Biden-Era Medicaid Cost Surge

 Over the past 12 years, two major policy changes have led to massive Medicaid program growth. Keep in mind, the growth of Medicaid has not improved Americans’ health, as a recent Paragon research paper documented, and has worsened access to care for traditional Medicaid enrollees.

The first change is that the Affordable Care Act (ACA) significantly expanded Medicaid by granting eligibility to able-bodied, working-age adults and favoring them over traditional Medicaid enrollees (children, pregnant women, seniors, and the disabled) through significantly higher federal reimbursement rates for state spending on them. Paragon has produced a comprehensive reform that would end the ACA’s federal discrimination against traditional Medicaid enrollees and move nearly half of Medicaid expansion enrollees into the exchanges with a large premium tax credit. This is a long overdue policy reform that Congress should consider.

The second change stems from a set of Biden administration policies, along with increased state Medicaid money laundering schemes, that have significantly increased the federal Medicaid baseline as shown in the first figure below. Between the Congressional Budget Office’s 2021 and 2024 baselines, projected federal Medicaid spending increased by 8.6 percent, a sizeable $685 billion, from 2023 to 2034.

 

Several Biden policies explain a portion of this increase. The Families First Coronavirus Response Act provided states with additional federal Medicaid money so long as they maintained Medicaid enrollment during the COVID public health emergency (PHE). The Biden administration also extended the PHE into the spring of 2023, which kept ineligible people on the Medicaid program much longer.  Finally, the Biden administration took regulatory actions to keep ineligible people on the program longer and to validate state financing gimmicks that fleece federal taxpayers and raise Medicaid rates well above Medicare rates for many providers in many states.  As a preview, in March, Paragon will be releasing a research paper on the growth of Medicaid money laundering and what policymakers should do about it.

The House budget resolution contains instructions for the Energy and Commerce Committee to find $880 billion in savings relative to baseline. Congress could achieve these savings through common sense, necessary Medicaid reforms. The figure below illustrates how an expected level of savings in Medicaid (assuming Medicaid reforms make up about 80 percent of the savings) compares to the 2021 and 2024 CBO baselines.

 

Crucially, the magnitude of savings relative to the 2021 baseline—before the surge of Biden-era spending—is two-thirds smaller than the 2024 baseline. In fact, spending would only be 3.1 percent lower under this level of savings relative to the 2021 baseline. In essence, Biden’s policies led to a surge of wasteful federal Medicaid expenditures and the House budget resolution would largely reverse the fiscal impact of his policies.

One more important note—this just shows the federal side of Medicaid spending. States will be able to replace all savings that result from federal reforms. As discussed in my most recent newsletters, one of the main problems that federal policymakers should address is the substantial shift in Medicaid costs from the states to Washington over the past 15 years.

Brian Blase, Ph.D., is the President of Paragon Health Institute. Brian was Special Assistant to the President for Economic Policy at the White House’s National Economic Council (NEC) from 2017-2019, where he coordinated the development and execution of numerous health policies and advised the President, NEC director, and senior officials. After leaving the White House, Brian founded Blase Policy Strategies and serves as its CEO.

As a Policy Analyst for the Idaho Freedom Foundation, Niklas Kleinworth is a strong advocate for public policy solutions that place America first, are fiscally efficient, limit government, and expand the free market

https://paragoninstitute.org/paragon-pic/biden-era-medicaid-cost-surge/