State officials, economists debate fiscal impact of Medicaid expansion

1 week 4 days 7 hours ago Thursday, July 30 2020 Jul 30, 2020 Thursday, July 30, 2020 12:42:00 PM CDT July 30, 2020 in News
Source: Columbia Missourian
By: Mikayla Easley, Columbia Missourian
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COLUMBIA — There's no question that Medicaid expansion would provide more health  care to adults, but there is heated debate about of whether the state can afford it.

Advocates predict socioeconomic benefits based on what other states experienced after expanding; others aren't sold on expansion. Some lawmakers and others are concerned that even 10% will strain the state's already pared-down budget.

Missouri's Medicaid program, also called MO HealthNet, provides health care to low-income Missourians who are over 65 years old, blind, pregnant, disabled, parents or children. Currently, MO HealthNet is funded by the federal government at 65%, with the other 35% coming from Missouri's general revenue fund.

That could change Tuesday if Missourians choose to expand the state's Medicaid, which appears on the ballot as Amendment 2. 

Aiming to close the coverage gap, expansion would extend coverage to all Missourians earning less than 138% of the federal poverty level, or less than $18,000. In addition, any new enrollees under expansion would be covered by the federal government by 90%, with the state picking up the rest.

Conflicting analyses

In fiscal year 2021, Medicaid was allocated $2.5 billion in state funds — about  one-quarter of all general revenue.

The Medicaid expansions fiscal note created by the state auditor predicts, if passed by voters, it would cost $2 billion per year between the state and federal government. Missouri's 10% cut would be an additional $200 million.

"In the history of our state, never has there been a new $200-plus million cost mandated on our general revenue fund without an enormous ripple effect across other services Missouri provides," said House Budget Chairman Rep. Cody Smith, R-Carthage, in a written statement.

When Gov. Mike Parson announced Amendment 2 would appear on Tuesday's ballot, he said Medicaid expansion would compete for funding with education and public safety resources.

Missouri State Treasurer Scott Fitzpatrick agreed. He said the General Assembly wouldn't want to raise taxes to pay for the program, and money would likely need to be shifted from elsewhere.

"The only other areas really that are large enough that you can go to and really cut a good chunk of money is education,"  Fitzpatrick said.

However, a fiscal analysis by the Center for Health Economics and Policy at Washington University in St. Louis predicted Medicaid expansion would save the state some money — potentially up to $39 million after implementation costs.

The study found  some new patients who would have enrolled in the state's current Medicaid program — for which the state covers 35% of the cost — would likely be eligible for the expansion population, where the state's share would be 10%.

Timothy McBride and Abigail Barker, the co-authors of the study, said the largest savings would come from the disability category. Although that group makes up just 16% of Missouri's Medicaid population, they accrue 46% of the costs. 

"The group is not large, but it's large enough to create $56 million in savings," McBride said.

Under the assumption, McBride and Barker predict many adults with disabilities would forego applying for disability status in Missouri because the process can be lengthy and tedious. Even after months of determination, many patients are still declined due to the rigorous criteria.

Instead, if the potential Medicaid recipient fits both the age and income requirements, the McBride and Barker assume they would choose the different and easier option and enroll as expansion population, saving the state money for their care.

But Department of Social Services Chief Financial Officer Patrick Luebbering said  it's not that simple. Under federal law, Medicaid expansion enrollees are only eligible if they don't already qualify for another federally required program, such as disability. During a Missouri House Budget hearing in June, Luebbering said any new disability patients would still only qualify for the 65% of federal funding and predicted no savings at all.

Luebbering didn't know how hard the Centers for Medicare & Medicaid Services will push to determine disability status for new enrollees, and the guidance he'd been given supported its prediction that no money would be saved.

McBride disagrees.

"Those with disabilities would say, 'What's the simplest way for me to get healthcare coverage?'" McBride said. "And if I'm below 138% of the federal poverty level, and I'm a low-income person, I have a hard time paying for my healthcare expenditures, I would go as a new Medicaid eligible person." 

Other states did show savings from their disability population. Arkansas, for example, saved $17.1 million related to decreased spending on disability patients, according to a study by the State Health Reform Assistance Network.

Another main difference between Washington University's study and another conducted by Mercer Government Human Services Consulting is the amount of enrollees and how much their care will cost.

McBride and Barker estimated there would be around 231,000 new adults who would enroll in the first year, and each new patient's care would cost $465 a month in fiscal year 2022. Mercer, however, found  the population would be a little higher and potentially sicker, costing $731.25 per member per month.

Overall, DSS estimates a $2.5 billion impact on the state's budget, higher than the state auditor's projection.

Because they were done before the pandemic, the fiscal analyses don't take into account the effects of COVID-19, which has skyrocketed both unemployment and the number of people needing health care. 

"Given the current environment ... we need to consider how unemployment has been impacted by COVID and therefore impacting the level of uninsured that could be newly eligible upon implementation," said Angie WasDyke, a consultant with Mercer, during June's budget hearing.

Jake Haselswerdt, an assistant professor in MU political science department, said more people than initially expected could enroll in Medicaid due to COVID-19. But having more people sign up for Medicaid instead of remaining uninsured could have benefits by reducing uncompensated care, he said.

If more people are insured, the less money health care providers have to pay for uncompensated care out of pocket. The study by the State Health Reform Assistance Network estimated that, in 2014, medicaid expansion states spent less general revenue toward uncompensated care than non-expansion states.

Long-term assumptions

While Washington University's study only looks at the effect Medicaid expansion would have on the state's MO HealthNet budget, other studies have shown more savings through employment and large-scale economic impact.

Regional Economic Models Inc. found that Medicaid expansion would create over 16,000 new jobs, the majority outside of Kansas City and St. Louis, and reduce state government spending on health care between 2022 and 2026.

The jobs created would come as more people are eligible for health care and influence both health care and non-health care industries.  For example, the study predicted an increased need for state and local government jobs, ambulance services, retail and construction to support the growth in the health care system. Most new jobs would be in rural Missouri.

As a result, Medicaid expansion would create $2.5 billion in goods and services, the REMI report states.

Vice President of Health Policy at Missouri Foundation for Health Sheldon Weisgrau said additional jobs would increase spending in the local economy, personal earnings and income taxes for general revenue.

The increased income could offset costs Missouri would face if Medicaid expands, Haselswerdt said.

In addition, expansion states have seen savings in other departments that offset Medicaid costs ,  mainly through increased eligibility for those in corrections or receiving mental health services.

Fitzpatrick said, while he can buy into the argument of increased economic activity, he's not comfortable making such big budget decisions on assumptions alone.

"You have to draw the line somewhere on what you're going to decide is an acceptable assumption to make," Fitzpatrick said. "To me, when I'm talking about state finances and what the budget impacts are going to be, I like to look at what I think is the most realistic."

For more on Medicaid expansion, watch KOMU-TV Thursday at 10 p.m.

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