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John Hood tries again with crowd out argument against Medicaid

Unfortunately, legislators in North Carolina have decided to refuse [1] federal funds to extend Medicaid coverage to 500,000 uninsured people in our state. Thankfully, during debate on the bill they largely dropped some of their wildest talking points and stuck to the line about Medicaid in North Carolina needing reforms before it expands.

That hasn’t stopped John Hood from doubling down on crowd out as the biggest reason to block expansion. It turns out, according to his telling, that single-payer forces are attempting to extend Medicaid to more parents and uninsured adults as a secret plot to put insurance companies out of business.

In response I’ll just say that actuaries who get paid to model sources of insurance coverage show, in state specific estimates [2], that the number of people with private health coverage will increase after 2014, even with Medicaid expansion. Increasing the number of people with private insurance is a pretty roundabout way of getting to single-payer.

Also, most insurance companies think Medicaid expansion is a good idea. That’s because they recognize it will allow the uninsured to get coverage. That means if those families eventually change to private coverage they will be coming from Medicaid instead of from the ranks of the uninsured. Insurers realize that the uninsured have many more unmet medical needs than those on Medicaid. Someone coming from Medicaid to private insurance will use fewer health services. Insurance companies, we should note, would prefer not to go out of business.

With people getting premium support payments it is more cost effective to expand coverage through Medicaid. Legislators originally claimed that increasing the number of people on Medicaid is a huge problem because it would drastically shift the payer mix at hospitals across the state. These hospitals would still see the same number of uninsured patients and a large percentage of their private patients would switch to public coverage. Hospital financial officers and actuaries all dismissed that claim so politicians have dropped it. Let’s hope others follow suit.