Wisconsin Got It Right - National Center for Policy Analysis

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N AT I O N A L C E N T E R F O R P O L I C Y A N A LY S I S
Medicaid Expansion:
Wisconsin Got It Right
Issue Brief No. 151
by Devon M. Herrick
October 2014
A well-known provision of the 2010 Patient Protection and Affordable Care Act (ACA)
required states to expand Medicaid eligibility to individuals with incomes up to 138 percent of
the federal poverty level (FPL) or face the loss of federal matching funds for the joint federalstate health program for the poor.
However, the U.S. Supreme Court ruled that provision of Obamacare
unconstitutional.1 As a result, a number of states have opted not to expand
Medicaid eligibility or, as Wisconsin has done, only partially expand
eligibility, allowing many low-income residents to access private coverage
rather than be forced into Medicaid.
For states choosing to expand Medicaid eligibility to 138 percent of the
FPL, the federal government will pay 100 percent of the cost of benefits for
newly eligible enrollees through 2016.2 The enhanced federal match will
drop to 95 percent in 2017, and 90 percent in 2020 and thereafter.3
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However, states that choose partial expansion will receive their historic
matching rate for new enrollees.4 (The Federal Medical Assistance
Percentage for Wisconsin is 58 percent.) 5 In addition, other provisions
of the ACA provide generous, sliding-scale subsidies for low- to middleincome individuals to purchase private health coverage in a health insurance
exchange operated by the state or federal government.
Exchanging Medicaid for Better Coverage. Prior to Obamacare, most
legal residents of Wisconsin earning less than 200 percent of poverty were
eligible for coverage under the state Medicaid program, BadgerCare.6 But
in 2009 — only four months after the program was launched — funds ran
low and the state stopped accepting new enrollees.7
In 2014, rather than expand Medicaid to cover all legal residents earning
up to 138 percent of poverty, Wisconsin opened enrollment to childless
adults earning less than 100 percent of the poverty threshold.8 Though
these individuals were previously eligible, many were unable to enroll when
the state stopped accepting applications in 2009. Wisconsin also removed
from Medicaid an estimated 62,776 people earning more than 100 percent
of poverty.9 This allowed those earning above the poverty level to access
subsidized private coverage in the health insurance exchange. As a result of
the new reform, more poor Wisconsinites are now enrolled in Medicaid.
Wisconsin’s innovative Medicaid changes could serve as a model for
other states. In addition to increasing private coverage, partial expansion
will give Wisconsin more flexibility when it applies for a federal waiver to
continue its Medicaid reforms in 2017. Many experts believe the federal
government will be more receptive to waiver applications from states that
don’t accept the enhanced match.
Medicaid Expansion: Wisconsin Got It Right
Figure I
Premium per Family Member after Subsidy
$636
$528
$477
100% of Poverty Level
$419
133% of Poverty Level
$311
$396
$315
$233
Family of One
Family of Two
Family of Three
Source: Author's calculations based on the federal poverty level.
Exchange Subsidies Are More Generous than
Medicaid. The ACA requires individuals with incomes
below 133 percent ($15,556) of poverty to enroll in
Medicaid if it is available in their state. Individuals and
families who lack access to an employer-provided health
plan — and are ineligible for Medicaid — may purchase
coverage in the exchange.10 Subsidies are available to
individuals and families with incomes below 400 percent
of the federal poverty level — just over $95,400 for a
family of four in 2014. However, there are no exchange
subsidies for people earning below 100 percent of poverty
— because they are expected to enroll in Medicaid.
The subsidies in the exchange are very generous. The
most a low-income individual or family will pay is 2
percent to 3 percent of income toward a private health
plan that would otherwise cost a family of four $14,500
or more annually, according to the Congressional Budget
Office. Consider [see Figure I]:11
■■ Two percent of annual income is $233 for an
individual earning right at the poverty level.
■■ It is $311 for someone earning 133 percent.
■■ For a family of four, 2 percent of income at 100
percent of the poverty level is $477, while 2 percent
of income for families earning 133 percent of poverty
is $636.
2
Family of Four
Certainly this represents a
significant amount of money
for low-income families. For
instance, a $477 premium
payment by a family of four
at 100 percent of the federal
poverty level is $119 per year
per family member, while a
family of four at 133 percent of
the federal poverty level would
pay $159.
However, exchange enrollees
are getting a subsidy that, on
average, is roughly 50 percent
greater ($9,000 versus $6,000)
than the value of Medicaid.12
Indeed, the Congressional
Budget Office initially predicted
that about half of states would
follow a path similar to
Wisconsin’s and only partially
expand Medicaid to 100 percent
of poverty.13
Because of the greater subsidy in the exchange and the
contributions toward their premiums by the individuals
covered, there will be more funds available for the health
care of individuals in the exchange than if they were
covered by Medicaid. Thus, if the 62,776 Wisconsinites
with incomes above 100 percent of poverty who were
removed from Medicaid in 2014 instead enroll in private
coverage in the exchange, health care providers will
receive roughly $3 billion more over 10 years than
Medicaid would have paid.14
What’s Wrong with Medicaid? On paper, Medicaid
coverage appears far better than the private health
coverage most Americans enjoy — with lower costsharing and unlimited benefits.15 However, Medicaid
enrollees fare worse than similar patients with private
insurance.16 Medicaid enrollees tend to be in poorer health
and face barriers to care.
Poor Access to Care. Studies across the United States
show it is easier for the uninsured to make doctors’
appointments than it is for Medicaid enrollees.17
■■ Nationally, about one-third of physicians do not
accept new Medicaid patients.18 This is nearly double
the portion of doctors who have closed their practices
to new Medicare patients (17 percent) and to new
privately insured patients (18 percent).19
■■ Physicians are four times more likely to turn away
new Medicaid patients as they are to refuse the
uninsured who pay out-of-pocket (31 percent versus
8 percent).20
Although Medicaid enrollees’ access to physicians is
currently better in Wisconsin than in some other states,
access to care for new BadgerCare enrollees would
likely decrease if more people are added to the Medicaid
rolls and new patients flood doctors with requests for
appointments.
Low Medicaid Provider Fees. Low reimbursement
rates are one of several factors contributing to the shortage
of physicians willing to treat Medicaid enrollees.21
On average, Wisconsin pays physicians participating
in the fee-for-service Medicaid program only about
three-fourths as much (77 percent) as Medicare pays
for the same service. [See Figure II.] For primary care,
BadgerCare only pays about half (49 percent) as much
as private insurers for the same service.22 Low provider
reimbursement rates make it more difficult for Medicaid
enrollees to find physicians willing to treat them, limiting
their access to care.
states that expand Medicaid eligibility to adults who are
not disabled. Estimates of crowd-out are controversial
among analysts. Some researchers predict a high rate of
Medicaid substitution for private coverage, while others
believe the effect will be negligible. Estimates of crowdout for diverse populations vary:
■■ An analysis of past Medicaid expansions to mothers
and children in the early 1990s by economists and
Obama administration advisers David Cutler and
Jonathan Gruber found that when Medicaid eligibility
was expanded, 50 percent to 75 percent of the newly
enrolled dropped private coverage.23
■■ A recent analysis by Gruber and Kosali Simon
estimated crowd-out for the Children’s Health
Insurance Program averages about 60 percent.24
■■ Academic researchers Steven Pizer, Austin Frakt
and Lisa Iezzoni estimated the crowd-out of working
adults (the target of Medicaid expansion under the
ACA) could reach 82 percent.25
Thus, a conservative estimate is that Medicaid rolls
might have to rise by 1.4 people in order to reduce the
uninsured by 1 person.26
Benefits to Health Care Providers. Medicaid
payments to doctors and hospitals vary from state to state,
but, with only two exceptions (Alaska and Wyoming),
private insurers pay much higher physician fees than
As with low Medicare reimbursements, Medicaid
fees often do not cover the cost to physicians of treating
enrollees. Physicians must have more
Figure II
highly reimbursed, privately-insured
patients to offset the lower fees
Physician Fees for Wisconsin Medicaid and Medicare as a Percentage
paid by Medicaid. If more people
of Private Insurance Fees
are placed in Medicaid, many more
100%
physicians will balk at accepting
them.
Displaces Private Insurance.
In states which expand Medicaid
eligibility to all legal residents
earning from 100 percent to 138
percent of poverty, many of the new
enrollees will be individuals who
previously had private coverage.
Crowd-out (or substitution) occurs
when people who are already covered
by employer or individual insurance
drop that coverage to take advantage
of the public option. Crowd-out is
likely to be a significant problem for
81%
62%
Medicaid
Medicare
Private Insurance
Source: Author's calculations based on data from the Kaiser Family Foundation and the Lewin Group .
3
Medicaid Expansion: Wisconsin Got It Right
state Medicaid programs. If Wisconsin residents were
privately insured, they would have easier access to
doctors willing to treat them. The Wisconsin health care
economy — local doctors and hospitals — could expect
far more generous reimbursements than under Medicaid.
How much more? Although it varies by state (and
insurer), a rule of thumb is that private insurers generally
pay fees at least 50 percent higher — and often double —
what Medicaid pays.27
Conclusion. On paper, Medicaid coverage appears far
better than what most Americans enjoy — with lower
cost-sharing and unlimited benefits. But by almost all
measures, Medicaid enrollees fare worse than similar
patients with private insurance and often experience
worse health issues than patients with no insurance.
Wisconsin made a wise choice when it decided to forgo
a full Medicaid expansion in favor of a smaller program
that would maximize the availability of private coverage
for Wisconsin’s low-income residents.
Devon M. Herrick is a senior fellow with the National
Center for Policy Analysis.
4
Endnotes
MaryBeth Musumeci, “A Guide to the Supreme Court’s Affordable Care Act Decision,” Kaiser Family Foundation, July 2012. Available
at http://www.kff.org/healthreform/upload/8332.pdf. Also see I. Glenn Cohen and James F. Blumstein, “The Constitutionality of the ACA’s
Medicaid-Expansion Mandate,” New England Journal of Medicine, Vol. 366, No. 2, January 12, 2012, pages 103-104.
1.
Eligibility is technically cut off at 133 percent of the FPL, but individuals with incomes up to 138 percent of poverty may be eligible, due to a 5
percent income disregard.
2.
3.
Future Congresses have the right to renew, alter or cancel the federal match.
Robin Rudowitz, Samantha Artiga and MaryBeth Musumeci, “The ACA and Recent Section 1115 Medicaid Demonstration Waivers,” Kaiser
Family Foundation, February 5, 2014. Available at http://kff.org/report-section/the-aca-and-recent-section-1115-medicaid-demonstrationwaivers-issue-brief/.
4.
“Federal Medical Assistance Percentages (FMAP) by Quarter,” Wisconsin Department of Health Services, 2014. Available at http://www.dhs.
wisconsin.gov/ltcare/programops/fiscal/fmap.pdf.
5.
Grace Wyler, “In Wisconsin, Scott Walker Looks for His Own Way to Insure the Poor,” Time, November 4, 2013. Available at http://nation.
time.com/2013/11/04/in-wisconsin-scott-walker-looks-for-his-own-way-to-insure-the-poor/.
6.
Patrick Marley and Guy Boulton, “State suspends BadgerCare Plus Core Enrollments,” Milwaukee Journal Sentinel, October 5, 2009. Available
at http://www.jsonline.com/news/wisconsin/63529162.html.
7.
“Department Provides Update Regarding Operationalization Of Governor Walker’s Entitlement Reforms,” Wisconsin Department of Health
Services, July 16, 2014. Available at http://www.dhs.wisconsin.gov/News/PressReleases/2014/071614.htm.
8.
9.
Ibid.
MaryBeth Musumeci, “A Guide to the Supreme Court’s Affordable Care Act Decision,” Kaiser Family Foundation, July 2012. Available at
http://www.kff.org/healthreform/upload/8332.pdf.
10.
“Annual Update of the HHS Poverty Guidelines,” Federal Register, January 22, 2014. Available at https://www.federalregister.gov/
articles/2014/01/22/2014-01303/annual-update-of-the-hhs-poverty-guidelines.
11.
Charles Blahous, “Medicaid Under the Affordable Care Act,” in Jason J. Fichtner, ed., The Economics of Medicaid: Assessing the Cost and
Consequences (Arlington, Va.: Mercatus Center at George Mason University, 2014), pages 83-97.
12.
“Estimates for the Insurance Coverage Provisions of the Affordable Care Act Updated for the Recent Supreme Court Decision,” Congressional
Budget Office, July 2012. Available at http://www.cbo.gov/sites/default/files/43472-07-24-2012-CoverageEstimates.pdf.
13.
Author’s calculations based on 62,776 new exchange enrollees earning above 100 percent of poverty and removed from BadgerCare Plus.
Private insurers tend to pay fees that are 50 percent higher than fee-for-service Medicaid. Thus, all else equal, the amount of funds spent on care
should be higher under private coverage, even after subtracting the enhanced federal Medicaid match the state will forgo.
14.
Evelyne P. Baumrucker and Bernadette Fernandez, “Comparing Medicaid and Exchanges: Benefits and Costs for Individuals and Families,”
Congressional Research Service, February 28, 2013. Available at http://www.fas.org/sgp/crs/misc/R42978.pdf.
15.
Kevin Dayaratna, “Studies Show: Medicaid Patients Have Worse Access and Outcomes than the Privately Insured,” Heritage Foundation,
November 7, 2012. Available at http://www.heritage.org/research/reports/2012/11/studies-show-medicaid-patients-have-worse-access-andoutcomes-than-the-privately-insured.
16.
Brent R. Asplin et al., “Insurance Status and Access to Urgent Ambulatory Care Follow-up Appointments,” Journal of the American Medical
Association, Vol. 294, No. 10, September 14, 2005. Available at http://jama.ama-assn.org/cgi/content/abstract/294/10/1248.
17.
Sandra L. Decker, “In 2011 Nearly One-Third Of Physicians Said They Would Not Accept New Medicaid Patients, But Rising Fees May
Help,” Health Affairs, Vol. 31, No. 8, August 2012, pages 1,673-1,679.
18.
19.
Ibid.
5
Medicaid Expansion: Wisconsin Got It Right
20.
Ibid.
Peter J. Cunningham and Len M. Nichols, “The Effects of Medicaid Reimbursement on the Access to Care of Medicaid Enrollees: A
Community Perspective,” Medical Care Research and Review, Vol. 62, No. 6, December 2005.
21.
Author’s calculations using data from the Kaiser Family Foundation and the Lewin Group. See “Medicaid-to-Medicare Fee Index, 2008,”
StateHealthFacts.org, Kaiser Family Foundation. Available at http://www.statehealthfacts.org/comparetable.jsp?ind=196&cat=4.
22.
David Cutler and Jonathan Gruber “Does Public Insurance Crowd Out Private Insurance?” Quarterly Journal of Economics, Vol. 111, No. 2,
May 1996, pages 391-430.
23.
The actual rate varied depending on the conditions governing expansion and the populations covered. Jonathan Gruber and Kosali Simon,
“Crowd-Out 10 Years Later: Have Recent Public Insurance Expansions Crowded Out Private Health Insurance?” Journal of Health Economics,
Vol. 27, 2008, pages 201-217.
24.
Steven D. Pizer, Austin B. Frakt and Lisa I. Iezzoni, “The Effect of Health Reform on Public and Private Insurance in the Long Run,”
Health Care Financing & Economics, Working Paper No. 2011-03, February 17, 2011. Available at http://www.hcfe.research.va.gov/docs/
wp_2011_03.pdf.
25.
A ratio of 1.4 new Medicaid enrollees to reduce the uninsured by 1 assumes a crowd out rate of 29 percent [1– (1/1.4)]. One analysis found
about one-quarter of the newly insured children in families earning less than 200 percent of poverty had substituted public coverage for private
coverage. See Peter J. Cunningham, James D. Reschovsky and Jack Hadley, “SCHIP, Medicaid Expansions Lead to Shifts in Children’s
Coverage,” Center for Studying Health System Change, Issue Brief 59, December 2002, page 4. Available at http://www.hschange.com/
CONTENT/508/508.pdf.
26.
Wisconsin Medicaid fee-for-service physician fees are only about 77 cents on the dollar of what Medicare reimburses a physician for the
same service. Medicare reimburses physicians about 81 percent of what a private insurer reimburses physicians for the same service. See
“Medicaid-to-Medicare Fee Index, 2012,” StateHealthFacts.org, Kaiser Family Foundation. Available at http://kff.org/medicaid/state-indicator/
medicaid-to-medicare-fee-index/.
27.
6
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7
Medicaid Expansion: Wisconsin Got It Right
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