Gold Dome, Health Care

How Colorado’s Medicaid expansion harms patients

Medicaid expansion would limit access to care for the significant fraction of the currently uninsured who would otherwise be eligible for federal premium subsidies under ObamaCare. It raises costs for state taxpayers, increases costs for people who are hospitalized, and prevents state insurers from collecting millions of dollars in federal subsidy money.

Naturally, the Colorado Hospital Association favors it.

The proposed expansion would allow able-bodied working age adults with incomes under 138 percent of the federal poverty level to enroll in Medicaid. A significant fraction of able-bodied adults between 19 and 54 with incomes below 138 percent of the federal poverty level, the expansion group, consists of college students who already have private coverage. Medicaid already covers children and the disabled, so they aren’t included. The Colorado Indigent Care Program pays for medical care for acutely ill adults who need expensive care but cannot pay.

The CHA’s tortured reasoning in support of the expansion makes for a thoroughly amusing press release.

First, CHA argues that providing care for people who don’t pay creates a “cost shift.” It says that hospitals increase the amount they charge those who do pay in order to cover losses from those who don’t. For the record, nonpayment amounts to less than 3 percent of national health spending, and commercial banks lose 4 percent on bad credit card debt.

CHA also argues that taxing hospital bills to fund Medicaid expansion doesn’t increase costs. Instead, the tax helps to “bend the ‘cost shift’ of uncompensated care that is passed along to Colorado companies and insurers in the form of higher premiums.” (In Colorado, the hospital provider tax is called the hospital provider fee because the legislature wanted the money but didn’t want to put the tax to a popular vote as required by TABOR.)


It’s a tooth fairy world. Everybody who uses a hospital pays for the uncompensated care a hospital provides directly to a sick patient, but nobody pays for the taxes on hospital bills that are used to expand Medicaid to reduce uncompensated care costs.

If Medicaid is not expanded, the federal government must pay almost the entire cost of a commercial health insurance policy for everyone who makes more than 100 percent of the federal poverty level ($11,490 for one person in 2013). It will not pay the subsidy for people who are Medicaid eligible.

A growing body of evidence suggests that commercial insurance is better for people than Medicaid. After adjustment for patient characteristics, people with commercial coverage are more likely to survive surgery, and have better outcomes for cardiac procedures, better access to care, shorter hospital stays, lower total charges, and generally faster recoveries.

Commercial policies offer better access to health care because Medicaid just doesn’t pay. Academic studies show that coverage expansions don’t necessarily increase access, but that increasing provider payment does. In one survey, the odds of a privately insured patient getting an appointment to fix an ACL tear was 57 times higher than those of a Medicaid patient

In 2006, some of the nation’s leading actuaries studied the margins that hospitals in Washington State made on their Medicaid, Medicare, and private commercial business. In aggregate, Washington hospitals lost 15.4 percent on Medicare and 15.6 percent on Medicaid. They made 16.4 percent on commercial business. In order for Medicaid to break even, the state would have had to pay an additional $227 million in revenue, an increase of 18.5 percent.

Yet hospitals still take Medicaid patients, thanks to millions of dollars in grants and special interest payments from state and federal governments. With this fact in view, perhaps it is unreasonable to hope that CHA and its members would stand up for patient welfare by resisting Medicaid expansion.

Linda Gorman is Health Care Policy Center Director at the Independence Institute, a free market think tank in Denver







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