The Cost of Taking Away Health Care

By Suzanne Wikle

Medicaid will soon undergo radical transformations in states where the Centers for Medicare and Medicaid Services (CMS) have granted permission to disenroll people who don’t work a certain number of hours each week or month. Eleven states have asked permission from CMS to do this, and so far three states – Kentucky, Indiana and Arkansas – have received CMS approval. These states are embarking on work that will cost hundreds of millions of dollars in added administration and bureaucracy that will likely have one result: fewer people with health insurance.

States are seeking permission from CMS to make these changes through a waiver process that is supposed to be budget neutral, meaning that the federal government must incur no additional costs under the waiver than without the waiver. But it’s important to know that this budget neutrality only applies to the cost of providing health insurance and health care. The requirement to be budget neutral doesn’t apply to administrative costs, including building new IT systems to track additional documentation and processing significantly more paperwork.

Because states’ waiver proposals don’t include administrative costs it’s hard to nail down their exact costs. However, we have learned that these costs include:

Of course, there’s another cost to these new policies: the loss of health insurance by countless people. Those who lose Medicaid coverage will struggle to access health care and receive treatment for chronic conditions like diabetes or acute conditions like cancer—and ultimately some may face a premature death. These costs are much harder to measure but will be felt by families and communities in the states that are choosing to impose new barriers to health care. 

Beyond the toll on individual families, communities will also suffer in ways that should not be underestimated. Reduced Medicaid enrollment means fewer dollars flowing to doctors and hospitals, and therefore fewer dollars flowing to their employees. Rural communities may be hit especially hard, as hospitals there rely heavily on Medicaid reimbursements to keep their doors open. 

It’s a sad irony—states will be spending hundreds of millions of dollars to take away health insurance from low-income residents and reduce the economic activity generated by doctors and hospitals. It just doesn’t make any economic sense, especially when the economic benefit of Medicaid expansion has been proven again and again.

Ignoring the price tag of implementing new barriers to health insurance does a disservice to the entire conversation.  Tax dollars should be spent providing health care, rather than paying for new red tape and bureaucratic systems that hinder someone’s ability to access health insurance.