Guy Boulton

Milwaukee Journal Sentinel

Lost in the ongoing debate over whether Wisconsin should expand eligibility for Medicaid — and accept roughly $184.9 million a year in federal dollars for doing so — is one small detail:

Former Gov. Scott Walker and the Republican-controlled legislature already expanded the Medicaid program.

They just didn’t take the federal money available to states to offset much of the cost.

Wisconsin is the only state in the country that expanded eligibility for its Medicaid program — the change made in 2014 covered 147,000 adults without dependent children as of January — while not accepting the federal money available to states through the Affordable Care Act.

That decision will have cost the state an estimated $1.1 billion in federal dollars through the current fiscal year, according to the Legislative Fiscal Bureau.

Gov. Tony Evers has proposed expanding eligibility for Medicaid up to the threshold that would enable the state to receive the additional federal money.

Republicans in the Legislature — whose votes Evers would need — have largely stood firm in their opposition. And now legislators are citing a study that contends expanding the program would shift $1.1 billion in costs to private health plans.

The study — released last month by Republican lawmakers at a news conference at the state Capitol — was by the Wisconsin Institute for Law & Liberty and the Center for Research On the Wisconsin Economy, or CROWE, at the University of Wisconsin-Madison.

Economists and policy analysts quickly criticized the study for what they contend is a lengthy list of flaws, with one describing it as “baloney.”

“My real concern is they are trying to affect policy with such garbage work,” said Tim Classen, a professor of economics at Loyola University in Chicago.

The authors of the study — Will Flanders at the Wisconsin Institute for Law & Liberty and Noah Williams, an economics professor at UW-Madison — stand by the study and its conclusions.

“It’s what the analysis shows backed up by a number of years of data," Flanders said. "It’s what the numbers came out to.”

The study set out to compare health care spending for people who are privately insured — largely those who get health insurance through an employer — in states that expanded Medicaid under the Affordable Care Act and those that didn’t.

The premise of the study is that health systems, physician practices and other health care providers will shift costs to private health insurers because Medicaid’s reimbursement rates don’t cover their costs.

Whether the study adequately accounted for Wisconsin having already expanded eligibility for BadgerCare Plus, the state’s largest Medicaid program, is a question. So, too, is whether health systems and other health care providers can shift costs at will to private health insurers. (More on both later.)

There’s also a question about the study’s time frame. The study ended with data from 2014 — before any purported cost shift to private health plans could have occurred in most states.

Here’s why this is a question:

The expanded eligibility for Medicaid programs under the Affordable Care Act didn’t begin until Jan. 1, 2014. Health systems would begin to see any purported shortfalls from more patients’ being covered by Medicaid during that year.

Insurers typically negotiate three- to five-year contracts with health systems and other providers. Even assuming that health systems could raise prices for every heath insurer if there was a shortfall, the price increases would not have been set until the following year, 2015.

Insurers and employers who self insure, in turn, set premiums for their health plans for the following year in September or October.

This means that any costs shifted to private insurers wouldn’t have appeared in the cost of health plans until 2016 at the earliest.

Flanders and Williams said some states expanded Medicaid before 2014.

For example, New York, Delaware and Massachusetts expanded coverage before that year. And some other states did limited expansions before 2014.

That said, more than 8 million people — a large number by any gauge — gained coverage through the expanded eligibility for Medicaid in 2014.

The study’s conclusion — that expanding eligibility for Medicaid would result in $1.1 billion in costs being shift to private employers — also raised questions.

The Legislative Fiscal Bureau estimates that 76,000 people in Wisconsin have incomes between 100 percent and 138 percent of the federal poverty threshold, or $12,490 to $17,236 this year. The Evers administration puts the number at 82,000 people in the state.

That high end — 138 percent — is the threshold for the state to be eligible for the federal dollars available under the Affordable Care Act.

(Adults with incomes below 100 percent now are eligible for BadgerCare Plus under the state’s partial expansion.)

Using the Legislative Fiscal Bureau estimate, the study's conclusion would result in an average of $15,065 in costs being shifted to private health insurers for each person — and that’s if all of them sign up for coverage.

Their actual medical bills would have to be higher given that this is just the purported shortfall between what it costs to provide medical care and what the BadgerCare Plus program pays health systems and other providers.

The program spends $3,252 a year to cover adults.

In other words, each person would have to have roughly $18,000 a year in medical costs based on the study’s conclusions.

To put that in perspective, for adults with health benefits through an employer, average health care spending ranged from $1,746 a year for men 19 to 34 years old to $8,344 for women 55 to 64 in 2016, according to the Peterson-Kaiser Health System Tracker.

It averaged $4,326 for men and $5,775 for women who were 45-54 that year.

The average costs for people with low incomes could be somewhat higher given the relationship between health and income.

“It really is unfortunate when they do such sloppy work that gives you conclusions like this that are just ridiculous,” said Classen, the economics professor at Loyola University in Chicago.

Flanders said more people could be in that group — those with incomes between 100 percent and 138 percent of the federal poverty threshold — and that the study was not based on a per-enrollee cost.

“This is a somewhat unique approach to be looking at private health care spending,” he said. “This is what the results found.”

And Williams, the economics professor at UW-Madison and co-author of the study, said the study’s estimate is plausible.

The study’s conclusions didn’t evoke any skepticism by the legislators — Rep. Joe Sanfelippo, R-New Berlin; Sen. Duey Stroebel, R-Saukville; Sen. Chris Kapenga, R-Delafield; and Sen. Dave Craig, R-Big Bend, — who held the news conference to tout them.

That may be understandable given that it had the imprimatur of Williams, a respected macro-economist who has a doctorate from the University of Chicago. And Flanders, research director at the Wisconsin Institute for Law & Liberty, has a doctorate in political science from Florida State University and has been published in Politico, National Review and The Wall Street Journal.

Without question, Republican legislators raise a valid point in noting that private health plans pay higher rates to hospitals, doctors and other heath care providers than Medicaid.

But studies show that expanding eligibility for Medicaid significantly improved hospital operating profit margins, according to an issue brief from the Kaiser Family Foundation, which does health policy research.

Further, hospital associations have pushed to expand eligibility for Medicaid in states that didn’t — and they presumably wouldn’t take that position if they thought it would increase their costs and force them to raise prices.

Critics of the study done by Flanders and Williams also contend that it did not account for the fact that Wisconsin already partially expanded Medicaid.

“The issue that really is not addressed for me is Wisconsin’s expansion has sort of already happened,” said Laura Dague, an economist and associate professor of health policy at Texas A&M University. “The application of these numbers to the Wisconsin context is pretty questionable.”

Basically, the study comes up with a national average of the purported cost shift to private health plans from a broad group — adults with incomes up to 138 percent of the poverty threshold. It then applies that average to a subset of that group — those with incomes between 100 percent and 138 percent of the threshold.

The study's critics contend that isn’t an apples-to-apples comparison.

Flanders and Williams contend that some of the states that expanded Medicaid already covered adults, including adults without dependent children.

“The assumption we are making here is those equal out for us to arrive at a reasonable estimate for the group in question,” Flanders said. “The assumption I would dispute is that it is a broader group.”

And Williams noted that five states already had broad coverage for adults without dependent children before the Affordable Care Act.

Four states and Washington, D.C., did. Five states had limited coverage. Six states had programs that were closed. And eight states, including Ohio and Illinois, had no coverage, according to information from the Kaiser Family Foundation.

The study’s model also incorrectly used a “per-enrollee” figure — average spending for people in private health plans — as a “per-capita” figure, meaning everyone in the state.

This was an honest mistake that came from an incorrect footnote. But it distorted the study’s conclusion because about a third of the state is covered by Medicaid or Medicare.

Finally, there’s the debate over the underlying premise of the study — whether health systems can shift costs to private health plans. For one thing, it implies that health systems have the leverage and market power to set prices higher.

“They are going to raise prices to the extent that they can anyway,” said Andy Schneider, a research professor at the Center for Children and Families at Georgetown University. “If they have market leverage, they are going to raise prices.”

Economists and hospital trade groups, however, fiercely debate this.

Neither Flanders nor Williams contend the study is perfect.

“There are invariably assumptions that have to be made in every econometric analysis,” Flanders said.

Flanders also said that there are inevitably differing viewpoints on how to best model the question in the study and valid critiques can be offered.

There were more than a few of those.

“It really is unfortunate because Noah (Williams) is an exceptional macro-economist,” Classen said. “He’s incredibly talented as an academic economist. But this foray into health economics is really disappointing to see.”

“It gets out there,” he added. “People retweet it. People believe it.”

It also is almost certain to be cited by Republican lawmakers who oppose expanding eligibility for Medicaid and taking the money available through the Affordable Care Act.

Whether to accept the federal money is a key issue in the debate. And the position of the Republican lawmakers frustrates Robert Laszewski of Health Policy & Strategy Associates, a health care consultant and Wisconsin native who has been a sharp critic of flaws in the Affordable Care Act.

“Why are we even having this discussion? The data is there. The studies are there. The practical information is there,” Laszewski said. “When are these people going to give up and finally admit that forcing Wisconsin taxpayers to pay something the federal government has been begging to pay for is not smart policy?”