Laments Medicaid’s ‘legalized fraud’ and says childless adults should work
The U.S. Senate has an opportunity to slow the growth of Medicaid, something that hasn’t been seriously tried for decades, Sen. Ron Johnson says.
Miss it, and Wisconsin and nine other states are at serious risk of caving to political pressure, expanding their Medicaid programs, and setting off a frenzy of spending on the fastest growing welfare program in the country, the Wisconsin Republican says.
“This is our moment, if we’re ever going to do it,” he says. “We have to be clear about what we’re doing, and we have to keep it simple.”
Part of the budget reconciliation bill that narrowly passed the House of Representatives last month is a recommendation for reforms projected to reduce the growth in Medicaid spending by least $720 billion over the next 10 years. The savings would be achieved in part by curbing a system of state taxes on health care providers and federal reimbursement that Johnson has called nothing less than a money laundering scheme. The other component is requiring millions of childless adults on Medicaid, a program intended for the poor, to get jobs.
Johnson has been the leader calling on the Senate to add a line-item review of the Medicaid budget. The fiscal conservative knows the inner workings of Medicaid as well as anyone in Congress.
Often in his three terms in the Senate, he has been a lone voice railing against the $543 billion in improper Medicaid payments disbursed, according to the Office of Management and Budget, from 2015 through 2024. The reconciliation bill has turned his attention to the addition through Obamacare of more than 21 million people to the Medicaid rolls, and the provider tax provision.
“The provider tax loophole is designed for state governments to fleece the federal government,” Johnson told the Badger Institute late last week. “We know where the abuse is. It’s legalized fraud. Let’s call it what it is.”
Predictably, the legacy media have spent little time examining the waste, fraud and abuse and instead focused on a narrative of lost funding and services, something the Wall Street Journal editorial board called “The Medicaid Scare Campaign.”
The Congressional Budget Office estimated the reconciliation bill would reduce Medicaid spending by an average of $72.3 billion a year for 10 years. Enforcing work requirements would lead 7.6 million people, mostly single men, to drop off the rolls by 2034, the CBO estimated.
A Wisconsin Department of Health Services impact study in April based on the bill’s original proposal for $880 billion in Medicaid cuts estimated that 52,000, or 27% of an estimated 191,000, childless adults would lose their coverage.
“We expect about 63,000 individuals will get caught up in this new red tape of proving they are eligible and could potentially lose their Medicaid eligibility because of these new (work) requirements,” said Wisconsin Medicaid Director Bill Hanna on the WisPolitics Capitol Chats podcast this week.
The April study also estimated that the state could lose anywhere from $6.4 billion to $16.8 billion in federal funding over the next 10 years if the reconciliation bill includes a per-person limit on federal funding for Medicaid.
The current bill calls for a freeze in the provider tax, not a cap or a reduction, although Johnson says there has been some discussion among fiscal conservatives in the Senate.
The problem with such predictions of lost coverage is the assumption that so many childless adults would drop out of Medicaid and remain idle. House Speaker Mike Johnson, R-La., said this week the idea that work requirements are onerous isn’t credible.
As the Wisconsin DHS acknowledged in its report, the federal government already has a work requirement for those receiving benefits from the Supplemental Nutrition Assistance Program, or “food stamps.”
“Work requirements should have been put in a long time ago,” House Speaker Johnson said on a Sunday news program. “Four-point-eight million people will not lose their Medicaid unless they choose to do so.”
Lost in the debate is any question over the idea that able-bodied adults without dependents should be eligible for Medicaid in the first place, something never envisioned when Congress created the program in 1965.
Passage of the Affordable Care Act, or “Obamacare,” in 2010 allowed these adults to get Medicaid benefits with incomes as high as 38 percent above the federal poverty line. Those earning more would become eligible for other subsidized coverage under Obamacare. Previously, Medicaid was generally not available to such adults in most states.
The federal government backed this expansion by promising states it would pay 90 percent of the cost of such new recipients’ coverage.
Medicaid is funded by both states and the federal government, with the federal share of the cost for most recipients ranging from 50 percent to 77 percent, depending on the state. In Wisconsin, the federal share is about 60 percent. That’s why having to pay only 10 percent of the cost for those added to Medicaid was such a powerful incentive for states to expand their rolls.
Wisconsin, however, already provided Medicaid to able-bodied childless adults with incomes under the poverty line, and under Gov. Scott Walker rejected the Obamacare expansion, deferring such adults with incomes above the poverty line to the subsidized Obamacare insurance exchanges.
Gov. Tony Evers has included a package for Medicaid expansion in every one of his budget proposals. Republican majorities in the state Legislature have removed every one of them.
Senator Johnson says that refusal under Walker and since then has been wise.
“Republicans in this state always anticipated that the federal gravy train would end and now that it has, we have some spending decisions to make,” Johnson says.
The outsized role of childless adults increased during a more than three year “health emergency” declared and extended by President Biden long after the impact of COVID-19 had abated.
At the onset of COVID in March 2020, overall Medicaid enrollment in Wisconsin was 1,187,838. At its peak in May 2023, enrollment had ballooned by 41.2 percent to 1,676,787.
By May 2024, after federally mandated “unwinding,” enrollment had dropped to 1,351,059, a nearly 20 percent reduction from the peak, but 163,221 or 13.7 percent more people on the rolls than March 2020.
Medicaid enrollment as of April is still 97,934 or 8.2 percent higher than the start of the pandemic. Department of Health Services officials have several times declined to explain those increases.
Childless adults also hit an enrollment peak, 306,817, in May 2023, dropping to 188,072 in July 2024. However, unlike every other Medicaid category, enrollment of childless adults went back up every month to 197,808 in February before dipping to 194,305 in April, according to state data.
While Wisconsin DHS officials also declined to explain the trend, the math says childless adults are the most valuable bargaining chip in the state’s Medicaid money laundering, as Paragon Health Institute called it in its study in March.
Paragon has gotten the attention of the D.C. media with its studies of Medicaid waste and fraud. Senator Johnson makes frequent reference to its pithy but data-laden study of the provider tax.
In the traditional funding split such as Wisconsin’s, for every $100 in state funding, the federal government puts up $150, Niklas Kleinworth, co-author of the Paragon study, told the Badger Institute. For those added to Medicaid through the Obamacare expansion, $100 in state funding gets a $900 federal match.
States are then allowed to levy a tax on hospitals and insurance companies to increase revenue available via a federal match, later returning some of that funding to the very entities being “taxed” and keeping the rest.
“Everyone involved — hospitals, doctors, insurance companies and the states — has a perverse incentive,” Kleinworth says. “The only people who don’t benefit are the enrollees and the federal taxpayer. It’s a shell game.”
Paragon has pointed out in 2012-13 President Obama included curbs on provider taxes, supported by his vice-president, Joe Biden. President George W. Bush and President Trump in his first term called for provider tax reform.
Congress refused to accept any of the proposals.
Unless Congress does something substantive, Senator Johnson, who is optimistic, said the holdout states such as Wisconsin will interpret the lack of political will as an invitation to expand their Medicaid programs.
“The message sent is, ‘Why shouldn’t we take the free money? Why should we be the chumps?’” Johnson says.
Instead, the time is never better to keep resisting and reverse the insane spending, he says.
Mark Lisheron is the Managing Editor of the Badger Institute.
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