The Incalculable Health Costs

The slow collapse of Medicaid.

Always generous Uncle Sam will pay for almost any health ailments for some Americans. That’s the comforting message those recipients---about 16 million low-to-middle income folks. Eventually, this little-noticed part of Obamacare will cost billions, probably eventually trillions of dollars. To start, the federal and state governments between 2010 and 2019, will dish out a mere $6.8 billion.  That the best determination of Richard S. Foster, chief actuary for the Centers for Medicare and Medicaid (CMS), U.S. Department of Health and Human Services. Those figures are tucked away in tables accompanying lengthy reports. But they represent only a tip of the potential mountain of outlays that lie ahead.

Public concern has focused primarily on the law’s provisions relating to charges other individuals will be demanded to fork over for medical treatment. Twenty states are mounting legal challenges to Obamacare’s mandate to buy health insurance. In the battleground state of Missouri seven in ten voted Aug. 3 against the mandate). In Virginia, a federal judge August 2 allowed the state’s lawsuit defying the insurance mandate to go forward.

Not surprisingly, few, if any, of those 16 million who are promised magnanimous care are complaining. Taxpayers, however, should be, if they are made aware of the future Olympian costs. The easily brushed-aside Medicaid program, together with the so-called CHIP health program for children, offer the most comprehensive U.S. health programs in existence. Among the entitled 16 million (although it maybe as high as 18 million), Medicaid will be paying, beginning in 2014 for all health care costs of anyone making up to 133 percent  (although a footnote says 138 percent) of the Federal Poverty Level (now $14,404). After three years, it will be $19,877 a year. For a typical American family of four, Medicaid will care for those earning up to $47,200 by 2017, according to a senior specialist at CMS. In 2017, the amount paid by the federal government will decrease slowly each year, reaching 90 percent in 2020 where it will remain. The states will have to pick up the balance from then on, in this Federal-state sharing program that is Medicaid. Only a consummate bureaucrat could have concocted this intricate system.

Some 13 percent of all children up to age 18 live in poverty. Ten percent are white, Thirty-five percent are black and are more subject to health problems. Twenty-nine percent are Hispanic. Fifty percent of blacks are in female household families. These are the prime customers of Medicaid.

Even families earning incomes up to $88,000 will have their medical bills largely subsidized under the new Medicaid program. Usually expensive long-term care will not be a financial problem for these lucky ones either; free care in a nursing home for life is a guarantee. This enormous give-away begins in 2014. Families making up to $88,000 will get refundable tax credits. IRS will give money to insurance companies in new state “exchanges” to enable the higher-earning Medicaid families to purchase their health care. So, IRS will be taking on another social engineering job, just as it has run the Earned Income Credit (EIC) program. This, even though IRS has not had a stellar record in money management. In 2005, for instance, its Inspector General found 28 percent of the $40 billion paid out for Earned Income Credit was fraudulent, Accounting reported.

Medicaid, plugging along since its creation in 1965, is jointly funded by both the federal and state governments. Among the groups currently served by Medicaid are eligible citizens and resident aliens, including relatively low-income adults and their children and people with certain disabilities. Even before Obamacare gets into gear, Medicaid is already the largest source of dollars for medical services for the needy. The fastest growing area of Medicaid is nursing-home coverage because of the aging World War II and Korean Conflict era generation. But an even larger explosion in cost for taxpayers will come beginning in 2020 when some of the baby boom generation begins to seek nursing home care.

For 2008, (latest figure available) Medicaid spending for nursing home care was $56.3 billion, according to CMS. Giant insurer MetLife says the average cost of a year in a nursing home was approximately $80,000 in 2009. And, it said, price rollbacks in other services throughout the country have not affected long-term care service providers. If nursing home care costs increased by only 3 percent a year, by 2011 they would exceed $84,000.  If, for instance,t only 2 percent of the now living 70 million baby boomers are eligible for Medicaid and need nursing home care. Costs to the taxpayers could total uncountable trillions of dollars. Looking far ahead, the number of people 65 and older in America is calculated to double, from 39 million now to 89 million by 2050. Woe be to then-living taxpayers.

Don’t Medicaid patients have to make a co-payment for medial services? Not for birth control planning services, chemotherapy, dental treatment for children, doctor fees for out-patient surgery, doctor visits in a nursing home, emergencies, home services for mentally retarded, disabled or elderly, preventive health education, physical therapy, radiation, or renal dialysis, or if you are in a nursing home, or under 18, pregnant, or getting birth control services. For other care, patients pay $1 or $2 dollar co-payments, or often nothing.

Gripes have come from most states that paying their share of Medicaid will bankrupt them. The new law, however, has the federal government, as I’ve noted, picking up 90 percent of the cost of the expanded Medicaid in future years. Robin Rudowitz, policy analyst with the Kaiser Family Foundation, on National Public Radio, explained: “There’s sole federal financing for those who are newly eligible from 2014 to 2016, and then the federal share phases down to 90 percent by 2020. But, as Alan Weil, executive director of the National Academy for State Health Policy (NASHP), pointed out on the same NPR program even if states don’t have to come up with much money, it still may be money they don’t have, and they worry about whether they can meet the increased demand.

NASHP has noted that “expanding coverage will increase demand for services which will strain the capacity of the health care system already under pressure. “The goals of health reform will not be met if the newly insured find that their coverage is a hollow promise.”

A CMS senior specialist informed me that “the Actuary projects that by fiscal yea 2017, the average Medicaid enrollee is expected to receive about $11,800 in health care benefits annually through Medicaid. Spending per person is projected to increase at an average rate of 6.7 per year through fiscal yea 2017.” This means, at that rate, the average enrollee by 2020 would receive $20,491 gratis. A Medicaid family of four, incidentally, in 2014 is to get about $40,000.

The Cato Institute just published a 52-page study, entitled “Bad Medicine,” explaining many of the costs and consequences of the Obamacare law. The author of the report, Senior Fellow Michael Tanner, writes that the refundable tax credits for the not-so-poor on Medicaid “are expected to total $449 billion between 2014 and 2020...with the credit calculated on a sliding scale” according to income to ease any payment for insurance. But a second credit provides a subsidy for a proportion of out-of-pocket costs. “The net effect of this rather complex formula is that a family” with $30,000 income getting an insurance policy costing $9,435 would get a subsidy of $8,481, and have to pay $947 themselves. “If the same family had an income of $65,000,” they would get a subsidy of $3,358 and pay $6,077 themselves. “As with many tax credits, the phase out of these benefits creates a high marginal tax penalty as wages increase.” Workers who increase their income “could actually see their after-tax income decline as the subsidies are reduced. This creates a perverse set of incentives that can act as a ‘poverty trap’ for low-wage workers.”

Cato Institute’s Tanner points out that childless men “will now be eligible for Medicaid.’ And they are a high-risk, high-cost health care population” Some are living with expensive treatment for AIDs. He recounts Tennessee’s experience when it expanded its Medicaid program to this segment of single men in its population. “Over the next 10 years, Medicaid costs in the other 49 states rose by 71 percent. In Tennessee, they increased by an overwhelming 149 percent. Despite this massive increase in spending, health outcomes did not improve.” The state’s governor called it “a disaster.” Just another example demonstrating that money can’t buy happiness and government money can often buy the opposite. With the Federal Poverty Level increasing each year and the sky-high potential cost of chronic illness and free long-term care for Medicare patients, future costs are necessarily incalculable.