Virginia Medicaid Expansion Has Serious Drawbacks

Virginia would be better served by allowing residents earning above 100% of the federal poverty line to seek coverage in the health insurance exchange rather than expanding Medicaid, according to a new study from the National Center for Policy Analysis (NCPA).

The Affordable Care Act originally envisioned that all states would expand Medicaid eligibility to 138 percent of the federal poverty line or risk losing federal matching funds. This provision was subsequently struck down by the Supreme Court. As a result, Virginia and other states now have the option to decide whether or not to expand Medicaid eligibility.

“There are about 1.7 million individuals living in Virginia with incomes under 139 percent of the federal poverty level, although only about 486,000 of them lack health coverage,” say Devon Herrick, an NCPA senior fellow and Linda Gorman, director of the Health Policy Center at the Independence Institute.

“Uninsured Virginians earning just above the poverty level can enroll in private coverage superior to what they would get from Medicaid. Freeing them to seek private insurance will result in better quality and access to care, while expanding Medicaid will impose heavy costs on Virginia taxpayers,” Herrick continued.

  • States that expand Medicaid eligibility to non-disabled adults are likely to experience “crowd-out” – substitution of Medicaid for private insurance.
  • Research indicates that Medicaid enrollees fare worse in terms of health outcomes than do similar patients with private insurance.

Most of the newly eligible would be adults, whereas most children in families at this income level are already eligible. Allowing those individuals to seek private coverage in the exchange would prevent the strain on doctors and displacement of private insurance that will follow if Virginia expands its Medicaid program. “Doctors and hospitals will also benefit from much more generous fees than the paltry reimbursements state Medicaid programs pay,” says Herrick.

For families earning less than 100 percent of poverty, Virginia could tailor its Medicaid program in ways that make sense to meet Virginians’ specific needs. These services might include selectively covering some optional populations but not others.

Source: Devon M. Herrick and Linda Gorman, “An Economic and Policy Analysis of Medicaid Expansion in Virginia,” National Center for Policy Analysis, September 2013.

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