Maine is in the process of proposing Medicaid expansion on their November ballot. This initiative would expand Medicaid to those earning less than 138 percent of the federal poverty level (FPL) and fulfill the six attempts of the Maine legislature to pass the expansion bill, consistently blocked by LaPage’s veto. Maine initiative law prevents the governor from vetoing the publicly passed legislation.
Last month, Republican legislators began pushing for the Medicaid program to be called “welfare” rather than insurance. Governor LePage has been pushing for the same change last week. Today it was just announced that the language on November’s ballot question would not contain the words welfare, entitlement, or insurance. There are several ways to analyze the claim that Medicaid is not insurance but welfare and by all of these methods, Medicaid meets the definition of insurance.
First, looking at the dictionary definition of insurance Merriam Webster defines insurance as, “coverage by contract whereby one party undertakes to indemnify or guarantee another against loss by a specific contingency or peril.” The one party in the case of Medicaid would be the government. Some point to a definition of insurance as one requiring a premium or payment in return for a service. The underlying assumption in this definition is that Medicaid beneficiaries do not pay taxes. Medicaid beneficiaries, especially those that earn taxable income who would gain Medicaid expansion, do pay taxes whether that is income taxes or sales taxes that fund state and local services.
Further, Medicaid is often not a free service. Many Medicaid beneficiaries are required to pay cost sharing for health care services. Under existing law states are permitted to charge certain Medicaid populations limited amounts for services. Several states have taken advantage of Section 1115 waiver authority to extend these limits to require greater cost sharing from lower income groups. In many ways states are moving to treat Medicaid as a private insurance program rather than welfare program. Over 70 percent of beneficiaries are under private insurers policies. In states like Arkansas, Medicaid expansion is nearly indistinguishable from private plans for beneficiaries.
Second, looking at the impact of Medicaid on a beneficiary’s financial protection. Studies that look at Medicaid’s impact on beneficiaries vary on many of the health impacts but they consistently find that people who gain Medicaid coverage benefit in every financial indicator whether that be fewer bankruptcies to less borrowing for medical expenses. The point of having insurance for anything, a car, a house, or one’s life is to financially protect a person when they need to spend a substantial amount of their resources on that expense. Medicaid has been shown time and time again to protect people from incurring financial strain from both catastrophic health problems and from the regular expenses that are necessary to promote health.
Why is this exceptionally important? Looking back at the RAND health insurance experiment from the 1970s found that added cost-sharing for medical expenses did not decrease health indicators for people with medium and high levels of wealth, but health indicators decreased for low-income beneficiaries. This means that low-income people are likely to forgo necessary treatment when faced with financial obligation and that payment for care presents a significant burden to care. This supports the idea that Medicaid is insurance because like insurance plans that offer low cost sharing, Medicaid reduces the cost of coverage and ensures health isn’t harmed. Just because Medicaid is often a free or low cost program for beneficiaries does not indicate that it is a welfare program. Rather it indicates that it is the appropriate level of cost sharing for the population receiving the insurance program to maintain health.
Third, Medicaid has been delinked from welfare. In 1996 as part of the welfare reforms, Medicaid eligibility was delinked from welfare allowing people who are not welfare eligible sign on to the program. This in turn allowed for states to begin to experiment with higher eligibility levels for childless adults who were previously ineligible because they did not meet welfare eligibility standards. The Medicaid expansion fits the mold of these de-linked programs. The people who are eligible for Medicaid expansion are oftentimes not eligible for welfare programs.
So why have we not agreed what insurance looks like? There are many reasons one of which is car insurance. Most people’s main interaction with the insurance system is to buy an insurance product for expensive items like their car or home. These items that are insured are often considered luxury items and the costs associated with insuring them are a result of the decision to purchase a car. Chances are people also view the insurance as a product that is purchased to protect a person against the high cost of catastrophic expenses, rather than routine maintenance. Health is different. Routine care is often unaffordable and caring for one’s health is not a luxury. In the same way, insurance can come in different forms. In it’s core, insurance must protect people against financial distress. Redefining insurance as a private market product neglects the history of public sector insurance and doesn’t account with the current Medicaid program.