin to cover the explosion in costs, Mayhew said, which led the state to cut the pay for doctors and hospitals and start waiting lists forthe elderly and disabled patients who needed services the most. To top it off, she said, the federal government ratcheted back its funding, leaving the state with a half-billion-dollar  debt.

Ironically, she said, the Medicaid expansion did not significantly reduce the uninsured population or hospitals' burden of charity care -- two of the main arguments that led the state to try it.

Bragdon and Mayhew were the final two witnesses at Monday's Tallahassee hearing by the Senate Committee on the Affordable Care Act.  The hearing opened on quite a different note, with studies showing how Medicaid expansion could bring an economic boost to the state as well as help the uninsured.

Joan Alker, co-executive director  of the Georgetown Center for Children and Families, reprised for the panel the findings of her study released in November. Supported by two Florida health foundations, the research team projected that the federal support for the project would bring the state a $16 return for every $1 it cost ( See Researchers: Medicaid Expansion Would Pay Off for Florida).

At Monday's hearing, Alker also noted that there is a life-and-death  component to the decision. A "star-studded" research team from Harvard found a significant reduction in early deaths among the under-65 adults in Oregon covered under a Medicaid expansion.

Another witness who testified in favor of expansion was Greg Mellowe, director of Health Research and Analysis for the liberal Florida Center for Fiscal and Economic Policy. Contrary to what most people think,  he said,  "the Medicaid budget is not spiraling out of control."

He said Medicaid spending went up because enrollment shot up during the recession, which cost many their health insurance along with their jobs.

"Per-person spending is actually less this year than in 2004-05," Mellowe said.

Both witnesses reminded the senators that Florida has the worst rate of uninsured of any state except Texas. Anticipating the testimony on Arizona and Alaska that would come later in the hearing, they said there are important differences this time.

For one thing, said Alker, the Medicaid program in Maine was still using the most inflationary style of payment, fee-for-service.  By contrast, a majority of Medicaid patients in Florida are already enrolled in private managed-care plans and the state hopes to obtain federal permission to move all to managed care by the time Medicaid expansion would take effect, in 2014.

In between the pro-and-con research teams, hospital executives begged the committee to expand Medicaid, saying it is the only possible way to keep hospitals afloat. The Affordable Care Act will take  certain funding away from hospitals starting next year because the assumption was that they'd have a flow of new income from the expansion of coverage to patients who were formerly uninsured.

For detailed coverage of the hospital executives' testimony, see this Sarasota Herald-Tribune article.

Carol Gentry, founder and special correspondent of Health News Florida, has four decades of experience covering health finance and policy, with an emphasis on consumer education and protection.