During the pandemic, the number of Americans enrolled in Medicaid skyrocketed from 75 million to 90 million. The issue? Not everyone currently enrolled in Medicaid is eligible.

And the federal government is trying to prevent states from removing ineligible Americans from their rolls.

This costs the taxpayer serious money, explains Hayden DuBlois, deputy research director at the Foundation for Government Accountability.

“The reality is very, very disastrous for state and federal taxpayers alike, for the truly needy who are kept waiting, for other budget priorities, which are now getting more and more crowded out by Medicaid as it’s just consuming so much of state budgets,” DuBlois says. “So it’s really snowballed into this crisis that is quickly falling out of control.”

DuBlois joins “The Daily Signal Podcast” to discuss how the federal government is handcuffing states to Medicaid, and what conservatives should do to respond.  

We also cover these stories:

  • The Supreme Court agrees to hear a case challenging affirmative action in higher education.
  • California state Sen. Scott Wiener, a Democrat who represents San Francisco, introduces a bill to allow children 12 and up to get a COVID-19 vaccine without parental consent.
  • Seven Virginia school districts sue newly elected Gov. Glenn Youngkin over his executive order giving parents the right to decide whether their child wears a mask at school.

Listen to the podcast below:

Douglas Blair: Our guest today is Hayden DuBlois, deputy research director at the Foundation for Government Accountability. Hayden, welcome to the show.

Hayden DuBlois: Thank you so much for having me.

Blair: I want to talk to you today about Medicaid and the looming disaster that this program is going to cause.

So, the Foundation for Government Accountability reports that as part of this Families First Coronavirus Response Act, Congress offered states an additional 6.2% increase in funding for Medicaid cost. That came with a caveat that states who accepted the money had to relinquish major control of their Medicaid programs, including determining Medicaid eligibility and managing enrollment.

So that’s a lot to sort of digest here, but can you explain why that is such a big deal?

DuBlois: Sure. As you said, at the beginning of the pandemic, when Congress first passed their initial piece of coronavirus relief, which was the FFCRA, they gave states a bump in their FMAP, which is the Federal Medicaid Assistance Percentage. And that’s the portion of funds for Medicaid that the feds pay. And the way it works is feds pay a little bit, states pay a little bit. But they gave a 6.2 percentage point bump for the duration of the public health emergency.

Sounds great, but like a lot of congressional programs, it comes with a lot of strings attached. And in this case, as you noted, the strings attached are states cannot remove enrollees from their Medicaid programs, even if they are no longer eligible for the program.

So naturally, that’s causing some pretty severe headaches, and Medicaid enrollment is spiking at an unprecedented rate. Just before the pandemic hit, enrollment was about 75 million individuals, just over 75 million. Today, it’s closer to about 90 million, which is unprecedented, it’s the largest increase in the program since its inception, since we’ve been recording it.

The problem is a huge portion of these new enrollees aren’t on because of the pandemic, they’re on because of … government mismanagement.

Ninety percent of new enrollees, according to our estimates, are locked into the program. They’re on it, but they’re no longer eligible for it, yet they’re continuing to receive Medicaid benefits.

So it’s caused this crisis where states are seeing Medicaid enrollment skyrocket, costs go through the roof, all while they’re powerless to remove individuals because the federal government has caught them in a bind and said, “Well, that’s part of the deal you accepted with this extra federal funding.”

Blair: Two things about that. One, can you explain to our listeners who gets Medicaid? Is this something that’s open to all Americans or is this just the elderly who gets Medicaid?

DuBlois: Sure. So Medicaid was originally designed as a program for the truly needy and a means-tested program.

Medicare, for example, you get that when you turn 65 years of age, that’s an entitlement program. Every American will get that. Medicaid, on the other hand, was originally designed for individuals who were in extreme poverty, have developmental or intellectual disabilities, who are otherwise in need of care that they could not get or could not afford to get.

So, it was really focused on the most vulnerable individuals. It has changed since Obamacare passed in 2013, when Medicaid expanded in the majority of states to a class of able-bodied adults aged 18 to 64, who make up to 138% of the poverty level.

As a result now of the roughly 90 million people on Medicaid, 20 million or so are able-bodied, working-age adults who make up to 138% of the poverty level who otherwise don’t have any conditions that would have previously made them eligible for Medicaid.

Blair: Does that mean, though, that these people who needed it, was this program actively serving them in a way that was getting them the medical care that they needed, or was this a program that is like a lot of other government programs where it’s kind of just, it’s there to say that we’re doing something?

DuBlois: Well, it’s an interesting question. It is there so that we’re doing something, but they are doing things, they’re just doing the wrong things. As Medicaid was expanded to this whole class of new able-bodied adults, the folks who are really in need of it have paid the price.

There’s, I think, roughly now 650,000 Americans with intellectual or developmental disabilities who are aged in need of in-home care, who have underlying chronic conditions, who are all stuck on Medicaid waiting lists, many of whom have been stuck for years while this new class of able-bodied adults were sort of pushed to the front of the line.

So, that has come at the expense of these individuals who are truly in need of Medicaid assistance, but aren’t able to get it.

Meanwhile, we’ve got, according to our estimates, millions of people on the program who aren’t even eligible while these individuals continue to wait. And thousands of whom, of these individuals with chronic conditions, have actually, unfortunately, passed away on these waiting lists over the last eight years since Obamacare was first implemented.

So it’s been distorted into a program that has veered from its original mission of serving the most vulnerable and has now become, honestly, more like a welfare program that’s serving individuals who it was never originally intended to serve and now, thanks to these new congressional restrictions, people who aren’t even eligible for the program.

Blair: Let’s go back to those restrictions. Why were those provisions and the restrictions themselves inserted into this bill? What was the aim here?

DuBlois: Well, to be frank, I think it was very much a hidden provision that a lot of folks did not know was buried in this piece of legislation that was hundreds and hundreds of pages long.

If you ask the individuals why they put it in there, they’ll probably say, “Well, it’s a pandemic and we need to make sure people have health care coverage.” Which is a noble goal, but blanketly putting them onto this massive welfare program without adequate safeguards to make sure they’re eligible isn’t exactly the right answer.

The challenge that we’re facing is that you can literally have individuals who are committing fraud and states are unable to remove them from the program legally, or states might have state laws on the books themselves that say … for example, “We have to do cross-checks with income or residency or household composition on a quarterly basis.” And they’re doing those cross-checks, but they’re finding all these matches and they can’t do anything about it because they can’t remove those individuals from the program.

So while the intentions—I’m sure it will be argued—were good, the reality is very, very disastrous for state and federal taxpayers alike, for the truly needy who are kept waiting, for other budget priorities, which are now getting more and more crowded out by Medicaid as it’s just consuming so much of state budgets. So it’s really snowballed into this crisis that is quickly falling out of control.

Blair: Did any states bite and take this increase and have we seen any impact from those decisions to do so?

DuBlois: Yes. Every state has taken the increase, all 50.

Blair: Oh, wow.

DuBlois: Yeah. So we’ve seen that reflected in the enrollment trend, again, bumping from 75 million people on Medicaid just before the pandemic to about 90 million today. Which again, that’s 15 million new people. That’s basically the largest increase in the history of the Medicaid program in such a short period of time. So we’ve seen that.

Medicaid in some states is growing at 10%, 15%, 20% annualized, which is unbelievable considering those same states, we’re seeing 0% to 1% to 2% enrollment annualized increases prior to the pandemic. And that’s all being driven by these handcuffs.

Now, there is kind of a silver lining here. States do have the ability to unshackle themselves from the handcuffs, to say, “No, thanks. We don’t want the federal funding anymore. We’ll go back to the way Medicaid was before the pandemic.”

And then, by doing so, they would reclaim the power to manage their own Medicaid programs, remove individuals who are no longer eligible, and otherwise just take back control from Washington, D.C., that has really exerted its authority during this crisis.

Blair: You mentioned that all 50 states had taken this boost in funding, can they just unilaterally go, “We’re not going to take it anymore,” and go back to how things were? Or is that even a possibility?

DuBlois: It is. It is a possibility. And it’s something states really should be looking at.

The difficulty is earlier on in the pandemic when there was a lot of uncertainty and when states were unclear of how much federal aid they were going to get, this seemed like a really good idea at the time for them. But as we’re getting out of the public health crisis—and there have been a number of pieces of coronavirus relief legislation, the CARES Act, [the American Rescue Plan Act]—more and more money has gotten to states, they’re more flushed with cash. It’s not something they really need right now.

And they’re also seeing that, “Well, darn, the cost of keeping these ineligible enrollees on the program is actually more than the money we’re getting from the federal government to keep people on the program.”

So a lot of states have passed that tipping point where it’s actually cost-ineffective for them to continue receiving that money. So those states can simply go to the federal government and say, “Listen, we are not interested in continuing to receive this extra funding bump. No, thanks. Appreciate it, but we’re declining the offer from here on out.” And from that point forward, they would have the power to re-control their Medicaid programs.

Blair: Have any states indicated that’s the direction they’re going to go in?

DuBlois: No states have formally done it yet, but there have been a number of states that are having public discussions and are expressing interest.

Because as I noted, it’s really at that point now where the dominoes are starting to fall in that a lot of states have reached that cost-ineffective point for them. And they’re really starting to say, “OK, it’s now at the time where it just doesn’t make financial sense for us to keep doing this. We’re losing money on a monthly basis.”

So a lot of states are now starting to have public discussions about this. And it’s coming up more and more in state legislatures and in governor’s offices around the country.

So we’re optimistic that once one state makes the first move, it’ll kind of be like dominoes falling and other states will follow, similar to what happened over the summer with those expanded unemployment benefits, right?

We had this $300 weekly unemployment bonus that states were receiving. You had a couple states from the get-go say, “You know what? This just isn’t making sense for us anymore. It’s causing our workforce to stagnate.” They rejected the federal funding and ultimately, 26 states wound up opting out of those increased unemployment bonuses and the workforces in those states thrived.

So we’re optimistic that a similar situation could and probably will occur with these Medicaid handcuffs.

Blair: I’m glad you brought up the welfare angle to this. We recently spoke with an expert on “The Daily Signal Podcast” about the so-called Great Resignation, where many Americans are leaving their jobs and going out into the world, many are pointing to these types of generous welfare programs as one of the big reasons why people feel like they don’t have to stay at their old jobs anymore. Does this Medicaid expansion play into that?

DuBlois: Yes. That’s certainly a huge part of it. I mean, we at FGA, about a month or two ago, we released a paper on the—if you stacked up all the different welfare and welfare-like benefits in the country and compared it against the minimum wage and the median wage in those states, how would it look?

And nationally, for a lot of folks, it makes much more sense financially to stay on welfare than it does to return back to work, which is especially concerning when you realize a lot of these welfare programs don’t have any work requirements in place, that’s Medicaid, or have had their work requirements indefinitely suspended, like the food stamps program.

So when you add up food stamps, Medicaid, earned income tax credit, all these different programs, and aggregate them together, it is definitely a decision point that’s keeping the workforce from realizing its full potential.

I mean, we still have millions of fewer Americans in the workforce than we did prior to the pandemic. We still have unemployment claims ticking up now, and I think this most recent week. We still have our labor force participation rate well below where it should be.

So we’ve got this gap in individuals who have dropped out of the workforce, and a lot of economists are wondering where they are. Well, they’re on welfare, because welfare roles have spiked at the same time the workforce has seen its numbers plummet.

So that’s certainly a factor, Medicaid is playing a big role in that. And it’s something that policymakers really need to take into consideration when they’re looking at ways to rejuvenate their workforce.

Blair: Would policies like this Medicaid kind of tie in where you’re not allowed to leave the program or they’re not allowing states to remove people from the roles eventually lead to something like a single-payer health care system or “Medicare for All”?

DuBlois: Yeah. I mean, again, the goal at the national level that’s been talked about has been Medicare for All. We’re seeing this as a shift in the conversation toward “Medicaid for All.”

And if you look at some of the provisions and proposed amendments to the Build Back Better plan, that’s exactly what it would do. It would take this first step of these handcuffs and it would double down on them. And not only expanding coverage by an unprecedented degree, but also taking the handcuffs and doubling down.

So one of the provisions in Build Back Better, as it currently stands, is to extend the duration of the handcuffs while reducing the extra funding states are getting and prohibiting them from, once the handcuffs finally do come off, prohibiting them from removing more than a certain number of enrollees in any given month. And that’s just the tip of the iceberg.

The other provision would actually say a state will be financially penalized if it imposes eligibility requirements that are stricter than they were in October of 2021.

So if a state, for whatever reason, wants to try to impose a work requirement or different cost-sharing approaches to get their Medicaid program under control, the feds are actually going to penalize them now.

So this is all part of a broader conversation of Medicare for All, Medicaid for All, expanding welfare to able-bodied adults. It’s really all wrapped up in that dialogue.

Blair: I’m glad you brought up the so-called Build Back Better plan. One of the things that everyone argues about this plan is that it has an enormous price tag. It’s sort of unprecedented in the amount of spending that would be required for this to go through. As it stands now, how much does Medicaid cost Americans in taxes each year?

DuBlois: I would have to a look at that number. I don’t have it off the top of my head, but it is close to a trillion dollars each year. And it is certainly one of the largest federal programs out there. And it’s something that is only increasing as a share of the budget.

I mean, one of the things we track at FGA is what percent of state budgets are consumed by Medicaid. And it’s been slowly ticking upward and upward and upward over the last several years to the point now where between $1 in every $4 and $1 in every $3 spent at the state level is being spent on Medicaid.

What’s even more scary as part of this is the federal government recently released its updated improper payment estimates for Medicaid. So that’s the proportion of Medicaid spending that is spent improperly either on fraud or administrative errors or individuals who are mistakenly kept on the program, even though they’re no longer are eligible. And that rate has ticked up to well over 20%.

So more than $1 in every $5 spent on Medicaid is spent improperly. And of that 20%, 80% is due to eligibility errors, individuals who are not eligible for the program.

So that kind of wraps this whole conversation around full circle when you consider that Congress is literally telling states they can’t remove ineligible individuals from the program. But in some states it’s even worse. In some states it’s quite literally close to 50 cents on the dollar is spent improperly.

So when you hear about a program that’s costing hundreds of billions of dollars and of that, 1 in every 5 is spent erroneously, that should really be raising some eyebrows in the minds of federal and state policymakers as we start to get out of this public health crisis, as we start to think about ways we can move forward.

Blair: Has the federal government responded to those numbers? That just seems egregious.

DuBlois: They try to dismiss it and minimize it as much as possible, which is especially considering that just eight years ago, the improper payment rate was about 5%. So it’s gone up from 5% to about 20% in eight years, which is unbelievably frightening for all taxpayers and for all policymakers.

But the federal government doesn’t seem to care all that much. In fact, they don’t release the state-by-state improper payment rate data. They bundle it all together in a national rate and pump that out. And they’ve been rather un-transparent with providing those numbers.

So, at the Foundation for Government Accountability, what we’ve done is we’ve gone around to each and every state and submitted public records requests to get their latest improper payment rates. And that’s how we’ve been able to see, yeah, some states are at 20%, but some states are at 30% or 40% or 45% improper payments. And that’s frightening and egregious.

Blair: Now, I’m curious, you mentioned that this, the tax burden for Medicaid, obviously, you don’t have the number in front of you, which is totally fine, but has that spike in enrollments to 90 million people substantially caused the tax burden to go up?

DuBlois: It is at the point where it’s starting to, right? So as more and more ineligibles are locked into the program, the money’s got to come from somewhere.

I was recently on a call with some state policymakers. And in that particular state, they added, basically, at the end of the call, they said, “Oh, and by the way, we need to come up with another $10 million to pay for these individuals who shouldn’t be on the program.” And it was kind of an endnote at the end of the call. But we’re starting to see that more and more. And more and more states are getting swamped with these ineligible enrollees.

And it’s got to come from somewhere, so it’s going to come in the form of tax increases or it’s going to come in the form of crowding out other budget priorities. And we’ve seen that at the national level, ever since Obamacare’s Medicaid expansion began.

As Medicaid has become a greater and greater portion of state budgets, other priorities like education have declined in their share of the budget. Transportation, similar trend. Public safety, this goes back to a lot of the conversations around the country about “defund the police,” that’s an obvious target for policymakers in certain more liberal states as Medicaid funding is growing out of control.

So we’re going to start seeing more and more of a scrambling to find ways to continue to pay for ineligible enrollees on Medicaid. And it’s going to come out of one pocket, which is higher taxes, or the other pocket, which is a crowding out of other spending priorities.

Blair: Given that we’ve throughout this interview established that this spending is going up, there’s a lot of waste and unaccountable funding that goes through in this program, what should the response from conservatives be to this attempt to expand Medicaid?

DuBlois: Well, conservatives should do a number of things. No. 1, they should be encouraging their state policymakers to take a look at rejecting this enhanced federal funding and getting off these Medicaid handcuffs so states can reassert control over the Medicaid programs.

Hand-in-hand with that, conservatives and states can also be encouraging their Medicaid agencies to do a better job checking front-end eligibility by refusing to accept information that’s self-attested by a Medicaid applicant, but not verified by the state. And kind of on the backend by continuing to do ongoing data cross-checks with death records, residency records, income records on an ongoing basis for Medicaid enrollees.

At the same time, they can also be pushing, instead of expanding Medicaid and other welfare programs to individuals, they can look at free market alternatives like innovative farm bureau plans that we’ve seen thrive in states like Tennessee and Iowa and Indiana and Kansas. And they can look at other options like short-term insurance, association health plans, repealing “certificate of need” laws.

There’s a whole bunch of free market alternatives out there that should be pursued before we even have the discussion about these vast, massive expansions of welfare that are going to come at a significant price tag.

Blair: As we wrap this interview up, I want to give you the opportunity to let our listeners know where should they go to learn more about this topic?

DuBlois: Yeah. So, you can go to thefga.org and read our most recent paper, which is “The Medicaid Crisis Is Here: How Congressional Handcuffs Are Causing Medicaid to Implode.” And we’re going to continue to be pumping out research on Medicaid over the coming weeks. So keep an eye posted on thefga.org.

Blair: Great. That was Hayden DuBlois, deputy research director at the Foundation for Government Accountability. Hayden, really appreciate your time.

DuBlois: Thanks so much for having me.

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