Medicaid Expansion:
A Huge Handout to Insurance Companies

Nov 27, 2017

Insurance companies in California raked in 5.4 billion dollars in profits off Medicaid, the federal health insurance program for the poor, from 2014 to 2016. These “gigantic profits,” as an expert in the field put it, represent a 16-fold increase in average yearly Medicaid profits for the insurance industry, compared to the preceding two-year period of 2012-2013.

The explanation is simple. The profits began to skyrocket in 2014, when the Medicaid expansion kicked in under the ACA. The law not only expanded Medicaid enrollment by raising the income limit for eligibility, but the federal government also footed the bill for states to significantly increase their Medicaid payments to insurers–supposedly because insurers would have to pay all those extra bills for the newly insured people.

But, apparently, insurance companies just pocketed the extra profit handed to them, without providing adequate service in exchange. In fact, the two companies that made the biggest Medicaid profits in California, Health Net (1.1 billion dollars in 2014-16) and Anthem (549 million dollars in 2014-16), are also two of the lowest-performing Medicaid insurers, according to surveys and patient complaints. (For example, patients complained that the insurers were not providing enough specialist doctors in a given area–which is a common complaint about plans offered under the ACA in general, especially the less expensive plans.)

And what did state officials do? Nothing. They admit that they didn’t even audit the insurance companies to see how much of the billions of dollars they handed them were actually being used for patient care!

In other words, this whole Medicaid expansion amounted to nothing more than a plain, old-fashioned, huge government handout ... no, not to poor people, but to big capitalists.