April 15, 2015

Hardly a week goes by without a new claim that Medicaid expansion will be free. In fact, we’re told the state can make money by gaming the system to get prisoners signed up on Medicaid expansion.

All these claims depend on Washington always paying 90% of the cost. And they depend on the cost estimates of Medicaid expansion being on target.

So read the Washington Times report on the accuracy of government health care program budget projections. “Cost projections are notoriously unreliable, and history is filled with examples of federal programs – especially in health care – that cost far more than originally predicted.

In 1965, the House Ways and Means Committee estimated that the hospital insurance program of Medicare – the federal health care program for the elderly and disabled – would cost $9 billion by 1990. The actual cost that year was $67 billion.

In 1967, the House Ways and Means Committee said the entire Medicare program would cost $12 billion in 1990. The actual cost in 1990 was $98 billion.

In 1987, Congress projected that Medicaid – the joint federal-state health care program for the poor – would make special relief payments to hospitals of less than $1 billion in 1992. Actual cost: $17 billion.

The list goes on. The 1993 cost of Medicare’s home care benefit was projected in 1988 to be $4 billion, but ended up at $10 billion. The State Children’s Health Insurance Program (SCHIP), which was created in 1997 and projected to cost $5 billion per year, has had to be supplemented with hundreds of millions of dollars annually by Congress.

Also, the government has consistently underestimated the rate of increase in the Medicaid rolls, further pushing outlays beyond projections, said Dennis Smith, a health care specialist at the Heritage Foundation.

In 2000, Health Care Financing Administration director Nancy-Ann DeParle, who now serves as the White House health “czar,” estimated that the number of children enrolled in Medicaid would increase by 1 percent a year, rising from 22.6 million in 2000 to 23.8 million in 2005. In reality, 29.9 million children, or about 26 percent more than projected, were enrolled in Medicaid in 2005, Mr. Smith said.”

There’s no such thing as a free lunch.

Don’t make Medicaid bigger. Reform Medicaid with managed care.