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Hurting Your Own Constituents, For No Reason

The Governor of Kentucky yells at a baby.

It sounds simple - people who receive government benefits, should have to work. The Trump Administration, and especially Centers for Medicare and Medicaid Services Head Seema Varma, have, for the first time, allowed states to have impose work requirements for Medicaid. Kentucky, a state whose embrace of Obamacare led to enormous gains in the health care of its citizens, is apparently the first state to Trump up on the offer. This might shock you - but such a policy is not nearly as simple as it sounds. Rather, it will be an expensive, bureaucratic nightmare to administer. It will force Medicaid applicants to allow in-depth government intrusion into their lives. It will not save the state any significant amount of money. It will, however, cruelly kick the young, old, sick and disabled out of the program.

Let's start at the beginning - there is no national scourge of people not working in order to get their sweet, sweet Medicaid. There are a lot of studies showing this to be the case - but the Michigan-based study quoted in this article shows the Medicaid population plainly:

  • About 50% of Medicaid enrollees are currently working

  • 12% are disabled and can not work

  • 13% are seniors or students

This leaves 27.6% of Michigan Medicaid recipients who are out of work. However, a study by the Kaiser Foundation (same link) took a closer look at Medicaid recipients who were not working:

  • 35% are ill or disabled

  • 28% are providing care to a family member

  • 18% are currently-enrolled students

  • 8% are retired

  • 8% are currently looking for work

  • 3% "other"

Remember that these numbers have already screened out the people who are currently employed. Now, it is entirely possible that some of those looking for work aren't looking so seriously...or that some of those who claim disability could work, or so forth. But even if you allow for such possibilities, only a small fraction of Medicaid recipients aren't "deserving" - perhaps 100,000 of the 2,000,000 Kentuckians who currently receive Medicaid. This aligns well with the 90,000 people who Kentucky itself expects to kick off the rolls.

But here is the thing - that 90,000 is unlikely to be the right 90,000 (even if you think there are people who shouldn't get health care, which I don't). If you are really "working the dole", it should be little trouble to convince a Medicaid Inspector (a new growth industry?) that you are looking for work or volunteering somewhere. Which Medicaid recipients will have trouble with the new bureaucracy this creates? Well - people with cognitive problems make up a large share of Medicaid recipients. Kentucky is also ground zero for the opioid crisis. These groups seem likely to be troubled by the paperwork required; they also are people who we, as a society, would want to have access to health care.

And what possible gain is there for Kentucky. Medicaid, as you recall, is a federal-state partnership. Kicking people off - deserving or not - means less federal dollars going to the bluegrass state. However, these people will still get medical care. Somebody will still have to pay for it. Without the federal government to shelter much of the cost, that somebody will be a citizen of Louisville, Lexington or Bowling Green. Finally, a real Bowling Green Massacre.

I know that Medicaid has problems. Its low costs come partially via low reimbursement rates. This means that fewer doctors accept it; about 69%, compared to about 85% for private insurance. But, other than saving money, there is nothing inherently wrong with Medicaid; in Montana, Medicaid reimbursement rates are the same as private, and it is therefore accepted at an identical rate (same link). The fact that some states expanded Medicaid under Obamacare, while other did not, creates a natural experiment for us to see its effects:

If there really aren't many people on Medicaid who shouldn't be, and work requirements will save little money for Kentucky while preventing deserving, rewarding residents from receiving health care, why is the change being made? Could the goal be to simply stigmatize Medicaid further, in a national attempt to weaken the American health program which has proven most able to reduce cost growth?

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