Could ObamaCare's Medicaid Expansion Be Even Larger Than Expected?


They've got him thoroughly covered.

When Richard Foster, the government's chief actuary for Medicare and Medicaid, testified about the recent health care overhaul before the House last month, he confirmed two frequently made criticisms about the law: The Patient Protection and Affordable Care Act is not likely to bring down costs, and, despite numerous presidential promises, it won't let all individuals keep their current health plans.

But a footnote in the prepared document version of his testimony reveals another reason to worry about the law's long-term effects: The law's Medicaid expansion might be far larger—and presumably far more expensive—than previously estimated. From page 10 of his testimony:

In addition to the higher level of allowable income, the Affordable Care Act expands eligibility to people under age 65 who have no other qualifying factors that would have made them eligible for Medicaid under prior law, such as being under age 18, disabled, pregnant, or parents of eligible children.   The estimated increase in Medicaid enrollment is based on an assumption that Social Security benefits would continue to be included in the definition of income for determining Medicaid eligibility.  If a strict application of the modified adjusted gross income definition is instead applied, as may be intended by the Act, then an additional 5 million or more Social Security early retirees would be potentially eligible for Medicaid coverage. [bold added]

Numerous states are already in deep fiscal trouble thanks to their bulging Medicaid programs. Arizona has asked for a federal waiver giving it permission to drop 280,000 Medicaid recipients from its rolls without fear of losing federal money. The PPACA calls for the federal government to pick up much of the cost of the Medicaid expansion, but states will still be responsible for coming up with tens of billions in extra funding over the next decade (one estimate indicates that Texas alone will face $27 billion in new Medicaid costs by 2023 thanks to the PPACA's expansion of the program).

The diagnosis isn't good.

If the calculation were made as Foster's note suggests it might be, it would also mean that the cost to the federal government would rise dramatically. In his testimony, Foster says the Medicaid expansion is officially projected to cover 20 million new individuals and require about $455 billion in additional spending over the next decade, the bulk of which would be paid for by the federal government. But if the calculation goes the way Foster's footnote suggests, new enrollment could be 25 percent higher. Adding 25 percent to the cost results in an additional $113 billion in spending over the first decade—wiping out the bulk of the law's officially-assumed deficit reduction.

Obviously this is a very basic, back-of-the-envelope calculation, so that figure might end up being off. Indeed, because the population would be made up of early retirees, who are somewhat more expensive to cover, that simplified estimate is likely to be low. As Foster notes in the body of the report, "adults and children have much lower average health care costs than aged and disabled enrollees."

The bigger picture, of course, is that we still don't really know how this will play out. Currently, for example, there are millions of individuals who are eligible for Medicaid or S-CHIP but not enrolled. So it's at least possible that total enrollment will be lower than expect. (That said, most experts I've contacted expect that the new law will actually bring many of the currently unenrolled out of the woodwork). But Foster's cautionary footnote should serve as yet another reminder that there are numerous reasons to believe that the PPACA might not work as planned—and that it will cost taxpayers quite a bit more as a result.

(Hat tip goes to Chris Jacobs.)

NEXT: Bollywood vs. Bin Laden

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. Dammit, Suderman. Its not PPACA (the Protecting Pusillanimous American Christianity Act), its ObamaCare.

    Seriously, dude, you self-identify as a Beltway insider when you use PPACA. Bond with the Common Man, already. Call it ObamaCare. He broke it, he bought it.

    1. Although something that looks at first glance like it ought to be pronounced “pee-pee caca” is not much better.

  2. Obama had the nerve to tell the lie once again before the Super Bowl about everyone being able to keep their existing coverage! The man is contemptible.

  3. millions of individuals who are eligible for Medicaid or S-CHIP but not enrolled

    One of the reasons I hate state social welfare benefits. There are millions of fine people eligible for this crap, and foodstamps/SNAP, who won’t take it out of principle or because they don’t need it while the government tries to recruit more and more recipients. Then you have the rest, including college-educated people from “privileged” backgrounds, who have no compunction about taking anything they can get even if they have to game the system. Accepting charity or relief should carry a stigma. The state is hell-bent on making welfare an entitlement.

    1. Exactly! I believe it’s because kids are taught from a young age that “You can do what you want.” “No one can tell you how to live your life” ect. It’s time to make it embarrassing to be on the dole. Why aren’t they looking at the qualifications and saying “hmmm, if there are millions of people not using this benefit, maybe we should update our requirements”.

  4. “The bigger picture, of course, is that we still don’t really know how this will play out”

    Really???? You really don’t know?
    I will venture a guess – it will cost much, much, much more than advertized, and deliver less. Of course, you will be told that amputations with anesthesia is more efficacious.

  5. Obamacare is going to cost taxpayers more than predicted? It won’t lower or even reduce the rate of increase of medical costs? Who’d a thunk it?

    In ten years we’ll find that it didn’t do crap for longevity or infant mortality rates.

    I once again ask supporters of this quintessential exercise in toxic sausage making, by what metric shall we judge the success or failure of PPACA?

    1. You will judge it by how quickly America adopts a single payer system to “fix” the problems.

      Then, you will see the beauty of this law.

  6. Here is another question to ponder:

    What constutitional authority does Obama have (via the executive branch) to grant all those waivers to the law?…..-hamburger

    1. Are you serious? Are you serious?

    2. It’s good to be King!

    3. The Good and Welfare clause, and a couple of others.

  7. What constutitional authority does Obama have (via the executive branch) to grant all those waivers to the law?

    The “all power to The One” clause.

  8. “The bigger picture, of course, is that we still don’t really know how this will play out.” That is the problem with entitlements. Once you entitle someone to something, you lose control of it. Medicaid, Medicare, Food Stamps, Social Security….none of these are tied to revenues–just to the number of qualified people who apply for the benefit. Moreover, once you have a benefit out there, people adjust their behavoir so that they can qualify for the benefit. Between the math and the behavoiral changes, costs spiral out of control.

    If you have to redistrubte wealth, it is much better to add uncertainty to the equation by tying it to available funds from a dedicated tax base. That will discourage people from trying to qualify (because they cannot be certain the money will be there), and keep the budget sustainable.

  9. Adam Smith – Great post, but I wish folks would refrain from using the word “redistibute” (especially Adam Smith!!). Property (money) that is seized and bestowed by the government is EARNED wealth. It was not distributed in the first place, so it cannot be redistributed.

  10. Differential diagnosis go!

    1. It’s lupus.

      1. *breathes last breath*


      2. It’s never lupus. Try again.

Please to post comments

Comments are closed.