Obamacare Medicaid expansion to overwhelm state budgets


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Finding out what’s in it: The 24 states that have accepted the Obamacare Medicaid expansion are about to have their budgets overwhelmed by the much larger numbers of enrollments in that program than was expected.

Obamacare’s Medicaid expansion makes working-age adults with no kids and no disabilities eligible for a welfare program that was costly and ineffective long before Obamacare. The 24 states with a year or more of data available expected no more than 5.5 million would ever sign up, but their expansion enrollment is already 11.5 million – more than double its projected all-time maximum.

Alaska, Indiana, Louisiana, and Montana have not yet released a year of enrollment data, but have all reported Obamacare expansion enrollment higher than their expected maximums, FGA vice president of research Jonathan Ingram and FGA senior research fellow Nicholas Horton noted. “Medicaid expansion already makes welfare for able-bodied adults a higher priority than services for the nearly 600,000 seniors, children with developmental disabilities, individuals with brain injuries, and other vulnerable individuals currently languishing on waiting lists for needed Medicaid services,” Ingram and Horton wrote. “Mounting overruns will soon exacerbate pressure on policymakers to shift even more money away from the truly needy and towards ObamaCare’s able-bodied adults.”

Obamacare expansion benefits are 100 percent federally funded through the end of the calendar year, which has shielded states from billions of dollars in cost overruns since expansion took effect in January 2014. That will soon change. If Obamacare remains in place, states will be on the hook for five percent of their rapidly rising Medicaid expansion costs starting in January. And if President-elect Donald Trump and Republicans in Congress fulfill campaign promises to repeal Obamacare, federal funding for Medicaid expansion could be cut off in a matter of months.

On this issue, at least, there is precedent for congressional Republicans sticking to their word. Last January, President Obama vetoed an Obamacare repeal bill that would have ended Medicaid expansion.

Even if Obamacare is not repealed, these states still face serious budget problems because the cost of this program is, like everything else in Obamacare, far higher than predicted. If Obamacare is repealed, then these states face bankruptcy.

17 comments

  • wodun

    Part of the problem is that if people apply for Obamacare subsidies, they can automatically be put in Medicaid regardless of whether or not they want to rearrange their budget to pay for health insurance.

    Given the choice, how many of these people would choose to rearrange their budgets and buy actual insurance?

  • LocalFluff

    However could half the states accept this when about 5 out of 6 states (soon) have Republican majority? Maybe Obamacare is a misnomer, could as well be Romneycare.

  • pzatchok

    As soon as they started giving subsidies to lower income working people to help pay for Obama care insurance I knew the budget was blown.

    The insurance companies have no need to regulate the price according to what the people can afford. They can just keep raising the price and the feds will keep upping the subsidies.

    Just like higher education and federal grants and loans. Universities just raise the prices and the feds just keep paying. The students no longer even see the bill so don’t care nor are even aware of the real price of their own education.

    The people of America will NEVER get a British style health care system. Ever.
    Unless they are willing to nationalize ALL state universities in order to give medical personnel cheap educations paid for by the government but paid back by time served, like in the military.

    To open up nonprofit government run clinics and hospitals.

    Change the litigation laws against medical personnel and facilities. If they are government paid for and run then they will be taking the government to court.

    The drug industry will also have to go through some major changes also. And it will hurt.

    The Medicare/Medicaid system will have to turn into a civilian VA type system paid for by. I am sorry to say. but higher Medicare/Medicaid taxes.

    That way everyone who works will see the real cost of their own medical coverage in every pay stub.

  • wodun

    The insurance companies have no need to regulate the price according to what the people can afford. They can just keep raising the price and the feds will keep upping the subsidies.

    Wodun’s Law: The price of a good or service will always try to rise to the base subsidy plus whatever a person is willing and able to pay.

    The people of America will NEVER get a British style health care system. Ever. Unless they are willing to nationalize ALL

    Yes, this would be a big mistake. It creates a single customer system. There will be no innovation. Access to drugs will decrease as price fixing drives manufacturers out of the market. People will choose not to become doctors, nurses, researchers, and healthcare entrepreneurs.

    The best thing to happen, would be for government to give up trying to control people, markets, and companies.

  • pzatchok

    Actually GB does have private medical insurance and private health care facilities.

    You don’t really think the rich would mingle with the common folk? In GB?

    But all hospitals have a medical review board that in tasked with the evaluation of a patient and if they should receive some medical procedures. You know a death panel.

    As for drug prices. You do not have to go the route of price fixing.
    You could change things a little by allowing the importation of generic drugs(with lot testing by the FDA) and by changing the patent expiration times.

  • Kevin R.

    The corrupt bad faith method of building political coalitions.

  • wodun

    You could change things a little by allowing the importation of generic drugs

    We already have generic drugs. Mandating the use of generics creates a disincentive for drug manufacturers to make new products. They are also a sign of how the USA subsidizes the world through creating new drugs.

  • Garry

    Wodun wrote,

    “We already have generic drugs. Mandating the use of generics creates a disincentive for drug manufacturers to make new products.”

    Holders of patent rights have a 20-year monopoly on the right to exclude others from making/using/selling their products/processes, after which anybody can freely make/use/sell. If generics were never allowed, then that monopoly on rights would be permanent. Therefore, allowing generics (after 20 years) actually serves as an incentive to develop new drugs.

    At least, that’s the basic approach of patent law, but I understand that in practice it’s been bastardized (especially in the field of pharmaceuticals), to allow longer monopolies. It ought to be longer than 20 years for drugs, as the time starts from the filing of the patent application, but the drugs can’t be sold until FDA approval, which typically takes several years.

  • Edward

    Garry,
    I think that wodun’s point was different. If only generic drugs are allowed, or as wodun wrote, “Mandating the use of generics,” then no one would be buying the patented drugs, and the research and development expenses would never get recuperated. Thus, there would be zero incentive to spend the money to develop new drugs.

    Please notice how few pharmaceuticals are developed in countries with socialized medicine or single payer (or as wodun likes to put it: single customer — where the government is the customer in this monopsony — hat tip to someone here for that wonderful word, too). That the US is still willing to pay the high prices for new drugs is the only reason that several countries have access to these same drugs — for discounted prices. We Americans pay a high price for the rest of the world’s good health.

    You’re welcome, world.

    LocalFluff asked: “However could half the states accept this when about 5 out of 6 states (soon) have Republican majority?

    This was not always the case. Only in the last half decade have the states been turning Republican, at least where the local governments are concerned. This is one of Obama’s legacies. Americans are ever so slowly beginning to come to the realization that their government schools have taught them ill.

    Keynesian economics turns out not to work, as demonstrated in the Great Depression and now in the Great Recession. Social (In)Security was supposed to be wonderful, but it turned out to be a government-run Ponzi scheme (and FDR should have recognized this, considering that he did it only 15 years after Ponzi very publicly demonstrated the “bubble scheme,” as it had previously been known), where the early people get the benefit and the latecomers get virtually nothing.* Now we are learning that Medicare is not only being overwhelmed, but it is beginning to ignore the very people it was created to benefit. What a crock.

    pzatchok,
    Not only does Great Britain have private medical insurance (because the National Health (Dis)Service is so bad), but Canada does not prosecute the (still) illegal private medical clinics, because Canada knows how bad their system is. As Steven Crowder points out, it can literally cost you a leg.
    https://www.youtube.com/watch?v=q2jijuj1ysw#t=660 (at the 7:45 mark, earlier in this same video, the nurse recommends that they go to a private clinic, because she knows that her employer, the Canadian Messed-up Health System, is so bad, what with the very long lead times for getting medical attention or even for getting a family doctor. Who would ever imagine that it could take so long to get assigned to a doctor, and how many people had to die ahead in order for them to have a doctor with enough time to see a new patient?)

    * Ida May Fuller was the first recipient. She paid in a whopping total of $24.75 and ultimately received a mere $22,888.92 in Social (In)Security benefits. Pretty good “return on investment,” even for an early Ponzi scheme participant.
    https://www.ssa.gov/history/idapayroll.html

  • Garry

    I wrote my post to explain what a generic drug is – it’s a drug whose patent has expired. There’s no such thing as a drug that starts off as a generic, unless the inventor literally gives away the invention, either intentionally or by error (such as by failing to file within a year of the first public disclosure).

  • Edward

    Garry,
    In that case, I misunderstood your statement about generics being an incentive to develop new drugs. I agree that the shortened timeframe for making money from the patent is detrimental to the inventor pharmaceutical company and further discourages development of new drugs.

  • Garry

    I should have mentioned that clearly tuere jas to be a balance. Make the monopoly on patent rights permanent, and there’s little incentive to develop new drugs, as the rights holder can set whatever prices it wants. Make the monopoly too short, and there’s no time to recover development expenses (for the patented drug itself and for the dozens of other drugs that cost a lot to develop but never get to market).

    Where that line should be is the subject of debate, but I contend that the line should be there (in other words, more than zero years, but less than infinity)

  • pzatchok

    My only real beef with pharma patents is the abuse they get away with.

    Of course they can patent a drug but they should not get a patent on its delivery system or concentration/potency. They can copyright that though.
    Just because you went from a 5mg to a 10mg dose in a pill does not mean you get a new patent.
    If you change the inactive ingredients in a pill you do not get a new patent.
    If you change it to a timed release system you don’t get a new patent.

    They can patent the actual active chemical drug but not anything else about it.

    As for the US paying the lion share for drug development.
    Price the drugs the same worldwide or don’t sell them in the US. I don’t care what the price is just make them all the same worldwide.
    If Mexico can only afford the drug at a dollar a pill fine, then sell it in America for the same dollar. Show the US customer the real strength of the US dollar. Or raise the price in Mexico up a bit.
    If Canada as a nation collectively buys the drug at a reduced price then fine. thats the new US price also.

  • Garry

    Patzchok,

    I understand your frustrations, but those changes would require very extensive changes to the patent law. The most recent major revisions was around the year 2000, the first in about 50 years (just after I passed the old bar exam, rendering much of my knowledge obsolete).

    The way the system is supposed to work is, sure, you can get a new patent on a delivery system, or a new dosage, or new inactive ingredients, but that doesn’t delay the expiration of the basic patent, and after that expiration, others can make/use/sell your basic invention so long as they don’t infringe the new patent.

    I’ve worked on literally thousands of patents in the past 20 years, and the vast majority were small tweaks to existing inventions rather than being groundbreaking inventions.

    However, I have often read (in the general media, not in professional journals) that pharmaceutical patents are handled differently, and through legal gymnastics, it’s often the case that the old patents have their expiration dates moved up as well. I don’t know how true this is.

    One of the problems with the system is that, by and large, the patent examiners are young, inexperienced people who aspire to be patent attorneys (there’s much more money in it). Patent attorneys tend to be older and more experienced, and the patent attorneys sometimes intimidate the examiners. When this happens I blame the examiners, not the patent attorneys.

    In addition, there are ways to game the system. For example, if all examiners in a section make 108% of their quarterly quota (I’m not sure of the exact number), they all get a bonus, and nobody wants to be the one guy who prevents the other 30 or so people from getting their bonus. Points are awarded for making final decisions on patents. The patent attorneys know this, so when they have borderline cases, they try to schedule interviews with the examiners right around the end of the quarter, hoping to pressure the examiners into giving quick approval.

    Like all areas of the law, there’s an element of sausage making involved.

    I should point out that, by and large, the patent system does a good job of fulfilling its purpose of promoting technological development, by rewarding inventors for fully disclosing their inventions.

    I know enough about the patent system to do my job (rather, one of my jobs), which is on the fringes of the patent field. I wish I knew more, but have too many other things going on in my life to devote much time for study.

  • Edward

    Garry wrote: “by and large, the patent system does a good job of fulfilling its purpose of promoting technological development, by rewarding inventors for fully disclosing their inventions.

    The beauty of this system is that it lets the rest of us freely use these innovations after a time, a time during which the inventor gets to make or license his innovation. Even if it is a new way of using someone else’s invention or a useful modification to the original, this is how we progress.

    I have read that SpaceX does not patent its innovations that are not “visible” to the public. This may give SpaceX an advantage for longer than the normal patent duration, but if useful innovations are forever hidden, then only SpaceX will ever benefit from them. This is not how we progress.

    I agree that even small improvements to existing patents should also be eligible for patenting. Even if it is a delivery method. If I came up with a pill, then later I came up with a better way to deliver the medicine, such as injection, then I should be rewarded for that improvement even though everyone else gets to manufacture the pill after the first patent expires. Polio vaccination is a good example of this.

    The pill form of polio vaccine has a minuscule chance of actually causing polio in the recipient, as it contains a live virus. However, the injection form contains only dead virus, so it cannot cause polio in the recipient. Wouldn’t it be better if I were motivated to improve the vaccine rather than leave it in its less-good form?

    Sometimes the cost is not just on the price tag. Sometimes the cost is the effect it has on everyone else. For polio vaccination, there was an additional cost for the families and friends of those who got polio from the pill form. For the lady in Steven Crowder’s video at the link in my comment, above, the cost of free medical care was a long wait time and even then it cost an additional leg.

    pzatchok,
    It would be nice if the price of drugs were the same for the whole world, but the prices for everything are different in different places in the world. Even within your own town, the price of gasoline is probably different at different stations, although it may be the same where two or more stations are located at the same corner.

    Free markets work better than controlled markets, and we just have to live with the knowledge that yesterday the price of gasoline was highest in San Diego (so … aren’t you glad you didn’t have to buy there, yesterday?).

    Thomas Sowell, in his book “Basic Economics,” points out that having prices vary among various locations gives incentive to deliver goods to the places where they are most needed. When prices are forced to some level, then the location that has forced the price may get too little or too much of that product.

    This may hurt both the people at that location as well as everyone else around the world. A shortage in one place and a glut everywhere else is not good, as the manufacturer has a disincentive to make as much the next time period. He will not make enough to go around, and he has a disincentive to deliver to the places that don’t pay him as much.

    Free markets may seem unfair to those who want to always have the lowest prices, but free markets set fair prices. If the price is too high, then people stop buying until the price becomes fair. If the price is too low, then people horde and there is a shortage for everyone else, causing the price to rise until it reaches a fair level.

    The problem that I keep seeing is that everyone seems to want stuff for free or for less than it is actually worth. A good example is bootlegging music or movies. If too many people do this, then the people who make them will stop making them when it no longer pays to do so.

    So be careful how you want drugs to be handled and priced. You may not get the solution that you expect. Careless forced pricing of drugs is why the rest of the world does not innovate its fair share of new pharmaceuticals.

    And centralized control of medical services is why Canadian healthcare has such long wait times for even the simplest things, such as getting assigned a doctor, or for the most needed things, such as MRI scans, and why it can literally cost you a leg (see Steven Crowder’s entire video at the link in my comment, above).

  • pzatchok

    I am not talking about the small 10% price change because of local markets and taxes.
    I am talking about the 30%, 60% and in some few cases even 90% price change because the local Mexican market cannot afford something so they increase the US price to make up for it.
    People get ticked when they raise the price of gas in a hurricane zone. Drug pricing is worse.

    Just because I can afford to pay 10 dollars a pill does not mean its even close to fair.
    How would it be if we priced cars like we price drugs. That new Chevy costs the US buyer 30,000 dollars but the South American buyer 5,000. Both cars are made in the same plant and cost the company the same to make and ship. But your a North American you can afford more so you must pay more.

    And add in this idea.
    Until a generic of the drug is made then they hold a monopoly on that drug. You know the drug keeping your mother alive.
    I am all for the drug companies making back their investment. Just not wholly on the backs of the US customer.

    As for gas prices I live in a unique area. I live between two different shipping terminals with two different local taxes and rules. One switches over to the winter blend about a week before the other. Plus they are in two different states. So at times I can find gas up to 20 cents different at two stations right next to each other. But normally they are within less than 2% of each other.

  • Edward

    pzatchok wrote: “Just because I can afford to pay 10 dollars a pill does not mean its even close to fair.”

    Ah, the quest for fairness. The hard to answer question, “what is fair?”

    The socialists declare, “From each according to his ability, to each according to his need.” Everyone is equal all the time. That sounds fair, doesn’t it?

    The free market capitalists prefer a merit system, often based upon productivity or contribution (work, talent, skill, innovation, financial support, leadership, etc.); you get to have — and do with as you please — what you earned. Doesn’t that also sound fair?

    But how can two mutually exclusive systems both be fair?

    William Bradford tried a version of the first system, socialism, as he founded the Plymouth colony, and the colonists discovered that when everyone would share equally in the fruits of all, a surprising number of people become slackers. Is it fair that the slackers get a share equal to those who are doing most of the work? The colonists did not think so and petitioned Bradford to void their socialist contract (this was before socialism had a name or philosophy — this was an experiment that failed in its first year).

    So why does socialism remain in the world? Because the socialist leaders control the guns, and they like the system, since they deserve more than an equal share — due to the stresses and strains that come with leadership, of course. Which sounds fair. To the leaders. An added benefit was that the rest of the population belonged to the government, which was the leadership. Again, a benefit to the leaders.

    When Plymouth colony reverted to free market capitalism, everyone worked harder, even the slackers, because they only had what they earned — not what someone else earned. This system worked so well that they had plenty left over. First they had a big feast, inviting their friends, the Indians, to share in their bounty, then they started to trade their excess with their friends, the Indians. Free market capitalism worked so well that, in a mere three centuries, it turned a small backwoods village that was unable to feed itself, under socialism, into the world’s leading economic powerhouse.

    Only the regions of the planet that have free market capitalism have prospered. Two decades ago, there were only one billion people, among the six billion, who were considered “rich.” Almost all of them in America and Europe. In 1960, the figure was one billion rich, among the three billion. Again, they were in America and Europe. The difference is that America and Europe had free market capitalism and stable populations, while the rest of the world were under socialism or other centrally controlled, top down economic systems, and had booming populations.

    Today, there are two billion who are considered rich, among the seven billion on Earth. About half of these are in China and India. The difference is that China and India have started to move toward free market capitalism.

    So, yes, why is it that the US does the hard work while the rest of the world gets a discount on pharmaceuticals?

    Oh, that’s right, because most of the rest of the world — the socialist part, the jealous part — doesn’t develop much of the world’s pharmaceuticals. They have slacked off, because they don’t need to work as hard, since the hated America kindly provides at fire-sale prices. And they consider that only fair, because even the slackers should be just as equal as the hard working, innovative, productive people (with the leaders being more equal still — you just have to love that Animal Farm).

    Obamacare does something similar. It taxes the productive in order to pay for the health insurance premiums of those who are less productive.

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