Medicaid

Harvard Health Wonks Estimate that ObamaCare's Medicaid Expansion Alone Could Cost Nearly $1 Trillion

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The Congressional Budget Office's official cost estimate for last year's health care overhaul projected that the law would cost a little less than $950 billion over its first decade. About half of that cost came from the law's Medicaid expansion, which was projected to enroll 16 million new individuals in the joint federal-state health care program for the poor and disabled. 

One triiiiiiilion dollars!

But researchers at Harvard University are now warning that policymakers should be prepared for substantial uncertainty about the true enrollment effects of the Medicaid expansion. In a paper published in the journal Health Affairs earlier this week, a team of health economists estimated that, under the law, new Medicaid enrollment could be as low as 8.5 million people, but also as high as 22.4 million people—with additional costs to match. 

While the cost of the beefed-up Medicaid program could be as low as $34 billion a year, they could also be as high as $98 billion, meaning that a full decade of the Medicaid expansion alone could end up costing nearly $1 trillion—more than the entire law was supposed to cost in its first ten year out of the gate. 

The Medicaid expansion is going to require a lot more health providers too: On the low end, the paper estimates a need for an additional 4,500, and on the high end, it projects a need for more than 12,000 new physicians to handle the increased caseload that results from the subsidized access offered all the new Medicaid enrollees. But that may prove daunting given Medicaid's historically low reimbursement rates when compared to Medicare and private insurance. One of the most frequently noted problems with the program is that Medicaid beneficiaries have trouble finding doctors, and end up clogging up emergency rooms instead. 

What accounts for all that potential variation in new enrollment? According to the paper, it's mostly a matter of how much effort the government spends on trying to get people to enroll. "In the end," the researchers write, "Medicaid enrollment will be determined largely by the extent to which federal and state efforts encourage or discourage eligible people from enrolling."

This is a strong sign that the actual enrollment figures will end up at the higher end of the spectrum.

As a jointly run program, some of this will be determined by state governments. But both states and the federal government will have an incentive to ensure that insurance coverage is high under the law. Just look at the proto-ObamaCare reform in Massachusetts, where state leaders and program advocates consistently point to the Bay State's highest-in-the-nation health coverage when pressed about the program's other flaws. 

We also know how the federal government has responded to at least ObamaCare insurance program with low enrollment. When the law's high-risk pool program for the especially difficult to insure turned out to have far fewer enrollees than expected, The Washington Post reported that the Department of Health and Human Service's response was to launch "an aggressive marketing campaign."

ObamaCare's administrators went hunting for additional beneficiaries before. It's safe enough to expect that they'll do the same again.