Voters need to keep the Colorado Medicaid program in mind when the tax and spend coalition starts beating the drums for repealing the Taxpayer’s Bill of Rights (TABOR), which limits the annual growth of a portion of state spending to a very reasonable formula of population growth plus inflation.
In the FY 2017-18 Colorado Comprehensive Annual Financial Report (CAFR), the State Controller’s Office reports that state expenditures fell “due to decreases in the social assistance function resulting from less spending on purchased medical services.” In other words, lower Medicaid enrollment means less state spending.
Though total state expenditures grew in most other categories, the Medicaid spending decline was the biggest contributor to the total spending reduction of $1.1 billion, or 4.3 percent.
For most Colorado Medicaid patients, the state makes a per-member-per month payment even if a Medicaid enrollee uses no health care at all. Most hospitals get additional payments based on the number of Medicaid patients they treat. If there are fewer Medicaid clients, all of the providers receiving per-member-per-month payments lose money. They all have an incentive to support Medicaid program expansion in good times and in bad.
Before Obamacare, Medicaid enrollment was limited to the extremely poor, those with disabling medical problems, and pregnant women and their children. People ineligible for Medicaid, but unable to afford expensive procedures, received help through the Colorado Indigent Care Program and CoverColorado. When Obamacare passed, the state closed CoverColorado, dumping its expensive patients into the individual insurance market. it opted into the Obamacare Medicaid expansion, making healthy adults and children eligible for Medicaid if their household modified adjusted gross incomes (MAGI) were below 138% of the Federal Poverty Level.
Disabled people tend to stay enrolled in Medicaid because it covers the services they need. Of the roughly 1.25 million people enrolled in Medicaid, about 140,000 are disabled. In FY 2017-18, average direct spending per disabled person over 65 was around $28,000. Average spending on disabled people under 65 was around $20,000.
But FY 2017-18 Medicaid spending was down even though the number of disabled people enrolled went up. The enrollment declines came from the Obamacare MAGI expansion categories. Though average spending on able-bodied adults is much lower, around $3,000 a year, a lot more people are eligible through the MAGI categories than through disability. About 89,000 fewer MAGI eligible parents and children signed up from FY 2016-17 to FY 2017-18. That was a drop of about 10 percent.
Rather than examining the role an expanding economy has played in lifting people out of poverty and off government dependence, some of the “stakeholders” who make money from Medicaid are wringing their hands over the enrollment declines. They worry that unspecified “access barriers” prevent people from enrolling. This has led to calls to make enrollment easier by getting rid of the bureaucratic workload created by requirements to vet income and citizenship.
Colorado’s minimum wage was $9.30 in 2017. Even one not-quite-full-time minimum-wage job would lift a healthy single person above the Medicaid enrollment ceiling of $16,643 and make him eligible for the heavily subsidized medical coverage sold through Connect for Health Colorado. Given a strong economy with historically low unemployment, it is likely that people have been able to earn their way out of means-tested Medicaid eligibility for able-bodied adults and their families. It is also likely that dependence on government has shrunk as employment and incomes have risen.
By limiting year-to-year growth in state spending to reasonable levels, Colorado’s TABOR limits the extent to which the legislature can bow to the Medicaid industry’s efforts to keep the tax dollars flowing in its direction by continuously expanding the program. Limiting program expansion in good times means the state will be able to continue to provide services when the economy contracts, tax revenues decline, Medicaid caseloads expand, and other programs must be cut to pay for Medicaid expansions.
Linda Gorman directs the Health Care Policy Center at the Independence Institute, a free market think tank in Denver.