The Obamacare surge

Sign-ups on the health insurance exchanges are offsetting much of the decline in Medicaid coverage. Here's the shocker: The federally-run exchanges in Florida and Texas are in the lead!

If you need more evidence of how disconnected Republican politics is from reality (the GOP’s soon-to-be-coronated standard bearer is running for the third time on repealing Obamacare), take a close look at how many people signed up for individual health insurance plans on the exchanges during the just-concluded open enrollment period.

The total number of people purchasing government-subsidized plans surged to 21.3 million for 2024, up nearly 5 million or a 30% increase. This huge jump — the most since the early years of the exchanges — appears to have more than offset a less-than-expected decline in Medicaid coverage, which has fallen by only 2.6 million nationwide in the fiscal year ending last October 1, which is the latest data available from the Health and Human Services Department.

For those not closely following the politics of health insurance, the waning of the COVID-19 health emergency ended a temporary pause in the annual renewal process in Medicaid, which is the joint federal-state program providing coverage for the very poor. With states reimposing annual recertification to check for financial and other eligibility requirements, it was widely expected Medicaid enrollment would fall sharply.

According to the Kaiser Family Foundation’s Medicaid Enrollment and Unwinding Tracker, at least 15.8 million people have been kicked off the rolls since recertification began last March. More than 70% of those disenrollments were for “procedural” reasons, i.e., that weren’t able to provide state bureaucrats with the proper paperwork to stay insured.

All but 11 states (most of them heavily Democratic) posted declines in Medicaid enrollment. Smaller Republican-run states had the largest percentage declines. Florida and Texas combined threw a million people off the rolls.

But the new exchange enrollment figures released yesterday by HHS suggest the Biden administration succeeded in convincing millions of those folks to switch to exchange-based plans. Guess who the biggest gainers were? Florida (1.1 million new sign-ups or a 31% increase) and Texas (1.0 million new sign-ups, a 45% increase). The tight job market may also be extending health insurance to more workers.

Affordability was key for the people flocking to Obamacare as a replacement. The Inflation Reduction Act maintained the expanded premium subsidies first introduced in 2021. Many Blue states expanded their subsidy programs. And the so-called “family glitch,” which had based subsidies on the price of an individual plan even when enrollees needed a family plan, was eliminated.

As the Centers for Medicare and Medicaid Services pointed out in its press release yesterday, thanks to the Inflation Reduction Act, “four in five HealthCare.gov customers were able to find health care coverage for $10 or less per month for plan year 2024 after subsidies.”

Private insurance not more costly than Medicaid

Switching people from Medicaid to subsidized private insurance plans isn’t a bad deal for taxpayers, which it might look like at first glance. Private insurers tend to pay higher rates than Medicaid.

Yet, according to CMS’ actuary data, the average Medicaid enrollee cost federal and state governments $8,873 in 2022, the last year for which data is available. But that number is inflated by the fact that 44% of all Medicaid expenditures go for housing and supporting destitute elderly and disabled individuals who require long-term care, often in expensive nursing homes. The health care component of Medicaid only costs taxpayers about $5,000 per enrollee.

By comparison, the “benchmark” premium for exchange plans (before subsidies) averaged $5,724 nationwide in 2024. In other words, the cost to taxpayers of providing health care coverage for a poor or near-poor person on Medicaid is not much different than what it cost to provide the same coverage through a subsidized Obamacare plan.

That’s not surprising given that private insurance companies already run most states’ Medicaid programs. Given those fiscal realities, federalizing Medicaid makes a lot of sense.

It would standardize benefits across the country (many Red states offer far less than more liberal states in their coverage options). It would provide massive tax relief for the states by shifting the burden entirely to the federal government, which, despite all the corporate and high-income tax breaks handed out in recent decades, has a tax system that remains more progressive than most state income and sales tax systems. And it would eliminate the massive cost of running 50 state Medicaid systems and reduce the administrative burden heaped on providers.

Indeed, a Democratic Congress in 2025 should set up a commission to consider what it would take to eliminate the health insurance component of Medicaid entirely. Very low-income people could be sent into the exchanges like every one else who doesn’t have employer-based coverage — just as we’re seeing now during this Medicaid disenrollment period.

Republicans want to attach a work requirement to Medicaid. Why don’t we treat Medicaid beneficiaries like workers-in-waiting by making their transition to work (which for very low-income people often means to an employer who doesn’t offer health insurance) seamless? As things stand now, fear of losing Medicaid is a huge disincentive to taking a low-wage job.

Very low-income people going onto the exchanges could be fully subsidizied (zero premiums, co-pays and deductibles), just as they are now in Medicaid. The cost to the federal government would be about the same. This reform would enable the federal government to use the remaining long-term services and support program as a foundation for addressing the long-term care crisis that faces nearly every American family which isn’t independently wealthy.

While the Medicaid disenrollment process has yet to fully run its course, it’s likely that the total share of Americans without health insurance coverage will remain steady if not even decline a little as we head into election season. Let the Republican’s soon-to-be-nominee repeat his “repeal and replace” mantra like an aging disc jockey spinning golden oldies. It’s hard to imagine that message getting much traction among the more than 20 million Americans who now benefit from Obamacare.