Skip to main content

Medicaid Expansion: A Raw Deal


For the sake of most Oklahomans, our state legislature should continue to hold out against the unrelenting pressure of monied interests and refuse to expand the state’s Medicaid program under Obamacare. Why? It’s simple, really, if someone is robbing my house, moving from room to room and taking my valuables, I’m not going to point out a room they missed and invite them to steal even more. Expanding Medicaid will just allow the health industry to take even more from us than they already do.

That’s the fundamental, underlying message of my most recent paper, Medicaid Expansion in Colorado: An Exercise in Futility. In addition to providing some context about just how rich the health industry is in this country, I use plain language to restate the conclusions of an official study from a Colorado state agency to point out that Medicaid expansion advocates (mostly from the health care industry) are selling us a false bill of goods.

The false claim is that if we expand Medicaid, currently uninsured patients who do not pay their bills will have their bills paid by Medicaid. This will allow hospitals to lower prices for the rest of us since prices are high at least partly to make up for the freeloaders.

The Colorado study shows that when Medicaid was expanded, hospitals raised their prices even faster than they had in the past, exactly opposite the claims of the health industry’s Medicaid expansion advocates. And this hasn’t just happened in Colorado. A study out of Arizona shows exactly the same phenomenon. I suspect we’d find the same in nearly every one of the 36 Medicaid-expanding states. And, we’d see the same thing right here.

Surely, you might think, there has to be something wrong with these studies. After all, it makes sense that prices have to be raised to make up for losses suffered when some don’t pay their bills. There’s even a name for it, “cost shifting”, where the costs of treating the uninsured are shifted to the insured. Surely that’s a real phenomenon and Medicaid expansion could reverse it.

But these studies expose the reality that cost shifting, like other explanations of why health care is so expensive, is used by the health care industry to confuse us. They say new technology raises costs, but in every other industry since the dawn of man, improved technology lowers costs and prices. They say costs are high because they have to treat everybody in emergency rooms, but the Reagan-era law they reference only says someone has to be treated and stabilized if they have life-threatening injuries. They claim that emergency room treatment is very expensive, but never explain why, even when emergency rooms experience high volumes, where high volumes reduce per-unit costs in other industries.

Still, you might be thinking, none of this explains why health care prices would rise even as health care gets more money from Medicaid. That’s true. So far I’ve only given examples of how we are easily distracted. 

The fact is that when the health industry gets more government money, it raises prices because that’s how the industry claims all the money it was making before PLUS the new Medicaid money. That’s how it is that health care claims nearly a fifth of Americans’ incomes. That’s how it is that 13 of the 15 highest-paid professions are in health care. That’s how it is that less than 10 percent of employed Americans (those in health care) claim twice that level of America’s total income.

The most difficult argument to overcome in favor of expanding Medicaid, though, is that for a mere $100 million, Oklahoma will get $1 billion of its own money back from the federal government. This money, it is said, will benefit all Oklahomans as it is spent here, and improve our economy. This is tough to refute, but it’s not impossible.

First, our unemployment rate is below 4 percent, essentially at full employment. More money in health care will only distort the economy more than it is now, and it’s not as if people are dying from lack of health care. The industry has the money to take care of anyone who really needs help, as shown in an earlier 1889 Institute study of hospital finances.

Second, the health industry is so wealthy that it’s debatable just how much new money spent on it would stay in the state. Odds are, it would just go to buy vacation homes in Jackson Hole or in The Hamptons.

Third, “a billion for a mere tenth of that” sounds a lot like “you must buy this since it’s on sale.” The result is rarely a happy one. And this is especially true when it’s been demonstrated that the sale is a raw deal.

And that’s the upshot of the Colorado and Arizona studies. Medicaid expansion is a raw deal. It only allows the richest sector in our economy to take even more from us, not out of necessity, and not for any benefit to the rest of us, but simply because it can.

Byron Schlomach is Director of the 1889 Institute and can be reached at bschlomach@1889institute.org.


Popular posts from this blog

Lies We Tell in Government, and Our Debts to Truth

HBO’s mini-series,  Chernobyl ,  is a drama depicting  the disastrous  1986  explosion ,  and  hero ic efforts to control the  resulting  meltdown ,  of the Chernobyl nuclear power plant in Ukraine  (then part of the Soviet Union ).  A flawed man, but true hero,  Valery  Alexeyvich   Legasov , worked tirelessly to ameliorate the disaster’s consequences and  chiefly  investigated its cause. He was  Deputy Director of the  Kurchatov  Institute of Atomic Energ y , a Soviet elite, who  is portrayed at the end of  the  series making a dramatic speech at a trial about how the nuclear reactor exploded, when  such an explosion in that type of reactor  should not have been possible. In the course of the series, the audience  learns  that the reactor had a design flaw that had been covered up by the Soviet State (true).  The audience also learns  that...
Read more

1889 Institute's Statement Regarding School Closures

The 1889 Institute, an Oklahoma think tank, has released the following statement regarding Joy Hofmeister’s proposal to keep schools closed for the remainder of the school year. We at the 1889 Institute consider Joy Hofmeister’s proposal to close Oklahoma’s schools for the rest of the school year a gross overreaction to the coronavirus situation. Even in the best of times and circumstances, suddenly shifting every student in the state from traditional classrooms to online distance learning will have negative educational consequences. This in addition to the economic burden on two-earner families forced to completely reorder their lives with schools closed. We believe many of our leaders have overreacted to worst-case scenarios presented by well-intended health experts with no training or sense of proportion in weighing the collateral damage of shutting down our economy versus targeting resources to protect the truly vulnerable. We say reopen the schools and stop the madness. ...
Read more

Present Reforms to Keep the Ghost of State Questions Past from Creating Future Headaches

Oklahoma, like many western states, allows its citizens to directly participate in the democratic process through citizen initiatives and referendums. In a referendum, the legislature directs a question to the people — usually to modify the state constitution, since the legislature can change statutes itself. An initiative requires no legislative involvement, but is initiated by the people via signature gathering, and can be used to modify statute or amend the constitution. Collectively, the initiatives and referendums that make it onto the ballot are known as State Questions.   Recently, there have been calls to make it more difficult to amend the constitution. At least two proposals are being discussed. One would diversify the signature requirement by demanding that a proportional amount of signatures come from each region of the state. The other would require a sixty percent majority to adopt a constitutional amendment rather than the fifty percent plus one currently in place. ...
Read more

Insider Dealing: Car Dealer Protectionism Run Amuck

Imagine you wanted to open a restaurant. Imagine you were allowed to cook the food yourself, but you were prohibited by law from serving it to customers yourself; instead, you were forced to hire a waiter. Next, imagine that the waiter wasn’t pulling his weight, but you weren’t allowed to fire him unless you could prove you had good cause, and the people you had to prove it to were the waiters friends, who also happened to be employed as waiters. Finally, imagine that you had to get permission from the waiter before you could hire another waiter. If he refused, you could appeal his decision… to that same group of his waiter friends. Each of these imaginary scenarios is a close analogy to the very real laws that hinder the distribution of new cars.   Car manufacturers are not allowed to sell directly to consumers. They can make the vehicle, but then must hire dealers (a.k.a. waiters) to interact with consumers. These state-mandated middlemen will surely want a cut of each s...
Read more