Even Republicans Are Embracing Medicaid Expansion. That’s A Costly Mistake.

Republicans who oppose Medicaid expansion better watch out—the call is coming from inside the house!

North Carolina’s Democratic Governor Roy Cooper boasted in November that Republicans in the state legislature have “done a complete about face” on Medicaid expansion and “know it’s the right thing to do.” A group of Republicans in Wyoming is working to revive expansion efforts that died in the statehouse last year. There’s even movement among Republicans in Georgia, once a bulwark against Medicaid expansion.

Nearly a decade after the Affordable Care Act enabled states to expand Medicaid, Republicans in the 11 states that refused may feel pressure to cave. But they’re better off holding their ground. Expanding enrollment will only perpetuate the waste that has taken root in the program and further strain scarce taxpayer resources.

One in five Americans today is enrolled in Medicaid. Many were not eligible before Obamacare directed states in 2014 to expand the program to cover everyone making less than 138% of the federal poverty level—$18,754 for an individual as of 2022. In 2012, the U.S. Supreme Court declared the law’s Medicaid expansion optional for states.

As Medicaid enrollment has spiked, so have improper payments made by the program.

The Centers for Medicare and Medicaid Services define improper payments as those “that do not meet program requirements,” a broad category that covers everything from clerical errors to fraud. But a significant share results from eligibility issues—payments made on behalf of people who have enrolled in Medicaid but shouldn’t have been able to do so under the terms of the law.

In 2022, Medicaid made over $80 billion in improper payments, up from about $36 billion in 2016. According to a new Paragon Health Institute report, 97% of that increase can be attributed to “higher reported misspending in Medicaid.”

This was due not to an actual change in spending but to the fact that Medicaid suspended eligibility reviews from 2014 to 2017. So 2018 was the first year post-expansion that did not have artificially low improper payment estimates.

This is a persistent problem. Even 2022’s 15.6% improper payment rate is artificially low, thanks to CMS’s decision to reduce eligibility audits.

The Paragon report’s authors, Brian Blase and Joe Albanese, show that a majority of these improper payments comes from the Medicaid expansion population—the people who became newly eligible because of Obamacare.

The federal government encouraged states to sign up people in this group by picking up a greater share of their costs than it does for the poorer legacy population. Some states responded by signing people up under the expansion criteria even if they would’ve qualified under the old rules.

Imprecise enrollment standards also lower the guardrails that prevent improper payments. Medicaid’s improper payment rate skyrocketed from about 6%in the last year before expansion to a high of 21.7% in 2020.

And thanks to the pandemic, things are poised to get worse. CMS suspended improper payment reviews from April to August 2020 and has subsequently delayed eligibility reviews, citing “COVID-19 flexibilities.”

Even more brazenly, the Families First Coronavirus Response Act expands federal Medicaid funding as long as states do not remove ineligible people from the program or otherwise change their eligibility standards.

President Trump signed this measure into law on March 18, 2020. The public health emergency that has kept those rules in place is still in effect, nearly three years later. So it’s been quite awhile since the government has taken an interest in weeding out fraud.

No wonder the Congressional Budget Office estimated in June that nearly 13 million Medicaid enrollees are ineligible. In September, the left-leaning Urban Institute put the number at 16 million.

Of course, there’s very little incentive to end the public health emergency and get back to normal. States want the increased federal dollars. Congress and the Biden administration want to show they’re providing relief to those afflicted by the pandemic. And no one wants to be the one who kicks people off the Medicaid rolls.

That’s precisely why Republicans can’t give in to the Medicaid expansion temptation. The program already accounts for one of every six federal healthcare dollars spent.

There are plenty of ideas about how to make Medicaid work for the poor Americans it’s meant to serve. But ignoring $80 billion in improper payments isn’t going to help.