Devastating News for ObamaCare Backers

by John Goodman NCPA, May 6, 2013

Within the White House, within the Democratic chambers in Congress and among the (overwhelmingly liberal) health policy community there was considerable anguish last week. The reason: a new study finds that (as far as physical health is concerned) there is no difference between being in Medicaid and being uninsured.

It’s hard to exaggerate what a blow this is to the people who gave us the Affordable Care Act (ObamaCare). Everything about ObamaCare ― from the money we are spending to the damage being done to the labor market to the hassles the whole nation is going through ― depends on one central idea: that enrolling people in Medicaid will give them access to better health. (Tens of thousands of lives will be saved every year, the president told us.)

It gets worse. Beginning next year, ObamaCare is expected to newly insure about 34 million people. About half of these will enroll in Medicaid. The other half are supposed to get their insurance in health insurance exchanges, where most will qualify for generous premium subsidies paid for by federal taxpayers. If the Massachusetts health reform is precedent, however, these people will be in health plans that pay doctors only about 10 percent more than what Medicaid pays. Think of these plans as Medicaid Plus.

Yet, if Medicaid doesn’t make people any healthier than they were when they were uninsured, that implies that the entire ObamaCare program could be one huge waste of money.

[Actually, the results weren't a complete disappointment. There was less depression among the Medicaid enrollees; they reported that they were a tiny bit happier; and among those who had out-of-pocket expenses, they spent about $215 less out of pocket each year. But, remember, we could have reimbursed out-of-pocket spending and spent far less than was actually spent on this program.]

[Aaron Carroll and Austin Frakt argue that the study may have been "underpowered" ― failing to show significant effects because there were too few people in each disease category. However, as the Wall Street Journal editorial page pointed out, if this were a drug, it would fail to get FDA approval.]

The study released last week is not the first to find that enrollees in Medicaid do no better than the uninsured. In fact there are studies that show that Medicaid enrollees find it more difficult to get a doctor’s appointment and have worse outcomes than the uninsured. Each of these studies has been subjected to a lot of nitpicking on various grounds, however, and a fair-minded person would probably have to say that how much difference Medicaid makes is an open question.

Until now. Thanks to a budget crunch in Oregon, scholars had the ability to do a double-blind study (the gold standard for researchers) and it came out very, very badly for the supporters of the new health reform law.

The study doesn’t speculate on the reasons for its findings, but I will.

The uninsured in this country have access to a patch work system of free care when they are unable to pay for it out of their own pockets. In Dallas, Texas, where I live, for example, the entire county is part of a health district which makes indigent health care available to needy families. It covers people up to 250% of the poverty level, with sliding scale co-payments, based on family income. Parkland Memorial Hospital and its satellite clinics is the primary provider.

You could argue that uninsured, low-income families in Dallas are actually “insured” in this way, although they face the problems of rationing by waiting and other non-price barriers to care. Officially, they are counted as “uninsured,” however. When these very same individuals enroll in Medicaid, they enter another system of patchwork care and are classified as “insured.” However, a third of the doctors aren’t taking any new Medicaid patients. There is rationing by waiting in Medicaid along with its non-price barriers to care. Often, the uninsured and Medicaid enrollees are getting the same care from the same doctors at the same facilities ― even though one group is labeled “insured” and the other “uninsured.”

Here is what I wrote in the Handbook on State Health Reform:

[C]onsider the case of Parkland Memorial Hospital in Dallas, Texas. Both uninsured and Medicaid patients enter the same emergency room door and see the same doctors. The hospital rooms are the same, the beds are the same and the care is the same.

As a result, patients have no reason to fill out the lengthy forms and answer the intrusive questions that Medicaid enrollment so often requires. Furthermore, the doctors and nurses who treat these patients are paid the same, regardless of patients’ enrollment in an insurance plan. Therefore, they tend to be indifferent about who is insured by whom, or if they’re even insured at all. In fact, the only people concerned about who is or is not enrolled in what plan are hospital administrators, who worry about who will pay the bills.

At Children’s Medical Center, next door to Parkland, a similar exercise takes place. Medicaid, S-CHIP and uninsured children all enter the same emergency room door; they all see the same doctors and receive the same care.

Interestingly, at both institutions, paid staffers make a heroic effort to enroll people in public programs — even as patients wait in the emergency room for medical care. Yet they apparently fail to enroll eligible patients more than half the time! After patients are admitted, staffers valiantly go from room to room to continue this bureaucratic exercise. But even among those in hospital beds, the failure-to-enroll rate is significant — apparently because it has no impact on the care they receive [or the financial burden they incur].

If what happens in Dallas is similar to other cities, “insuring the uninsured” is not going to make a great deal of difference anywhere.

For the country as a whole, one third of all people who are eligible for Medicaid have not bothered to enroll, indicating that millions of potential beneficiaries do not view the program as very valuable. In Oregon, the situation is even more dramatic. As Avik Royexplains:

Of the 35,169 Oregonians who “won” the lottery to gain enrollment in Medicaid, only about 30 percent actually enrolled. Indeed, only 60 percent of those who were selected bothered to fill out the forms necessary to sign up for the benefits — which tells you a bit about how uninsured Oregonians perceive the Medicaid program.

Consider Massachusetts. RomneyCare cut the official “uninsurance” rate in half. But it created no new doctors or nurses or clinics. As far as I can tell, the same people are going to the same places and getting pretty much the same care that they got before. Hospital emergency room traffic is higher than ever. The traffic to the community health centers has changed very little.

But since they have expanded health insurance in Massachusetts, the demand for care has grown, even as the supply has remained unchanged. As a result, the time price of care has increased. The wait to see a new doctor in Boston is two months ― the longest waiting time in the entire country. People are getting the same care they got before, but they are paying a higher “price” for it.

I expect to see the Massachusetts results replicated nationwide.

In the developed world, the health policy community is excessively focused on health insurance, even to the point of ignoring health care. In fact, studies of waiting times and inability to get care are often derided as right wing attempts to undermine the concept of social insurance. The less developed world has the opposite vision. Almost all the countries south of our border generally offer free care to the general population. But they don’t go around handing everyone an insurance card.

I believe this difference in vision is partly explained by the difference in income and wealth. Middle- and upper-middle income families need insurance to protect their assets. Poor families don’t have assets. They don’t need insurance. They may need health care, however.

ObamaCare was designed by middle- and upper-middle income people. They chose for poor people the same thing they would want for themselves. They didn’t think about access to care because they have never had a personal problem with it.

C’est la vie.