The Partial Expansion Costs More and Accomplishes Less than a Full Medicaid Expansion

Medicaid waivers are experiments, and Wisconsin has been engaged in a 4-year test of the effects of partially expanding BadgerCare eligibility for childless adults, financed in part by reducing eligibility for parents.  Kids Forward has pulled together and analyzed the data relating to the effects of the Wisconsin experiment in a new report, which shows that Wisconsin’s partial Medicaid expansion has been a partial success for the state’s health care system, but at far greater cost to state taxpayers than a full expansion.

The effects of the Wisconsin approach to Medicaid spending will get more attention in the coming weeks and months for a number of reasons.  One reason is that the state Department of Health Services (DHS) is holding two public hearings next week on their request for a federal waiver to extend Wisconsin’s partial BadgerCare expansion. Another reason is that after the failure of efforts to repeal the Affordable Care Act (ACA), health care advocates will be renewing their push to use ACA dollars for a broader expansion of BadgerCare.

There’s no question that ACA implementation in Wisconsin has made a huge dent in the number of uninsured state residents. An important factor in that success is the availability of subsidized private insurance plans available through the federal Marketplace, which is a key element of the ACA that is still under assault. More than 200,000 Wisconsinites enrolled in Marketplace plans for 2016 and 2017.

The sharp drop in the number of uninsured Wisconsinites can also be attributed to the state’s expansion of Medicaid eligibility to childless adults up to the federal poverty level (FPL). That partial expansion has been a partial success, but it is far more expensive than a full Medicaid expansion for adults below 138% of FPL. The Legislative Fiscal Bureau calculated that a full expansion would have saved Wisconsin taxpayers more than $1 billion over a 5-year period.

The Wisconsin approach compares quite favorably to the record of other non-expansion states because none of those 18 states makes all adults below the poverty level eligible for Medicaid. Under the ACA, people above that income level are eligible for subsidized insurance plans through the Marketplace, but those below the poverty level are not. As a result, there are significant coverage gaps in the non-expansion states that have Medicaid eligibility caps below the poverty level. While that is not true in Wisconsin, there is an “affordability gap” for some of the adults over that income level.

Wisconsin’s ACA implementation and partial Medicaid expansion have had several positive outcomes:

• According to Census Bureau data, Wisconsin continued to have one of the 10 lowest uninsured rates in 2016 (tied with West Virginia for 9^th, although that was a drop from 6^th lowest in 2013).
• The number of uninsured Wisconsinites declined by 42 percent from 2013 to 2016.
• Uncompensated care in Wisconsin hospitals fell by nearly 37% during that period, which was comparable to the decline in other states.

However, when one considers how Wisconsin compares to the expansion states, how the limited expansion affects state taxpayers, and what happened to parents who lost their BadgerCare eligibility in 2014, the Wisconsin record doesn’t look as good:

• If Wisconsin were to fully expand Medicaid, more than 80,000 adults between 100% and 138% of FPL would be covered in BadgerCare, and that change would yield a net savings for state taxpayers of about $190 million per year.
• Wisconsin’s 42% decline in the number of people who are uninsured is 5 percentage points behind the average improvement in the 31 expansion states, and 5 to 9 percentage points behind each of Wisconsin’s neighbors (all of which are expansion states).
• More than 62,000 adults lost their BadgerCare eligibility in 2014, and a DHS study could only show that 58% of them obtained other insurance coverage (or regained BadgerCare coverage). Most of the rest are presumably uninsured.
• Wisconsin went from having the 12th lowest rate of uninsured children in 2013 to a tie for 20^th lowest in 2016, as states that expanded Medicaid coverage for parents found that there was increased Medicaid participation among kids who were already eligible.

The main argument that conservatives have made against a full expansion of Medicaid is that it would make states reliant on the continuation of the enhanced federal funding for those expansions. That’s ironic because the enhanced funding for Medicaid expansions has survived multiple attempts to repeal the ACA and because the partial expansion makes Wisconsin more dependent on the ACA insurance Marketplace, which is under threat from both legislative and executive branch actions.  Wisconsin’s success in achieving a 42% decline in the uninsured rate would suffer a major blow if conservatives make the ACA Marketplace collapse.

Wisconsin’s partial expansion has clearly been a better choice than not expanding Medicaid at all. However, fully expanding Medicaid to all adults with incomes below 138 percent of the poverty level would save state taxpayers $190 million per year, result in more people getting health insurance, and help our state regain its leading national role in providing access to quality, affordable health insurance.

You can read the full report here.

Jon Peacock