Congress passed the original Medicaid program in 1965 as a health insurance safety net for the most vulnerable low-income people in the United States. These individuals include the poor, parents with children, the disabled, and those needing long-term care. Medicaid is a pure welfare plan financed by both state and federal taxpayers. Of course, state and federal taxpayers are the same individuals, families, and businesses.
The original program was set up such that the federal government would match the financing with states in a 50/50 percent arrangement. Congressional members at the time believed that state legislators would resist increasing the size of Medicaid simply because they would want to limit the impact on their state budgets.
The exact opposite has occurred. State officials look at the Medicaid program as “free” federal money. Unlike other state budget items, for every state dollar legislators spend on Medicaid, they get a matching federal dollar. The Medicaid program is now one of the top three budget items for every state in the U.S. and is one of the federal government’s largest non-discretionary spending programs. Inflation-adjusted spending the first year of Medicaid was $10 billion compared to $900 billion for fiscal year 2023. In other words, Medicaid spending has exploded far beyond inflation alone.
Over the years, the federal contribution to the original Medicaid has gradually increased beyond 50 percent. For example, for fiscal 2024, federal taxpayers contributed 64% of the cost of Montana’s original program. One in five Montanans are currently covered by Medicaid.
The Affordable Care Act, aka Obamacare, became law in 2010, with most benefits beginning in 2014. After litigation to the U.S. Supreme Court, the law was amended so that states could decide whether to expand Medicaid to any able-bodied 18 to 64-year-old person. The incentive is that the federal government would pay 90% of the financing of the expanded program. Montana is one of 40 states that chose to expand Medicaid under Obamacare. Wyoming is the only mountain state that has not expanded Medicaid.
The federal government relaxed the enrollment requirements for the expanded Medicaid significantly during the first year of the COVID-19 pandemic. A time limit was placed on the relaxed enrollment. The issue is now whether Montana’s elected officials should extend this time frame.
Montana’s enrollment numbers are revealing. In 2016, the year Montana’s legislature expanded Medicaid, the overall program provided benefits to 125,000 children, 50,000 adults in the original Medicaid, and 50,000 adults in the expanded plan. In 2023, the expanded program had more than doubled to 110,000 and the original plan likewise more than doubled to 110,000. The number of children actually dropped to 111,000 enrollees.
Supporters of Medicaid in Montana claim that the “data” show the program is working well and is a benefit to the state. Unfortunately, there are some real problems with the entitlement. First of all, the provider payments in Medicaid are dismal. Depending on the specialty, doctors receive 20 to 40% of what private health insurance pays for the same procedure or treatment. Hospital reimbursements are likewise extremely low. There is no physician’s office or hospital that could keep its doors open with Medicaid payments alone. From a patient’s standpoint, simply having health insurance with Medicaid does not guarantee timely access to health care.
Secondly, employers with low-wage employees have a real disincentive to provide health insurance since they assume or hope that taxpayers via Medicaid will cover these individuals.
Third, these low-wage employees have a disincentive to seek better, higher-paying jobs for fear of losing their Medicaid health insurance.
Lastly, and most importantly, the evidence is clear that having Medicaid health insurance, except in very narrow circumstances, does not provide better health outcomes than being uninsured. In a scientific randomized study in Oregon, researchers found that people with Medicaid health insurance had no better clinical outcomes than a similar group of people without insurance. There are many things that determine health outcomes, including genetics, environmental impacts, and a patient’s commitment to follow-up care. Simply being in the Medicaid program does not guarantee a healthy life.
Having Medicaid does improve access to care when compared to being totally uninsured. Montana is one of the states with higher access to care for Medicaid patients when compared to many other states.
Medicaid was never intended to provide health insurance for over 20% of the U.S. population. Legislators should realize that the ever-increasing financial incentive from Washington, D.C. is simply more government intrusion into Montana’s health care delivery system. Elected officials should work on meaningful health care reform, rather than expanding an entitlement that has limited value and an unsustainable financial future.
Dr. Roger Stark is a visiting fellow with Mountain States Policy Center, an independent research organization based in Idaho, Montana, Eastern Washington and Wyoming. Online at mountainstatespolicy.org. A retired surgeon, Dr. Stark has authored three books including “Healthcare Policy Simplified: Understanding a Complex Issue,” and “The Patient-Centered Solution: Our Health Care Crisis, How It Happened, and How We Can Fix It.”
