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The Medicaid woodwork effect

By Jay MacDonald · Bankrate.com
Tuesday, December 10, 2013
Posted: 6 am ET

The rocky but resolute rollout of the Affordable Care Act has been as noteworthy for the stories that don't scream in large font as for those that lead the nightly news.

One topic that has taken a backseat to the website woes of the new online exchanges and the cancellation of health insurance policies that just won't make the grade next year is what's known in health policy circles as the "woodwork" effect on Medicaid, the federal health care safety net for low-income Americans.

Woodwork worries

What's the woodwork effect? Until recently, it was mostly a theory that predicted that, once publicity surrounding Obamacare reached a certain level, millions of lower-income Americans would take notice, suddenly discover that they're eligible for Medicaid and sign up in droves -- or, figuratively, "come out of the woodwork."

What little news of the woodwork effect that did creep into the punditsphere did so primarily through comments by Republican governors and legislators who cited it as a compelling reason not to expand their state Medicaid programs as provided for under Obamacare. You may recall that the U.S. Supreme Court made the Medicaid expansion provision a state-by-state option rather than a requirement in the justices' landmark 2012 ruling on the Affordable Care Act.

To date, roughly half the states have expanded or are moving toward expanding Medicaid to residents earning less than $15,800 individually or $32,000 for a family of four, including, for the first time, single adults and empty nesters. In some states, the income thresholds are half that. To sweeten the deal for the states, the feds offered to pay 100 percent of the cost for new enrollees in the initial years with a generous federal-state match well into the next decade.

Those opposed to Medicaid expansion, however, continue to argue that if they take the bait and cover those additional thousands (or in some states, millions) now, they'll pay dearly later when the feds reset the funding level.

Medicaid applications surging

Unfortunately for them, it turns out that the woodwork effect is well under way anyway -- and those doubting-Thomas states that have thus far refused to expand Medicaid stand to be the biggest losers.

According to the Centers for Medicare & Medicaid Services, applications nationwide to Medicaid and its little brother, the Children's Health Insurance Program, or CHIP, grew by 2.5 million in October alone. While applications increased by 15.5 percent in those states that are expanding Medicaid, they also grew 4.1 percent, on average, in states that have no intention of doing so.

Plus, according to a report issued last week by the Commonwealth Fund, states that balked at accepting the generous federal funds to insure their poorest populations are losing out on billions as a result. By 2022, Georgia will miss out on $4.9 billion, Florida will forfeit $5 billion and Texas can say goodbye to $9.2 billion, the study says.

Perhaps the ultimate irony in this troubling tale is that states that choose not to expand Medicaid will pay a disproportionate share of what the feds shell out to states that do.

On a positive note, the feds have set no deadline for the balkers to change their minds.

Follow me on Twitter: @omnisaurus.

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3 Comments
Rico
February 11, 2014 at 12:04 pm

That argument was made in the 1960s, as well. The federal money for Medicaid never did stop, even 50 years later. In the meantime, dozens of states stayed out of the program, expecting it to expire. When it didn't, the states came for the funding one by one...Arizona came last. Now, all 50 states have it. The only difference is those states subsidized the others in the intervening years. Today, about the half the states are subsidizing the Medicaid expansion states. So it goes.

Gary
December 10, 2013 at 8:05 am

Only until the the federal money stops. Then states like Florida and Texas will be much better off than those that committed to paying for all the extra medicaid recipients. At that time those states will be out billions unless they want to cut off the medicaid patients.

Taking the short term view is often the best way to run into financial troubles later. That's true for individuals, for states and even the federal government.

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