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The Keckley Report

Campaign 2016 Issue Brief #6: Medicaid, the Elephant in the Room

By April 11, 2016March 1st, 2023No Comments

Medicaid is arguably the most complicated and politically divisive program in health care, and its expansion a certain issue in Campaign 2016. It serves as the healthcare safety net for 70 million low income adults and children including 11 million who have gained coverage in the 32 states that expanded their program since passage of the Affordable Care Act. But it remains the elephant in the room as we grapple with the future of our health system and how best to balance its quality, access and costs.

Medicaid and Affordable Care Act: A Retrospective

A major premise of the ACA is that expansion of insurance coverage vis a vis Medicaid expansion by states coupled with subsidized coverage through state run insurance marketplaces would add 32 million to the ranks of the insured. By 2019, the government bean counters estimated that the number without coverage would shrink to 25 million including 11 million undocumented immigrants. The industry’s major stakeholders—physicians, hospitals, health plans, drug and device manufacturers bought in understandably: by increasing the numbers with coverage, care can be better managed, bad debt and charity care would be less and the market for their goods and services reimbursed by payers would  increase. Thus, the healthcare industry’s key stakeholders were supportive of the ACA in large part because it promised to reduce the swelling numbers of uninsured. And lawmakers stuck these industry groups with more than $500 billion in new excise taxes, required discounts, and payment reductions to fund the law—half its total cost.

States would play a key role since they oversee Medicaid sharing its funding with the federal government. The ACA required every state to expand its program for eligible uninsured adults and children up to 138% of the federal poverty level. And it offered a carrot:  the federal government would cover 100% of the costs for the expanded population for the first three years (2014-2016) with states picking up 10% of the costs for the expanded enrollment by 2019. That’s what passed Congress in March, 2010.

But 27 months later, things changed. The Supreme Court ruled states could not be required to expand their Medicaid programs as that would be coercive. (NFIB v Sebelius, June 28, 2012). On that day, the time bomb was lit. States would have the option of expanding their Medicaid programs and voters would have a say as it became a divisive political issue.

Proponents of expansion then and now have rightly documented its benefits: expanded coverage means better care at lower costs for low income adults and kids previously uninsured. And it means their care can be accommodated in less costly settings like already-crowded hospital emergency rooms and public health clinics.

Opponents in states argue it’s a matter of cost and federal over-reach: though per-capita Medicaid spending is low relative to seniors and other groups, it’s a budget buster for states that must balance their budgets constitutionally. Therefore, states should not be required or encouraged to expand Medicaid: the federal government should stand down, they argue.

Fast forward, today, 32 states and the District of Columbia have expanded their programs. Of those remaining, a handful are attempting to expand via Section 1115 waivers with CMS, and most are unwilling or unable to expand due to the political realities in their states. And in every state, the costs of Medicaid and the worthwhileness of its expansion are election issues.

The Realities of Medicaid

When Lyndon Johnson launched his Great Society program in 1965 with the creation of the Medicare and Medicaid programs, their roles were delineated: Medicare would serve seniors, and Medicaid the poor. Medicare would be run by the federal government; Medicaid by states. But in the 50 years since passage, the numbers eligible to participate in Medicaid, the categories that define eligibility, and the scope of services offered have expanded dramatically. Some facts:

·   Enrollment: Medicaid covered 77.6 million people at some point in 2014; 70 million women and children are currently covered. Nationally, total Medicaid and CHIP enrollment grew by 19% (11.2 million) between summer 2013 and January 2015. States that implemented the Medicaid expansion experienced three times greater enrollment growth compared to states where the Medicaid expansion is not in effect (26% vs. 8%).

·    Spending: Medicaid accounts for 16% of the $3.1 trillion in national health care spending. Per capita spending per enrollee averages $5790 vs $13249 for seniors. Medicaid accounts for up to 20% of the average state’s spending, ranging widely from state to state depending on its eligibility criteria, enrollment and scope of services.

·   Expansion: 32 states and the District of Columbia expanded their programs via the ACA; children accounted for a greater share of total Medicaid and CHIP enrollees in non-expansion states compared to states that have implemented the expansion to adults. (71% vs. 43%).

·   Utilization: Those that have received care as part of the expanded enrollment population use hospital and physician services at a higher rate than the general population.

·   Management: in 39 states, private managed care plans are subcontracted to provide care coordination to enrollees through contracts with the state’s Medicaid program. 

·   Reimbursement: Combined underpayments to hospitals from Medicaid were $14.1 billion in 2014. For Medicaid, hospitals received payment of 90 cents for every dollar spent by hospitals caring for Medicaid patients in 2014. Physicians are reimbursed by Medicaid at less than Medicare rates: 59% for primary care, 66% for all providers.

·   Access: less than half of physicians overall and two in three primary care practitioners accept Medicaid patients—down 10% in the last 4 years. Hospitals, by contrast, are required to treat all patients regardless of their ability to pay.

      The politics of Medicaid rivals its complexity. They make it the elephant in the room for policymakers:

·    Providers have a love-hate relationship with Medicaid. Doctors and hospitals appreciate that Medicaid reimbursement is better than no reimbursement at all, but believe they’re underpaid for the services provided.

·   State legislators want control of Medicaid. Most want maximum autonomy in its management, maximum funding from the federal government, and minimal interference from DC bureaucrats.

·    Insurers see Medicaid as a growth market and favor its expansion.

·    Enrollees face challenges seeing providers and the negative stigma associated with Medicaid coverage.

·    And voters are split. The majority favor Medicaid expansion believing universal coverage a moral purpose, but its politics has exposed the fault lines in our partisan elective circles.

What’s Ahead?

·    Advocacy on behalf of Medicaid enrollees is not likely to garner significant increases in funding nor passage of expansion in states where legislators are dead set against. Major changes to the Affordable Care Act’s Medicaid provisions are unlikely, so innovation and improvements in the program are likely the result of state led efforts focused on…

·  Innovation in primary care access and delivery including expanded roles for mid-level practitioners, usefulness of telemedicine and digital health, and team-based models that integrate dental and mental health, pharmacists, health coaches, nutritionists and others.

·   Innovation in formulary design and medication management especially aimed at providing prescribers more precise data about dosage and medication recommendations and tighter controls of branded and specialty drugs.

·    Innovation in behavior modification and health coaching as states and private MCOs focus on improving adherence to treatment recommendations by enrollees, changing unhealthy lifestyles and improving living conditions for many whose home environment is unsafe or unhealthy.

·   Innovation in care coordination and plan design so that enrollees are active participants in their care as shared decision-makers with their providers.

·    Increased accountability of private Medicaid MCOs who compete for lucrative contracts with states but often resist providing data about their clinical processes, enrollee experiences, provider contracting, financial results and more.

·    Increased compensation for providers based on the effectiveness of their management of Medicaid populations in risk-based contracts for which they assume clinical and financial risk.

·    And others.


Medicaid is an issue in Campaign 2016 because it reminds voters about prickly issues that make us uncomfortable or questions that remain unresolved in our health system: is healthcare a right or privilege in our society? Should providers be required to see patients regardless of their ability to pay? How should states fund Medicaid against education and other funding priorities? Should the federal government take-over Medicaid or leave it to the states since Medicare is wildly popular among seniors?

Medicaid is the elephant in the room for elected officials, policymakers and candidates aspiring a public office. It requires thoughtful consideration of fresh ideas and honest self-reflection about its noble purpose.


This is 6th and last in this series. Next week: The 5 Biggest Myths about U.S. Health System Reform. For prior reports, so to


 Jessica Greene et al “Summarized Costs, Placement Of Quality Stars, And Other Online Displays Can Help Consumers Select High-Value Health Plans” Health Affairs April 2016 671-679

 “Study: Nearly A Third Of Doctors Won’t See New Medicaid Patients” (2011 study)

Armstrong v. Exceptional Child Center, INC. (March 31, 2015) (SCOTUS Ruling: Medicaid providers cannot sue the state for paying them too little under the Medicaid Act; 5-4 Reversed opining of the Ninth Circuit Court). 

What is Medicaid’s Impact on Access to Care, Health Outcomes, and Quality of Care? Setting the Record Straight on the Evidence –

Jennifer Brown “Families of disabled Coloradans question complicated system” The Denver Post April 9, 2016.