States face a "Sophie's Choice" on Medicaid expansion

My most recent post made the case that the economic case for expand Medicaid is not a straightforward one. Now let's consider the moral calculus surrounding Medicaid expansion from three perspectives: that of individual prospective Medicaid recipients, taxpayers and society in general. In today's post I will focus just on the first of these.

The fact is offering would-be Medicaid beneficiaries private coverage would be far more humane than shoveling them into a program that already serves the poor so badly. Obamacare gives governors a "Sophie's choice." If they expand Medicaid, they will be helping those below poverty who otherwise would have been uninsured, but they will be hurting those from 100-138 percent of poverty by preventing them from obtaining heavily subsidized private coverage through the exchanges. Thus, states that already have taken their Medicaid eligibility standards close to poverty will harm many more people than they help by acceding to the expansion.

All the foregoing are empirical claims. Here's the evidence I used to reach this conclusion.

Does Medicaid Make People Better Off?

Medicaid is intended to make people better off. It would be ludicrous to squander hundreds of billions of dollars a year on a program that didn't. However well-intentioned though, Medicaid does a lousy job of providing access to care-especially compared to private coverage. For instance:

  • Currently, nearly one-third of doctors are unwilling to take new Medicaid patients;
  • For children, it's even worse-the GAO reports about 79 percent of doctors accept all privately insured children as new patients, compared to about 47 percent for children in Medicaid and CHIP[2]; and
  • Consequently, emergency room use is at least 50 percent higher for Medicaid patients compared to those with private coverage (or, for that matter, those without coverage).[3]

So there's little question that in many states, Medicaid essentially treats recipients like second class citizens-especially compared to those with private health insurance.

The more important question, however, is whether it improves health. (After all, even a doctor with lousy bedside manner might well be worth going to if s/he has superior clinical skills.)

Here, the evidence is mixed. There's at least a half dozen studies that show Medicaid patients have worse health outcomes than those with private insurance and sometimes, even than those with no insurance whatsoever. In some cases, these studies even show an elevated risk of death among Medicaid patients compared to the uninsured. The most prominent of these is a University of Virginia study of nearly 900,000 patients, published in Annals of Surgery, showing that surgical patients on Medicaid endured a 97 percent higher likelihood of in-hospital death than patients with private insurance and a 13 percent greater chance of death than those with no insurance at all.

Unfortunately, these are all so-called "observational studies" that compare people with Medicaid to people who are uninsured or have private coverage. Researchers do their best to make these comparison groups "statistically equivalent," e.g., by taking into account obvious differences in the age, gender, race, or other important characteristics within each group. But there's always a risk that some unobserved factors that researchers are unable to take into account may be driving the results.

For example, if people on Medicaid happened to be more likely to smoke than those without insurance, this could elevate their mortality risk, but it would have nothing to do with being on Medicaid. A study that took into account this "selection bias" (i.e., difference in smoking behavior that has nothing to do with being on Medicaid per se) would, therefore, draw a very different conclusion about the impact of Medicaid than one that did not.

There's been a fierce debate among researchers on this issue, with progressives arguing that Medicaid ultimately is admittedly flawed but beneficial to health, while others have argued the evidence is not so clear (see Scott Gottlieb and Avik Roy, here, here, and here). I won't get into the statistical weeds, but three studies that used what are called "quasi-experimental" approaches to correct for unobserved characteristics have both produced evidence that Medicaid improves health and lowers mortality risk for people who otherwise would be uninsured. But these studies focused on narrow populations (patients with HIV/AIDS, children and newborns), so their findings cannot necessarily be extrapolated to the average person who becomes newly Medicaid-eligible. The HIV/AIDS study also confirmed the superiority of private insurance over Medicaid (the studies on newborns and children did not address this question).[4]

To complicate matters, another study compared what happened in three states that expanded Medicaid to three comparison states that did not. But this produced mixed results, with one state showing a statistically significant decline in general population mortality risk associated with the Medicaid expansion, while another showed a statistically significant increase in mortality risk and the third showing no statistically significant change. Again, it's hard to draw completely bullet-proof conclusions, since a) the results varied by state; b) there's a dispute over how "comparable" these comparison states were and c) the mortality measure was a county-level estimate (as opposed to tracking individuals who enrolled in Medicaid vs. those who did not). One respected researcher has dismissed this study's findings as "uninformative" in light of all the flaws in its research design.

Which gets us to the best study that has ever been done on this topic using the "gold standard" of scientific evidence: a randomized controlled trial. Oregon recently expanded its Medicaid program to add 10,000 more people, using a lottery to determine who among those technically eligible would actually get coverage (the state did not have funds to add more people than this, hence a lottery was thought to be the fairest way to make this determination). This randomization feature allowed researchers to compare the newly-enrolled group with an equivalent group not selected knowing that there was no selection bias that might produce a spurious result. Medicaid enrollment resulted in improvements in physical and mental health, but had no statistically significant effect on mortality risk. Moreover, two-thirds of the improvement in self-reported health came after Medicaid enrollment, but before any actual Medicaid utilization; this suggests that "winning" the Medicaid lottery rather than genuine changes in physical health may have been an important contributor to the result.

My take-away from all this literature is that compared to being uninsured, Medicaid likely improves physical and mental health to some degree and may reduce mortality risk (the latter is much less certain). However, compared to private insurance, being on Medicaid is likely worse for health and mortality risk.

Sophie's Choice: The Moral Calculus from a Medicaid Recipient Perspective

This is why I reached the conclusion that offering would-be Medicaid beneficiaries private coverage would be far more humane than forcing them into an already-dysfunctional program. "Force" may seem like too harsh a word, but it should be kept in mind that Obamacare's rules prohibit anyone eligible for Medicaid from obtaining coverage through the exchange. Thus, states that elect to expand Medicaid effectively are giving those in the 100-138 percent of poverty group a one-way ticket into Medicaid. In contrast, letting such individuals buy their coverage on the exchange would maximize their freedom of choice of plans and providers, while the generous subsidies built into Obamacare would ensure such coverage remained affordable. Of perhaps greater importance, private coverage through the exchanges would create greater work incentives and fewer disruptions in coverage, as cogently described by Avik Roy. In the words of Arthur Brooks, it would maximize their chances of earned success (putting barriers in the way of earned success is deeply immoral for all the reasons he has eloquently articulated) Moreover, private coverage would be far more dignified than giving them a card that is so widely shunned by providers across the health system.

So back to Sophie's choice. The administration effectively has said that states either can make their uninsured poor better off by expanding Medicaid or they can make their uninsured near poor better off by not expanding Medicaid (since these individuals won't be forced onto Medicaid, but instead can get greater subsidies for private coverage through the exchange). They cannot do both. Just as Sophie could save one child only by sacrificing another, the Obamacare rules have created a situation in which governors can help one group only by hurting the other. Few would feel comfortable making this agonizing choice and fewer still would dare question the morality of whatever choice Sophie or a governor made under the nasty rules of the game set for them.

For states that can afford it, the best choice might be to cut the Gordian knot by refusing to expand coverage but then use state-only dollars to expand Medicaid for those below poverty. They will forego the generous federal match for this modest expansion, but that might be more palatable than accepting those matching funds knowing that some people literally will die if they are forced into Medicaid when private insurance might otherwise have been an option.

I realize this logic may not convince every reader. These skeptics will have to wait for my next piece that examines the moral calculus from the perspective of taxpayers and society.

Footnotes

[1] See, for example, Point-Counterpoint: Austin B. Frakt and Aaron E. Carroll, Sound Policy Trumps Politics: States Should Expand Medicaid. Journal of Health Politics, Policy and Law (2013) 38(1): 165-178. Sadly, this mentality also has been exhibited by former opponents of Obamacare, such as Arizona governor Jan Brewer, who alluded to a "a return on investment of more than 10-to-1" in announcing her recent decision to accept the expansion.

 

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