Looks like both sides are wrong about Medicaid

It’s funny how major pieces of legislation and the debates about them can be based entirely on false assumptions.

That appears to be the case with the Obamacare Medicaid expansion—which is still a live issue here in Indiana.

The most common pro-Obamacare argument for expanding Medicaid went like this: Uninsured patients generally don’t receive care at physician offices, so they wind up going to hospital emergency rooms—the most expensive place in the health care system—racking up huge bills that the hospitals then pass on to everyone else. So expanding Medicaid will reduce those needless ER visits, thereby saving all of us money.

“We’re paying for it anyway,” Brian Williams, an Indianapolis-based health care consultant for PricewaterhouseCoopers, told me back in October, while speaking about Indiana’s tepid cooperation with health care reform.

That sentiment echoed President Obama’s argument during the legislative debate that produced Obamacare, aka the Affordable Care Act.

“Those of us with health insurance are also paying a hidden and growing tax for those without it — about $1,000 per year that pays for somebody else's emergency room and charitable care,” Obama said during a September 2009 speech before Congress.

But research out of Oregon shows that not to be the case. Patients who received Medicaid benefits visited hospital ERs 40 percent more often than those who did not receive Medicaid benefits, according to the study by Amy Finkelstein, an economist at the Massachusetts Institute of Technology, and Katherine Baicker, a professor at the Harvard School of Public Health.

The Oregon research is important for all other states, including Indiana, because Oregon used a lottery to determine which citizens were allowed to join the health benefits program for the poor, and which were not. That situation set up the gold standard of research: a study population and a control group that were no different from one another, other than the chance occurrence of winning or losing Oregon’s lottery.

The average cost of each ER visit by the uninsured runs about $463 per year, based on federal cost data and the requency of visits recorded in the Oregon study. That means each additional person on Medicaid racks up an extra $190 per year in ER costs.

With Indiana contemplating a Medicaid expansion that would cover an estimated 182,000 Hoosiers, this additional ER could cost $35 million more per year. Of course, most of that expense would be borne by the federal government, not the state.

Even though conservatives crowed about the latest Medicaid study from Oregon, they should be reminded of earlier findings from the same researchers.

Finkelstein found that, contrary to conservative arguments, being on Medicaid is actually better than being uninsured. Oregonians who won the state’s lottery and received Medicaid benefits were 35 percent more likely to have an outpatient visit, 30 percent more likely to go the hospital, 15 percent more likely to take prescription drugs, and more likely to be in compliance with preventive care such as mammograms and cholesterol monitoring. Also, the lottery winners were 25 percent less likely to have an unpaid medical bill and 35 percent less likely to have any out-of-pocket medical expenses.

Medicaid improved measures of self-reported health and depression. However, in another bubble-bursting moment for Medicaid expansion advocates, Finkelstein found that Medicaid coverage had no effect on the prevalence of the really expensive diseases: diabetes, high blood pressure and high cholesterol.

This still leaves Medicaid open to plenty of criticism, but not to the long-standing conservative argument that being on Medicaid is worse than being uninsured.

I’m not sure if Indiana Gov. Mike Pence views Medicaid as worse than no insurance coverage, but he certainly views Medicaid as a failure, as I wrote last week. He thinks the Healthy Indiana Plan would provide better coverage for low-income Hoosiers and also help the state spend less money.

He’ll hash out that argument with the Obama administration next month.

What conclusions should we draw here? Only the most obvious ones: 1) some health care coverage is better for patients’ health and finances than no coverage; and 2) spending money does not save money.

And, finally, that the real debate is no longer about whether to expand coverage or not, but rather, how best to do it. Perhaps Obamacare can claim that shift in debate as one of its accomplishments. But it’s a debate that will have to be waged under different assumptions than the ones used to pass the law.