As the battle over Medicaid bleeds into budget negotiations (and Richmond careens toward a government shutdown), I came back to my earlier discussion about how the Republicans can improve their electoral prospects (mainly, get government out of the hurting-the-poor business). Of course, much of the Medicaid expansion argument has been about the state finances, not the effect on the poor. I think that’s a mistake, because the more one looks at the impact on poor Virginians, the worse Medicaid expansion looks.
It may surprise some people, but there is much evidence that Medicaid does not improve health for poor Americans (the most recent example is an Oregon study deciphered by Avik Roy in Forbes). This might sound counter-intuitive, until one remembers that health care insurance is not the same as health care access. The latter is badly impaired by Medicaid’s low reimbursement to doctors and hospitals. One could argue (and I certainly would) that much of this problem is driven by Medicaid’s exclusion from the de facto monopoly pricing scheme that the AMA has with Medicare and private insurers, but since no one seems willing to fix that, Medicaid’s effect on the health of poor Americans will still be anywhere from debatable (at best) to detrimental (at worst).
Yet while the poor will likely not see much benefit from Medicaid’s expansion, they will almost certainly pay for it.
What do I mean? For starters, assuming the federal government actually means what it says about covering 100% of the expansion cost initially and 90% afterwards, this means the expansion will be covered by FICA payments, a.k.a., “the payroll tax.” While that tax is proportional to income, there is also an income range (between roughly $120,000 and $250,000) where the tax is not levied at all. So even if the feds pony up the dough, it will be poor Americans (and poor Virginians) who bear the higher burden of funding it.
However, we have good reason to believe that Washington will not provide the funds promised. Just next door (in Canada), the central government balanced its budgets, paid down its debt, and won widespread praise in the 1990s…by cutting health care transfers to the provinces, who are actually responsible for administration and direct funding of health care under Canada’s “single-payer” system. Some provinces still haven’t recovered from the fiscal body blow, but that’s not relevant to this discussion.
What is relevant is how states raise their revenue. Unlike the feds, state governments (including Virginia) rely much more on regressive sales taxes. Virginia generates $1 out of every $5 in revenue from sales taxes (Virginia Budget), whereas for the feds the sales-tax take is under 20 cents per $5 (President’s Budget, FY2014). Sales taxes impact the poor (because they have less disposable income) far more than the middle class or the rich, so as Virginia takes a larger share of the Medicaid burden, so will Virginia’s poor.
In other words, poor Virginians will see higher cost for a largely non-existent benefit…and they’re supposed to be the big winners in Medicaid expansion.
All the more reason for Republicans in the House of Delegates to stand firm in their opposition; Medicaid expansion is still a net minus for Virginia, but it is especially bad for poor Virginians.
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