Why Obamacare's Medicaid Expansion Will Reduce Health Care Access

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Avik S. A. Roy

Chapin White of the Center for Studying Health System Change has published an important new paper in Health Services Research, a journal of health economics, which suggests that a critical part of the Affordable Care Act--its expansion of Medicaid coverage to 16 million more Americans--may actually reduce those individuals' access to health care.

White's report comes on the heels of numerous studies that show that patients on Medicaid, our national government-run health-care program for the poor, do far worse on health outcomes than do those on private insurance, and in some cases, worse than those with no insurance at all. (For an extremely deep dive into these studies, see my three-part series on the topic.)

1) Medicaid underpays doctors for their expenses

Why does this occur? The main reason is that Medicaid underpays doctors and hospitals to care for Medicaid beneficiaries. Medicaid's reimbursement rates are around half of those paid by private insurers. In many cases, Medicaid pays doctors less than it costs to care for Medicaid patients, meaning that doctors face the choice of caring for the poor, and going broke, or shutting their doors to Medicaid patients. One survey found that internists were 8.5 times as likely to accept no Medicaid patients at all, relative to those with private insurance. Another found that two-thirds of kids on Medicaid were denied a doctor's appointment for a serious condition, relatively to only 11 percent for the privately-insured.

Believe it or not, physicians even do better caring for the uninsured than they do caring for Medicaid patients. Two MIT economists, Jonathan Gruber and David Rodriguez, have found that three-quarters of physicians receive lower fees for serving Medicaid patients than they do for the uninsured, because many people without health insurance are still able to pay out-of-pocket for routine health expenses. (Gruber was the intellectual father of Obamacare, and remains an outspoken advocate of the law.)

2) Overall, Medicaid expansions do not lead to more doctor visits

Chapin White looked into this problem by examining the State Children's Health Insurance Program, or S-CHIP, which was created by Congress in 1997 as a way of expanding Medicaid to lower-income children who were above the income thresholds of traditional Medicaid. He found that CHIP was "not associated with any change in the aggregate quantity of physician services [consumed]," and concluded that "coverage expansions...do not necessarily increase physician utilization."

The main reason for this non-effect, he surmised, was due to the fact that CHIP paid physicians less for their time and expenses. "Increasing Medicaid fees," he wrote, "is...clearly related to a reduction in non-[cost-sharing]-related access problems among both low- and high-income children."

White compared children in states which had undergone large CHIP expansions, and compared them to children in states with smaller expansions. He also examined increases versus decreases in Medicaid physician fees. He found, surprisingly, that physician utilization was lower in the states with the largest CHIP expansions, and that expansions of CHIP led many children to lose private insurance as the government program crowded out the private sector. "Supply-side effects of CHIP--either the use of managed care tools or the relatively low reimbursement rates, or both--may have limited the utilization effect of the coverage expansion," White concluded.

3) Obamacare's Medicaid expansion could worsen physician access

As the below table shows, 11 percent of children in the lowest income quartile, who were uninsured, gained insurance; however, 13 percent of children in that quartile who had private insurance lost it, while Medicaid/CHIP expanded by 23 percent of children. In other words, for every two children who gained Medicaid coverage, one lost private coverage.

In the third-lowest and second-lowest quartiles, the proportion of those gaining Medicaid coverage and those losing private coverage were almost identical, suggesting that Medicaid was replacing private coverage in the majority of cases. Those individuals who are subject to the replacement will have poorer access to health care, because Medicaid pays less than private insurance. It is this cohort, represented especially by White's third-lowest quartile, that is subject to Obamacare's expansion of Medicaid.

White concludes: "In general, these findings argue strongly against the idea that the effect of expanding utilization can be deduced simply from the reduction in patient cost sharing...Coverage expansions by themselves do not necessarily spur increases or decreases in overall utilization."

Put more simply, health insurance is not the same thing as health care.

(H/T John Goodman and Jason Shafrin.)

Follow Avik on Twitter at @aviksaroy. UPDATE: Kevin Outterson [writes](http://theincidentaleconomist.com/wordpress/primary-care-capacity-in-2014/) that I "focus on [Medicaid's negative impact on access] but never mentions the very important boosts to primary care reimbursement in the ACA." However, Kevin must know that these reimbursement boosts are only available in 2013 and 2014, after which Medicaid reimbursement rates revert to prior levels. "The impact of the reimbursement increase likely will be lmited because of its temporary nature and exclusion of other [medical and surgical] services," [writes](http://www.forbes.com/sites/aroy/2011/03/17/new-study-obamacares-medicaid-expansion-will-exacerbate-doctor-shortages/) Peter Cunningham in an excellent study on the subject.

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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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