Why States Eyeing Medicaid Expansion Should Beware

by Naomi Lopez
August 24, 2018

In the Goldwater Institute’s recently released paper The Arizona Medicaid Expansion Experience: Beware the Peddlers of Cost-Shifting Claims, we show how Arizona’s expansion of Medicaid should serve as a cautionary tale to other states considering expansion. While Medicaid expansion did ease emergency department use by the uninsured in the Grand Canyon State, overall emergency department use increased—and hospitals are now charging the Medicaid program significantly more for Medicaid patients’ emergency care.

Despite the repeated claims that Medicaid expansion was needed to alleviate the costs of the uninsured using expensive emergency department services, emergency department use continued to increase after the Medicaid expansion. Our study found that the overall number of emergency department visits increased, even after controlling for patient age.

Hospitals’ list prices for services, commonly referred to as “charges,” for all payment groups (public and private) increased, but Medicaid charges in Arizona’s emergency departments alone increased more than 300 percent. Notably, these increases in charges to the Medicaid program are far more substantial for urban hospitals than for urban ones.

The study found that between 2007 and 2016, emergency department charges among urban hospitals increased by 255 percent, while rural hospitals saw an overall increase of 162 percent. Most of this growth difference is accounted for by urban hospital charges rising at twice the rate of rural hospitals (see table).

This study further suggests that hospitals are commanding higher charges from the taxpayers who foot the bill for the Medicaid program, with the larger, urban hospital systems dictating and driving these increasingly higher rates. Unfortunately, the Arizona lawmakers who passed the state’s Medicaid expansion failed to require any independent audit or oversight over hospital rates to the Medicaid program. Furthermore, there are no taxpayer protections evaluating how this spending is impacting the quality of patient care.

As Medicaid expansion is considered in a small handful of state ballot measures this fall, voters should know about and publicly debate whether the proposed expansions will meet the promised goals. It is just not enough to hope that expansion will achieve the desired goals. The Arizona experience should provide a cautionary tale for those states now eyeing expansion.

Naomi Lopez is the director of healthcare policy at the Goldwater Institute. She is co-author, with Angela C. Erickson and Christina Sandefur, of the recent Goldwater Institute study, The Arizona Medicaid Expansion Experience: Beware the Peddlers of Cost-Shifting Claims.