Utah Legislature seeks to take ACA Medicaid expansion money and fill pockets of private insurers

While the Utah House has been opposed to taking federal dollars to expand Medicaid as part of the ACA, the Utah Senate appears to be willing to do so. KSL reported yesterday that Senator Shiozawa has presented a plan that would take the expansion money and use it to direct people to private insurance coverage as much as possible. While it’s heartening to see the Senate willing to take the federal money (since Utahns are paying those taxes either way), the plan that Shiozawa put forward would use the money much less efficiently than if Utah just expanded Medicaid.

Why? Well study after study has shown that Medicaid provided much more coverage per dollar spent than does private insurance. And this makes intuitive sense, as private insurers are for profit.

In terms of the cost differences, this paper, published in Health Affairs, found that

if an average low-income Medicaid adult were instead covered by private health insurance for a full year, total spending would climb from $5,671 per person per year to $7,126, an increase of 26 percent. The level of out-of-pocket payments would rise from $197 to $1,293, an increase of 556 percent.

So, compared to using Medicaid, Shiozawa’s plan would cost 26% more to insure the same amount of people. Now why would that be desirable in any universe?

And how does Medicaid provide more cost efficient service? From the CBPP:

First, the average cost that insurers (i.e. the public program or private insurance plan) pay per beneficiary is lower under public programs than under private insurance, probably because these programs reimburse health care providers at lower rates and have lower administrative costs. Second, the average out-of-pocket costs that individuals incur are substantially lower under public programs than private insurance because Medicaid and SCHIP limit cost-sharing for low-income beneficiaries.

Indeed, the Kaiser Family Foundation states that Medicaid administrative costs are half of those of private insurers; in addition, Medicaid doesn’t have to make a profit, and it also reimburses doctors at a lower rate than does private insurance*.

Why does the Utah legislature want to reinvent the wheel in order to use our tax dollars less efficiently?

*Perhaps this is the reason Dr Shiozawa opposes Medicaid expansion? I'll email him to check.

Postscript: And no, Medicaid costs aren't out of control, and can't be used as an excuse for not expanding the program in Utah.