In 2009, Colorado expanded its Medicaid program to include childless adults under 100 percent of the federal poverty limit (FPL). This program was to be paid for by a fee imposed on hospitals and matched by federal funding. Original estimates showed 49,200 eligible citizens with an annual cost of $197.4 million. However, updated estimates have revised the eligible population upwards almost 3 times the original size at 143,000 adults. At also triple the estimates were the costs per person. On an individual basis the costs jumped from $292 a month to $900 a month because these individuals consumed far more health care than expected. These factors raised the projected cost of the program to $1.75 billion, almost nine times what was estimated. In response, Colorado has reduced the program to cover childless adults only up to 10 percent of the poverty and then further capped the program to 10,000 individuals. Other states have had similar experiences trying to cover childless adults. Wisconsin estimated that 24,000 individuals would enroll in their version of the plan in the first year. Within two weeks 25,000 had applied, and within 4 months 67,000 people had enrolled and 70,000 individuals were on a waiting list. In both Indiana and Oregon, the state had to cap enrollment.
This occurs, in part, because of the “woodwork effect”. When a new product or benefit is offered to a new population, individuals come out of the woodwork to take advantage of it. This reveals the limitations of government projections and the power of incentives. Inexperience with the cost per individual of the newly covered population adds to gross underestimations. Why is this so important? ObamaCare expands Medicaid coverage to all childless adults up to 133 percent of the FPL and provides subsidies for health insurance for individuals up to 400 percent of the FPL. Both of these are new benefits and new populations, and both will feel the woodwork effect. The federal government has never before offered health care or subsidies to these populations, and they have limited data available on health care needs. As individuals come forward to take advantage of these benefits, motivated by the individual mandate, costs will skyrocket. If the programs in the states provide an example of what will happen then ObamaCare will have to be scaled back drastically or, better yet, repealed.