Spending money makes some people feel better, especially when it is other people’s money. As a case in point, the Colorado legislature has voted to expand Medicaid eligibility.
In the first three years the expansion is expected to increase state government expenditures by more than $300 million. This amount will be supplemented by an additional $2.7 billion in federal funds, assuming the Obama administration does not renege on its matching fund promises. The state money will come from taxes on sick people’s hospital bills, taxes that the legislature euphemistically calls “fees.” The federal money will either come from increased federal taxes on personal income or increased borrowing.
The problem is that the latest research suggests that much of the additional Medicaid spending will be wasted. Results from the Oregon Health Study Group, published in the May 2, 2013 issue of the New England Journal of Medicine, show that enrolling the able-bodied poor in Medicaid increases annual health spending by $1,172 per person per year without improving blood pressure, cholesterol levels, or blood sugar levels. Rates of outpatient surgery, emergency department visits, and hospital admission are also unaffected.
In 2008, the Oregon Medicaid program created a waiting list for able-bodied people who wanted Medicaid coverage, a group similar in many ways to the people that the Colorado expansion will cover. People on the list who won a lottery were sent a Medicaid application for themselves and everyone in their household. They were enrolled if they completed the application and were 19 to 64 years old with an income below the federal poverty level.
The lottery created a natural experiment. By comparing the health results for the 6,387 lottery winners who were enrolled in Medicaid with the 5,842 controls who were not, academic researchers expected they would be able to demonstrate the clear benefits of Medicaid enrollment for uninsured people.
Two years later, the people enrolled in Medicaid were no better off in terms of the clinical measures chosen to evaluate the program’s effect. In both groups, blood pressure, cholesterol, and HbA1c level (which indicates the quality of a diabetic’s blood sugar control) were essentially the same, even though Medicaid enrollment tripled the probability of a diabetes diagnosis and almost doubled the reported use of diabetes medications.
Group cholesterol levels were the same even though cholesterol-level screening for Medicaid enrollees doubled, as did mammography and Pap smear screening in women over 50. Overall 10-year cardiovascular risk, calculated using the Framingham risk score, was statistically the same for both groups. Results were even the same for older people who were high-risk before the lottery was conducted because they had diabetes, heart attack, or congestive heart failure.
People who believe that Medicaid improves health despite the evidence from the Oregon Health Study emphasize that Medicaid coverage reduced financial stress. People enrolled in Medicaid reduced their out-of-pocket spending by $215 a year compared to the control group. On average, 5.5 percent of the control group reported expenditures that exceeded 30 percent of their money income (excludes housing, food, childcare, educational, or transportation assistance from various governments). Of those on Medicaid, only 1 percent reported such expenditures.
Whether it makes sense to spend $1,172 in order to reduce average out-of-pocket spending by $215 is an open question.
Medicaid enrollment also decreased depression as measured by 8 screening questions for moderate to severe depression. Thirty percent of the control group was depressed. Slightly more than 20 percent of the Medicaid group was. In 2006 and 2008, an estimated 9 percent of American adults had depressive symptoms. Rates among those unable to work were 39 percent. Rates among the unemployed were 21 percent.
While it is clear that Medicaid benefits the sick and helpless for whom it was originally designed, in the current environment there is little evidence of benefit from expanding Medicaid to cover able-bodied adults.
In fact, the opposite may be true. In an evidence-based policy environment, legislators would consider the possibility that a more effective way to improve health and relieve depression would be to reduce taxes, spend less, and roll back the regulations that impede private sector business expansion and hiring. This would reduce depression by reducing the number of unemployed, and make those willing to work better off by leaving more money in their pockets, money that could be used to meet their medical expenses.
Linda Gorman is Health Care Policy Center Director at the Independence Institute, a free market think tank in Denver.