This post originally appeared at https://www.badgerinstitute.org/medicaid-wisconsins-budget-buster-on-healthcare-costs/

A recent history of the state’s social spending Leviathan

As the state Legislature’s Joint Finance Committee begins budget deliberations, Gov. Tony Evers is pushing for a $31.6 billion budget for Medicaid over the next two years, a $4.2 billion biennial increase.

The $27.4 billion being spent on Medicaid in the current two-year cycle already represents nearly 30% of all state spending. In comparison, the governor is asking for $19.3 billion in 2024-25 biennium for public education, $13.9 billion for the University of Wisconsin System and $3.1 billion for Corrections.

The governor is once again asking that Wisconsin join 40 other states and allow the federal government to pay 90% of Medicaid costs. Because the state refuses the federal handout, state taxpayers have been underwriting between 35% and 40% of Medicaid’s biennial budget. That translates to between $9.6 billion and $11.1 billion of the current biennial Medicaid total.

Medicaid enrollment has exploded in recent years largely because the state has been prohibited since the beginning of the pandemic from dropping anyone – eligible or not – from the program.

There were just over 770,000 Wisconsinites on BadgerCare in March 2020, when President Biden declared the pandemic-prompted health emergency. Today, overall  Medicaid enrollment is more than 1.6 million people in the state and enrollment in its main program, BadgerCare is up to almost 1.2 million people.

State health officials have finally begun dropping individuals who no longer belong on the rolls, but Gov. Evers is once again pressing the Legislature to approve a federal expansion conservatives have long opposed.

Republicans in the legislative majorities say they have no intention of giving the federal government a bigger say in how Medicaid is paid for and run in Wisconsin.

With near record low unemployment under 3% and cushioned by federal surpluses in the program, conditions would appear favorable for Medicaid spending in the state to stabilize.

But several of those same Republicans, all too aware of Medicaid’s history, are pessimistic the spending juggernaut can be slowed.

Annual costs, which were on a steady rise for a decade before COVID 19, jumped nearly 20% to $12.7 billion in 2022. Until Congress called for an end to Biden’s emergency order late last year, the state Department of Health Services was prohibited from its usual culling of the Medicaid rolls.

For 35 consecutive months, the numbers of parents, childless adults, pregnant women and children on Medicaid in Wisconsin grew.

Beginning April 1, DHS had to begin the process of collecting eligibility information for everyone on Medicaid and, presumably, trimming back the Medicaid roll. Some states with conservative leadership, like Arkansas, have made it a priority to quickly reduce its Medicaid dependency.

Some conservatives speculate that DHS is in no hurry to do the same because Evers supports a more expansive program, regardless of how it is funded.

Evers has said publicly an expansion would put an additional 89,000 people on Medicaid after the eligibility rollback. However, DHS is making its budget assumptions based on the addition of as many as nearly 175,000 new clients.

The co-chair of the Joint Committee on Finance, state Rep. Mark Born, R-Beaver Dam, told the Badger Institute Medicaid expansion is not going to happen.

“It defies logic. There’s no need for it, for starters,” Born said. “This is just an expansion of the welfare state. Not only has he (Evers) added nothing to it from the last budget, but his rhetoric is also missing. Like it isn’t a priority. It’s almost like he’s checking a box to satisfy his political base.”

Evers lacks the political leverage to expand Medicaid because Wisconsin is the only one of the 10 states that have not approved expansion to have no coverage gap for people whose incomes are low, but above the Federal Poverty Level.

Despite the flurry of hand-wringing stories in the legacy media about hundreds of thousands of people being “thrown off” of Medicaid, or falling through the cracks with the DHS enrollment review, Wisconsin has a system in place to ensure coverage for low-income people, Born said.

Gov. Scott Walker closed the coverage gap while maneuvering within President Barack Obama’s Affordable Care Act, passed in 2010. The federal government granted Walker a waiver that would limit BadgerCare to those living below the poverty level and offer those able-bodied adults with incomes 133% above that level almost completely subsidized coverage on the Affordable Care Act exchanges.

“I was not a supporter of Obama Care,” Robin Vos, who would be elected speaker of the Assembly three years later, told the Badger Institute. “But I am incredibly proud that we found a way to take care of people slightly above the poverty level. We had a solution other states didn’t have. And we proved expansion was not a one-size-fits-all solution.”

Neither Vos nor Born, however, are optimistic that the Legislature can contain spending on the individual, regardless of the size of the Medicaid roll. When DHS has completed its review, Born doesn’t see a return to a pre-pandemic enrollment.

Between the start of 2020 and October of last year, the number of childless adults added to the state’s rolls nearly doubled to more than 281,000 at an average cost of $5,549, according to DHS data.

Pregnant women, while a much smaller group, also nearly doubled to 35,518 at an individual average cost of $7,248, the data showed. Parent enrollment swelled by more than 50% to 240,770 at an average of $3,655 per enrollee.

No state in the country has had any better luck than Wisconsin in containing Medicaid costs. The reason is simple. For all the talk of 50 state programs, Medicaid is fed by a federal government not restrained by having to balance a budget.

Federal taxpayers supported the entire Medicaid program on a budget of $35.5 billion in 1989. Last year, the cost was $592 billion.

NPR recently reported that as many as 18 million people nationwide could be stripped of Medicaid coverage and the Kaiser Family Foundation estimated that, at most, 14 million might no longer be eligible.

But as the Badger Institute reported in April 2021, Medicaid, like the other two social spending Leviathans, Social Security and Medicare, has been immune to real reform.

Brian Blase, whose Medicaid Fiscal Accountability Regulation was suffocated during the Trump administration, has taken to calling for incremental reform as the head of Paragon Health Institute, a non-profit think tank just outside of Washington, D.C.

The uncomfortable truth is that Medicaid’s reimbursement system has always encouraged state spending, Blase, the former special assistant for health care policy, told the Badger Institute.

The spending has, historically, been indiscriminate and unaccountable. Three years ago, the Centers for Medicare & Medicaid Services (CMS), reported that for the first time the amount of improper or illegal Medicaid payments topped $100 billion.

Last year, CMS boasted, improper and illegal payments dropped to only $80.6 billion, but admitted that in addition to better scrutiny in some areas, other spending was masked by “COVID-19 review flexibilities.”

In a report released in March, Blase recommended the federal government end a Medicaid provider tax, a dizzying merry-go-round in which states tax providers like hospitals and nursing homes, use that tax collection to get higher federal reimbursements, return some of the money to providers in increased payments and keep the rest.

The report goes on to find savings in limiting administrative costs, a redress of reimbursement favoring wealthy states with robust Medicaid programs over poorer states and encourages states to create or enhance work requirements as a condition of enrollment.

Blase knows from his failed reform effort that convincing any participants in Medicaid’s unholy marriage — providers, states and the federal government — to interfere with a reliable revenue source is a tough lift.

“The reform has to come at the federal level,” Base told the Badger Institute. “All of the taxing and reimbursement schemes are set up to get as much money from the system as possible. And states are a very powerful lobbying group in Washington.”

Blase presses on, he says, because despite all the spending, Medicaid is an awful tool for promoting public health. In its 2022 report, America’s Health Rankings ranked Wisconsin 28th for its overall health outcomes, plummeting from 6th in its 2019 report. The state finished near the bottom for premature deaths and low birth weights by race and finished 49th for excessive drinking.

“That’s a tough truth. Medicaid expansion really doesn’t promote healthy outcomes,” Blase said. “The outcomes are poor.”

While Gov. Evers has for years touted the shift of the burden from state to federal taxpayers, Congress has for years shifted the burden of its biggest social programs from tax collection to borrowing. Despite President Biden’s budgetary sleight of hand, Medicare and Social Security are not sustainable.

And when insolvency comes, as it surely will if nothing changes, Blase and others say the federal government will no longer be able to guarantee 90 percent reimbursement rates for a relatively smaller program like Medicaid.

As DHS reshuffles the Medicaid enrollment deck, Wisconsinites are going back to work. Wages are climbing and good paying jobs are going unfilled. For the first time he is aware of, John Deere in Horicon, for example, is paying the full insurance premium for its employees.

Why, he asked, would the Legislature want to change any policies that would discourage work and promote welfare, “the exact opposite of what we need right now.”

“With all this worrying about falling through the cracks, what doesn’t get covered enough is that we have a program so that doesn’t happen,” Born said. “People have access to a program that’s already there.”

Mark Lisheron is the Managing Editor of the Badger Institute. Permission to reprint is granted as long as the author and Badger Institute are properly cited.

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