SADOW: The Medicaid Expansion Narrative Is Beginning To Slip Away From Edwards

Medicaid expansion in Louisiana has proven itself a net negative. But it also may have become a net negative campaign issue for Democrat Gov. John Bel Edwards with a straw that may break the camel’s back.

Since Edwards unilaterally expanded Medicaid just after entering office, his Administration has waged a relentless propaganda campaign designed to convince the public that its benefits outweigh its costs. It has tried doing so on three fronts: (1) it’s better for the public’s health, (2) it saves the state money, and (3) it creates economic benefits.

All three propositions have been debunked, repeatedly. The first is the most nebulous, since we can’t go back in time and create an experiment where we compare health outcomes for those eligible who did and didn’t participate in it among Louisianans.

But Oregon did. Its groundbreaking Health Insurance Experiment showed people on Medicaid had no better physical health outcomes than those both uninsured and users of private health insurance (nor improved their chances of employment) similarly situated. There’s no reason Louisiana should differ.

Louisiana’s Department of Health has tried to imply Medicaid improved matters by disseminating statistics on various diagnoses by enrollees, hinting that these never would have happened without expansion. Of course, that’s a bad assumption, as underscored when I calculated a significant portion of those who signed up for expansion previously had insured themselves, either individually, through an employer, or through another government program (47 percent total). Subsequently, using a different methodology, Chris Jacobs of the Pelican Institute came to largely the same conclusion (35 percent previously enrolled privately) which mirrors research done in other states. This puts the unnecessary payments in the $145 million to $402 million range annually.

Also, much of the expansion population already had access to the same services, thanks to Louisiana’s peculiar one-of-a-kind state law that gives free care to anyone below the 200 percent Federal Poverty Limit at a state charity hospital. Finally, as it turns out, expansion conveys no greater health benefits than 30 minutes of brisk exercise daily – but obviously costing taxpayers much. Thus, at best, expansion has brought marginal health gains at tremendous taxpayer expense; at worst, it wasted money.

And it hasn’t saved the state money. LDH initially tried to mislead the public into thinking, because of complicated juggling of different enrollees at different reimbursement rates, that expansion would make the state more money from spinoff activity derived from the federal subsidy than it would have to pay in its match.

But it avoided ever admitting the source of the state match came from a tax increase on most hospitals, health insurance policyholders, and on the general public (because of the managed care system issues policies for regular Louisiana Medicaid recipients also charged that higher tax for every managed care policy written). The only reason the state “made” money was because it raised taxes a couple hundred million dollars.

Even this dodge has disappeared, due to the escalating match rate Louisiana must pay. At the start of 2020, the latest available statistics suggest that the state’s share of around $310 million annually more than offsets the additional revenue from the tax increases.

What’s more, only recently has the state begrudgingly admitted it has tolerated, if not encouraged, a significant rate of inappropriate, if not fraudulent, payments that made “savings” even less likely. Nearly $100 million went out the door, waste amplified by two significant policy changes made by Edwards: a reversal of more stringent eligibility controls instituted by his predecessor and automatic importation of food stamps recipients into expansion along with that program’s eligibility error rate.

Add into this the unnecessary payouts to the previously-insured as noted above. In the final analysis, expansion has cost, not saved, the state money with a gap that will grow more negatively with each passing year.

Finally, LDH has tried to claim all the federal money rushing into the state as a result of expansion has stimulated enough economic activity to make it worthwhile. It based this on a report it commissioned with researchers at Louisiana State University led by former Revenue Estimating Conference member James Richardson.

But, as I pointed out just after the report’s release, it failed to include the cost of the tax increase, or that the federal dollars coming in also rely in small measure on transferring what Louisianans earn to the federal government, or the effects of the 25 to 100 percent FPL segment that once received care from charity hospitals now utilizing expansion money, or the substitution effect of dropped policies from people privately paying to passing that along to taxpayers. Although possibly the work product simply was shoddy, more likely the report included none of these factors because LDH told the researchers not to put in these.

That’s defensible behavior, if in turn it reduces the report to rubbish that tells little about the genuine impact of expansion. However, what becomes troublesome is an error initially noticed by Jacobs of the Pelican Institute, in that the report incorrectly accounts for federal dollars withheld when people switched from private insurance obtained through the federal health insurance exchange, which greatly inflates any alleged economic benefit.

Worse, Jacobs spent more than the next year trying to the report authors to acknowledge and correct the mistake, neither of which have happened, including wrestling with LDH to get information about the report. Not only does this stonewalling reflect badly on the researchers and LDH (the controversy could have played a role in Richardson’s decision to depart the REC after some three decades of service), but it may be illegal as well.

That’s what one of Edwards’ competitors, Republican Rep. Ralph Abraham, aims to find out. In his capacity as a Member of Congress, he requested that the Department of Health and Human Services, which distributes money for expansion, look into whether the report’s issuance violated a portion of the appropriation act for the agency. The act prohibits using funds to release deliberately false or misleading information.

Researchers can make errors. However, an unwillingness on their part to acknowledge that or to attempt a correction or at least an explanation, or by the agency sponsoring that research, presents at the very least an ethical concern and, the DHHS inspector general will ascertain, whether it breaches the law.

And it has become a campaign issue because although LDH issued the work, the buck stops with Edwards. His opponents not only can point to all the evidence above displaying poor policy-making judgment in expanding Medicaid, but also paint Edwards as so obstinate in trying to repudiate that assessment that he turns to unconvincing and possibly illegal activity as rebuttal material.

Clearly, Edwards has used expansion as a campaign tactic: create a new benefit given to hundreds of thousands of people and then remind them often enough about that to get them to vote for him this fall. Conventional wisdom has maintained that this will win him more votes than he loses. That will change if DHHS sanctions LDH over the report.

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