WatchdogVA Prescribes Bad Medicine For Medicaid Expansion

WatchdogVA, an affiliate of the Koch Brothers funded Franklin Center, promoted unsubstantiated fears in asking legislators to weigh several considerations when determining how to expand Medicaid in Virginia, including fears over the federal government's role and a doctor shortage. The conservative blog also recommended block granting or privatizing the program, both of which would have disastrous consequences on Medicaid.

WatchdogVA Warns Virginia Would Be Burdened With Paying For New Medicaid Recipients If Federal Government Cuts Payments

WatchdogVA: Current Plan Doesn't “Account For Possible Budget Cuts or Adjustments” At The Federal Level. An August 21 WatchdogVA article discussing Medicaid expansion in Virginia warned that the federal government could remove some funding, leaving the state on the hook to cover beneficiaries, and said that the current Virginia plan does not take that fact into account:

What's troubling some lawmakers is the cost to the state budget. The current plan, they say, doesn't account for possible budget cuts or adjustments to federal funding levels, which would leave Virginia to cover the cost of a possible 400,000 more Medicaid beneficiaries.

Delegate Johnny Joannou, D-Portsmouth, asked about those concerns in a MIRC meeting Monday.

“What happens if we're in a federal financial crisis in Washington,” Joannou said, pointing out that Washington has failed to pass a budget on time in years.

Vernon Smith, a Medicaid expert from Health Management Associates said, “The short answer is if that were to happen, then the state would be on the hook. The longer answer is that something like that has never happened.” [, 8/21/13]

Federal Government Has Maintained A Generally Constant Funding Rate

The Washington Post's Wonkblog: The Federal Government's Only Change To Benefits Has Been To Increase Support. An article in The Washington Post's Wonkblog on March 5 explained that the federal government cutting support for Medicaid would be an unprecedented move, as the government has only increased their share of expenditures since the program's inception and has never reduced them below their original percentage: 

Right now, the federal government is on the hook to pay 100 percent of the [Medicare expansion] costs through 2016. After that, the match ratchets back, falling to 90 percent by 2020. Wouldn't a federal government -- especially one looking to trim a federal budget -- look to reduce funds by cutting into that match?

Legally, there's nothing to stop them: Congress could pass a law that fiddles with these numbers. But such a move would, it turns out, be unprecedented. At least in the Medicaid program, there just isn't a history of the federal government “dumping” new spending on the state.


There is one time the federal government did fiddle with funding levels, in the late 2000s. That, which you can see in the [below] chart, was to increase their share of Medicaid spending during the recession

[The Washington Post, 3/5/13]

CAP: Stop-Gap Provisions Could Be Included In Expansion To Avoid State Liabilty. An issue brief from the Center for American Progress found that some states are adopting the “circuit-breaker” approach which would require the state to opt-out of expansion if the level of federal funding drops below a certain level:

Some states are acknowledging that they could afford the expansion, but they fear the federal government will 'cut-and-run' at some point, leaving them with a majority of the cost burden. The reality is, however, that there is absolutely no precedent for this. Moreover, if a state is committed to expanding Medicaid, there are ways to address this concern. Both Arizona and Nevada, for example, have adopted the 'circuit-breaker' approach, in which the state will opt-out of the expansion only if the federal government's share of matching funds falls below a certain level. [Center for American Progress, 8/22/13]

WatchdogVA Warns Medicaid's Reimbursement Rate Will Cause A Doctor Shortage

WatchdogVA : Doctors Could Refuse To See Medicaid Patients Due To Complications In Compensation. According to the WatchdogVA article, the 400,000 possible new patients covered by Medicaid expansion would strain an already unstable system because “Medicaid payments are often a slow process with lots of red tape, leading many to refuse it as payment.” [, 8/21/13]

The Affordable Care Act Increases The Reimbursement Rates For Medicaid Providers

The Wash. Post's Wonkblog: The ACA Increases Medicaid Reimbursements To Match Those Of Medicare. A February 8 Wonkblog post explained that the Affordable Care Act boosts “Medicaid primary care reimbursement” which would, on average, be a raise of 73 percent:

The health-care law's big attempt at increasing Medicaid access takes on the exact same factor that we think inhibits access: Low reimbursement rates. The Affordable Care Act boosts Medicaid primary care reimbursement rates to match those paid by the Medicare program. Given that Medicaid rates tend to be really low, this works out to an average raise of 73 percent.

In the states that have been paying the lowest rates, the increase is even bigger. Here's another map from Kaiser Family Foundation that shows what the boost looks like nationwide.


Does that matter on the ground, to providers? It's hard to know from most of the Medicaid research, which was conducted before the Affordable Care Act expanded Medicaid. We do have one study though, from Michigan, which suggests that most doctors do feel like they can take on more Medicaid patients than they currently see. [The Washington Post, 2/8/13]

WatchdogVA Suggests Virginia Privatize Or Block Grant Medicaid

WatchdogVA: Virginia Should Consider Block Grants Or Privatization Of Medicaid. The WatchdogVA article suggested either a privatization or a block grant proposal, which allocates federal funds with limited provisions attached, as alternatives to the current Medicaid system:

Tea party leaders and conservative members of the House of Delegates have considered drastic changes to the program.

One idea is a block grant, in which Virginia would get a designated amount of money from the feds to distribute as it sees fit. There's a flexibility factor there.

Some, like Larry Nordvig, executive director of the Richmond Tea Party, suggest doing away with Medicaid entirely and going to a more privatized system.

“The free market will work out, like it always does,” Nordvig said. [, 8/21/13]

Block Grant Funding Is Unable To Keep Pace With Growing Health Care Costs

Center On Budget And Policy Priorities: Medicaid Block Grants “Would Cut Federal Medicaid Funding By 31% By 2023.” A blog post by the non-partisan Center on Budget and Policy Priorities (CBPP) stated that the gap in funds would occur because “the funding would no longer keep pace with health care costs or with expected Medicaid enrollment growth as the population ages.” The post also explained that millions of low-income Americans would be negatively impacted by the block grant strategy due to reduced access to Medicaid coverage. [CBPP, 3/26/13]

Congressional Budget Office: Block Grants For Medicaid Could Reduce Access For Medicaid Enrollees.  When Rep. Paul Ryan (R-WI) proposed using block grants to fund Medicaid in 2011, the Congressional Budget Office (CBO) concluded that states would need to reduce spending or raise revenues in order to maintain the level of funding they previously had:

Because of the magnitude of the reduction in federal Medicaid spending under the proposal, however, states would face significant challenges in achieving sufficient cost savings through efficiencies to mitigate the loss of federal funding. To maintain current service levels in the Medicaid program, states would probably need to consider additional changes, such as reducing their spending on other programs or raising additional revenues. Alternatively, states could reduce the size of their Medicaid programs by cutting payment rates for doctors, hospitals, or nursing homes; reducing the scope of benefits covered; or limiting eligibility. To some extent, under CBO's long-run projections, the rise in health care costs under current law would cause states to implement such changes anyway. However, given the size of the reduction in federal spending under the proposal, the magnitude of the changes would probably have to be greater.

If states reduced spending for their Medicaid programs, there would be a number of potential implications for both providers and beneficiaries. Given that payment rates for providers under Medicaid are already generally lower than they are under Medicare and private insurance, if states lowered payment rates even further, providers might be less willing to treat Medicaid enrollees. As a result, Medicaid enrollees could face more limited access to care. If states reduced benefits or eligibility levels, beneficiaries could face higher out-of-pocket costs, and providers could face more uncompensated care as beneficiaries lost coverage for certain benefits or lost coverage altogether. [CBO, 4/5/11]

Privatized Health Care Has Been Costly And Inefficient

Commonwealth Fund: For-Profit Medicaid Plans Performed Worse And Cost More Than Non-Profit Medicaid Plans.  According to a study by the Commonwealth Fund, an independent research firm on health care issues, for-profit plans performed worse on preventative care and chronic illness care compared to non-profit plans while costing 2 percent more in administrative costs:

Nonprofit plans differed significantly from for-profit plans with respect to the preventive care composite measure. The nonprofit plans achieved a significantly higher preventive care composite score than the for-profit plans (71% vs. 63%).

 [Commonwealth Fund, June 2011]

CBPP: Private Insurance Medicare Advantage Plans Cost 14 Percent More Per Beneficiary Than It Would Have Cost Under Traditional Medicare. A CBPP analysis found that between 2004 and 2008, overpayments for Medicare Advantage plans cost “nearly $44 billion” averaging “more than $1,100 for each beneficiary enrolled in a private plan” while driving up premiums for traditional Medicare beneficiaries by $86 per year for a couple:

The Medicare Payment Advisory Commission (MedPAC), Congress' expert advisory body on Medicare payment policy, has estimated that in 2009, Medicare will pay Medicare Advantage plans 14 percent more per beneficiary than it would cost to cover these beneficiaries in traditional Medicare. [1] The overpayments, which have totaled nearly $44 billion between 2004 and 2008, average more than $1,100 for each beneficiary enrolled in a private plan.[2]

By increasing Medicare costs, these overpayments also drive up premiums for beneficiaries in traditional Medicare by $86 per year for a couple, according to the chief actuary at the Centers for Medicare and Medicaid Services.[3] More than 31 million seniors and people with disabilities enrolled in regular Medicare are forced to pay higher premiums each month to subsidize these excess payments. [CBPP, 9/14/09]

CBPP: A Large Portion Of The Overpayments In Medicare Advantage Go To Insurers Not Beneficiaries. A CBPP analysis found that a large portion of the overpayments by Medicare for their private plans go to insurers, not beneficiaries, and that “about half of the overpayments goes to profits, marketing, and administrative costs” for fee-for-service plans:

Critics of health reform, as well as the private plans, contend that eliminating the overpayments would adversely affect enrollees and lead to substantial benefit cuts. They argue that the private plans use the overpayments to provide extra benefits that traditional Medicare does not cover and/or to reduce beneficiaries' premiums and cost sharing.

In reality, however, a large portion of the overpayments actually accrues to the insurers rather than to beneficiaries. For example, MedPAC has found that among private fee-for-service plans -- the fastest-growing type of Medicare Advantage plan-- about half of the overpayments goes to profits, marketing, and administrative costs.[8]

Moreover, MedPAC has found that it costs the Medicare program an average of $1.30 for every $1 in additional benefits delivered by Medicare Advantage plans, and in private fee-for-service plans, it costs Medicare more than $3 for every $1 in additional benefits. [9] Consequently, the excess payments are an extremely costly and inefficient way of delivering extra Medicare services or reducing out-of-pocket costs. [CBPP, 9/14/09]

Virginia Would See Economic Benefits From Expanding Medicaid For Little Extra Cost

CBPP: Virginia Would Spend “Just 5.2 Percent More” To Expand Medicaid Coverage Than It Would Have Spent Without The ACA. A CBPP fact sheet explains that Virginia will spend $1.3 billion more on Medicaid through 2022 with or without expansion. The expansion would increase state spending by $1.3 billion, which is “just 5.2 percent more than what Virginia would have spent on Medicaid in the absence of the ACA.” [CBPP, accessed 8/22/13]

Kaiser Family Foundation: Medicaid Expansion Would Save Virginia $424 Million In Uncompensated Care. An analysis by the Kaiser Family Foundation found that expanding Medicaid would decrease the amount Virginia would pay in uncompensated care by $424 million through 2022. [Kaiser Family Foundation, November 2012]

Virginia Hospital & Health Association: Medicaid Expansion Would “Provide A $3.9 Billion Boost” To Virginia's Economy And Create 30,000 Jobs. A study released by the Virginia Hospital & Healthcare Association found that expanding Medicaid coverage to the estimated 400,000 low-income adults eligible for expansion would “provide a $3.9 billion boost to the Virginia economy annually” while supporting 30,000 jobs:

To help policy makers as they grapple with these issues, VHHA commissioned Chmura & Associates to evaluate what the broader economic ramifications of the Commonwealth's Medicaid policy choices would be. The results of that analysis are available here and we encourage you to review the results and assumptions carefully. As with many aspects of the Affordable Care Act and health care reform, the issues and financial ramifications are complex and will certainly be shaped by events going forward. However, the three most important findings of the analysis are clear:

  • Implementing the Medicaid expansion in Virginia would provide a $3.9 billion boost to the Virginia economy annually;
  • The related federal funds could support more than 30,000 jobs; and
  • While most of the direct benefits accrue to the health care sector, significant benefits would also be enjoyed by businesses and households.

Strengthening the existing Medicaid program and potentially extending coverage to an estimated 400,000 low-income adults has far reaching consequences that go well beyond what can be quantified in purely economic terms. [Virginia Hospital & Healthcare Association, accessed 8/22/13]