Aaron Yelowitz testified about improper Medicaid enrollment, eligibility review, and incentives created by the federal matching rate. This spoken-word transcript is distinct from his authored written testimony.
Participants
- Seth Grove: Chair, Pennsylvania House State Government Committee
- Aaron Yelowitz: Professor of Economics, University of Kentucky; Cato Institute senior fellow
Written testimony and recording source
Read Aaron Yelowitz’s authored written testimony at the Mercatus Center.
Generated spoken-word transcript
00:00:00 — Seth Grove: All right. We’ll bring up our next testifier, Dr. Aaron Yelowitz, Professor, Department of Economics, University of Kentucky. Go Wildcats! Having a great football season this year.
Aaron Yelowitz: We are. Thank you very much, and good morning to everyone. I can’t see the committee, but Chairman Grove, Chairman Conklin, and members of the House State Government Committee, thank you for the honor of participating in today’s hearing.
By way of introduction, my name is Aaron Yelowitz, and I serve as a professor of economics at the University of Kentucky. I’ve been here for about 20 years now. Starting with my dissertation in graduate school in the early 1990s, I’ve focused much of my research on how the Medicaid program works. My views expressed today are informed by my research and by my reading of the literature on Medicaid. Today, I’d like to offer the following takeaways.
00:00:57 — Aaron Yelowitz: The Medicaid expansions from the Affordable Care Act led to expanded insurance coverage, including adults with incomes substantially greater than the federal poverty line. Errors in Medicaid enrollment include both enrolling ineligible adults and denying coverage to eligible Americans. And there can be little incentive for states to audit Medicaid enrollment as long as the federal government continues to pay 90 cents on the dollar for the new adult category.
Like many health economists, I became intensely interested in the biggest expansion of government into the provision of health insurance in 50 years with the implementation of the Affordable Care Act. My research team published some of the first studies quantifying gains in both public and private health-insurance coverage in 2016 and 2017, using publicly available data from the Census Bureau’s American Community Survey.
00:01:51 — Aaron Yelowitz: Our early studies found that, because the Medicaid expansions—which were initially adopted by 26 states, including Pennsylvania, as well as the District of Columbia—provided coverage to nonelderly adults with incomes less than 138 percent of the federal poverty line, there have been large gains in Medicaid coverage for both poor and near-poor eligible individuals in expansion states. Perhaps unsurprisingly, there were also large gains in private coverage for those higher up the income distribution through other means, like HealthCare.gov.
But when I applied the same research methodology that we used in our early studies to higher-income individuals, I discovered that Medicaid expansions to new adults were also leading to increased coverage among adults far from the income threshold of 138 percent of the poverty line. I first documented this finding in September 2016 in the Commonwealth of Kentucky.
00:02:45 — Aaron Yelowitz: Using American Community Survey data, I found that 38 percent of new adult recipients—or about 73,000 Kentuckians—had incomes exceeding the Medicaid eligibility threshold, with more than 13,000 having incomes exceeding 250 percent of the poverty line, which in today’s dollars is about $69,000 for a family of four.
The findings in the study were cited as part of Kentucky’s recently passed House Bill 7, which shines greater light on eligibility redetermination and presumptive-eligibility practices. The bill also relies on administrative data sources, such as the Kentucky Office of Unemployment Insurance, to better track changes in employment and wages. I followed up the sole-authored case study of Kentucky with a larger national study with collaborators from the University of Kentucky and Georgia State University.
00:03:38 — Aaron Yelowitz: In a study that received prominent attention from The Wall Street Journal in August 2019, I compared nine states that expanded Medicaid with 12 states that had not expanded Medicaid by 2017. My team found that approximately 800,000 individuals across the country appeared to gain Medicaid coverage for which they were seemingly ineligible. My study received scrutiny that I rebutted in the Health Affairs blog later that year.
Then, toward the end of 2019, I also published a research paper for the Mercatus Center with my collaborator from the Paragon Institute that not only documents changes in improper enrollment between 2012 and 2017 for all 50 states—obviously including the Commonwealth of Pennsylvania—but also identifies local hot spots.
00:04:37 — Aaron Yelowitz: Our reading of audits by the Office of Inspector General at the U.S. Department of Health and Human Services found many shortcomings with states’ Medicaid eligibility processes, including failing to maintain proper documentation, not properly verifying income eligibility, misclassifying individuals into the new adult category, and failing to properly verify citizenship.
Audits both at the federal level by the OIG and by various states corroborated the concerns that our approach with survey data had raised. OIG audits in California, Colorado, my home state of Kentucky, and New York have shown large numbers of both ineligible and potentially ineligible Medicaid enrollees. State audits in Louisiana and Oregon have shown a broken eligibility process with large numbers of ineligible or potentially ineligible enrollees.
00:05:33 — Aaron Yelowitz: An important and intuitive reason for this consistent finding across different methodologies boils down to incentives. For a new adult Medicaid enrollee, the federal government pays 90 cents of every dollar of expense, far higher than for other categorically eligible groups on Medicaid. The incentive for any state to vigilantly scrutinize enrollment is far smaller than if the state were paying a higher percentage of the Medicaid program, or if Medicaid were a block grant.
So I want to talk about an eligibility process and what it would look like in my mind. A Medicaid eligibility process with integrity would have two goals. The first is to reduce the number of false positives, and the second is to reduce the number of false negatives.
00:06:23 — Aaron Yelowitz: A false positive is when someone who manages to enroll in Medicaid isn’t actually eligible. A false negative would be a person who is eligible for Medicaid but is unsuccessful at enrolling, perhaps because of paperwork burdens. Improper enrollment—the false positives—creates taxpayer waste, diverts resources from the intended beneficiaries, and fundamentally violates the idea of horizontal equity: that those in similar circumstances should be treated the same.
Let me conclude my remarks with two thoughts for the committee. The first is that my analysis was done before the pandemic. As you’re aware, the Families First Coronavirus Response Act required states to provide continuous coverage for Medicaid enrollees until the public-health emergency ends as a condition for receiving enhanced federal funding. Thus, there are millions more adults with incomes greater than 138 percent of the poverty line now enrolled in Medicaid than before the pandemic because we aren’t currently recertifying their eligibility.
00:07:22 — Aaron Yelowitz: Second, the approach of merging administrative data sources—which is something I alluded to from Kentucky’s House Bill 7 and that was also prominently used in Louisiana audits—could fruitfully be applied in Pennsylvania. So, a call to action for the committee: with your help, I’d be eager to assist in such an effort. You might have the ability to gather data like that to explore these questions much, much further. With that, I look forward to answering your questions.