Medicaid expansion widens safety net, but are future costs a ticking time bomb?

Ike Madison

The smile on Ike Madison's face is telling.

For years, his health care strategy went something like this: “When I got sick, I had two choices. You either lay in bed and die or go the emergency room. I had been suffering.”

That should change. The 57-year-old Wayne County resident is among nearly 270,000 low-income residents enrolled since April 1 in Healthy Michigan Plan, the state's version of Medicaid expansion under the Affordable Care Act.

Madison suffers from ulcerative colitis, an inflammatory bowel disease that sent him to the hospital twice in recent years. He said he has been to the emergency room three times. On some occasions, he took his half his prescription medicine dose because he couldn't afford its cost. Other times he gave up trying to renew the prescription and quit taking it.

Madison has a part-time job unloading trucks for the Salvation Army in Romulus, and doesn't qualify for its health insurance. He can't quite believe he is entitled to regular doctor visits and coverage of medication he needs.

“The best part is now I can start doing what I need to do. I'm going to get a checkup as soon as I get the chance. It'll be peace of mind.”

While this health care shift has not come without controversy, state officials are pleased by the early response. James Haveman, director of the Michigan Department of Community Health, expects to add at least 320,000 low-income individuals to Medicaid this year and nearly 500,000 within a few years.

“I think we are running ahead of schedule,” Haveman said.

Administration officials say it will improve healthcare outcomes, save hospitals money and spur job growth. They project more than $1 billion in state general fund savings by 2020 – much of that from shifting mental health costs to Medicaid. But critics still see an ill-advised social experiment they believe will saddle the state with debt, while one mental health advocate disputes a key part of the state's saving calculus.

Before now, Medicaid in Michigan was largely limited to children, parents below the poverty level with dependent children, the elderly and disabled. It covered about 1.8 million residents in 2013. There were nearly 1.2 million uninsured residents in Michigan in 2013, according to MDCH analysis.

Expansion widens the health care umbrella to include the uninsured “working poor,” individuals or families making up to 138 percent of the federal poverty level. That amounts to about $16,000 for an individual and $32,500 for a family of four.

Under terms of the Affordable Care Act, the federal government is committed to pay the full cost of Medicaid expansion through 2016. Its share would fall to 90 percent by 2020 with states to pay no more than 10 percent after that.

Gov. Rick Snyder expects the state to save more than $200 million a year in mental health spending, as Healthy Michigan recipients will be eligible for services that had been paid by the state.

He also projects to save more than $60 million from state prisoners who receive medical treatment outside the prison system and by transferring to Medicaid a state-funded assistance program for 35,000 low-income adults not otherwise eligible for Medicaid.

But Michael Vizena, executive director Michigan Association of Community Mental Health Boards, pegs annual savings to the state for mental health costs at $140 million –$60 million less than the state projects.

Vizena said analysis by his organization found the state underestimated the cost of mental health services not covered by Medicaid, such as treatment for those in prison or jail, certain individuals receiving Medicare and expenses like injected medications

“We don't want those savings to be at the expense of those with mental health problems,” Vizena said.

Snyder proposes banking half of projected general fund savings to compensate for added state costs that accumulate after 2016. He projects those funds will keep expansion at no cost to the state through 2034. A 2013 analysis by the Senate Fiscal Agency projects that the “crossover point” –where costs exceed savings – could occur anywhere from 2023 to 2036.

Snyder spent considerable political capital pushing the measure through a reluctant Republican-controlled Legislature, as it squeaked through the state Senate in August by a 20-18 vote after earlier approval by the state House. Michigan is one of 26 states to approve expansion but among just eight with GOP governors to do so.

Political critics remain unconvinced, as they, too, assert that Snyder's savings projections are overly optimistic.

“I am extremely skeptical,” said state Sen. Patrick Colbeck, R-Canton, an outspoken expansion opponent who joined 17 other Republicans voting against the measure. At the time of the vote, he called it “nothing short of government control of our health care decisions.”

Colbeck predicts it will eat into the state's general fund far sooner than Snyder projects.

“I think it is fiscally irresponsible. I think it is socially irresponsible.”

Hospital officials consider Medicaid expansion a prudent step forward, one that should help reduce the cost of uncompensated care for patients without health insurance. A 2013 report by the Michigan Health and Hospital Association found that hospitals spent nearly $900 million on charity care and uncollectable funds in 2011. Those costs are paid by a combination of public funds, losses to physicians and higher charges to insurers.

Laura Appel, vice president of federal policy and advocacy for the Michigan Health and Hospital Association, said hospitals have been actively working to enroll eligible patients for Medicaid. She expects it to improve follow-up care as well as cut back on inappropriate use of the emergency room.

“It will give us an opportunity to say to folks that what you need is a visit to your primary care doc,” she said.

That sounds good to Ed Natschke, who lives near Houghton Lake in the northern Lower Peninsula. Natschke, 53, said he lost his health insurance after he had to leave a truck-driving job last September for health reasons connected to diabetes.

“I had to rely on samples (of medication) and stuff like that from the doctor when I could get to see him. I felt real vulnerable, down.”

Natschke said there were times when his free samples ran out. He paid a price.

“You go without, and you watch your (blood sugar) numbers rise.”

Now he can count on regular access to a doctor and medication he needs to keep his diabetes under control.

“When I actually got the (Medicaid) card in my hand, in my possession, it was like half the world was lifted from my shoulders. It was one of the best feelings I have had in a long time.”