Economist: Medicaid expansion must be examined
by Ted Carter
Published: July 29,2012
An analysis state economist Bob Neal says is the most important he has ever undertaken will help state leaders decide whether to accept billions in federal funding to cover a quarter-million or more Mississippians who lack health insurance.
Though Neal views his analysis as critical to the decision before policy makers, it is uncertain how much consideration his economic conclusions will receive. Gov. Phil Bryant has concluded Medicaid expansion would be fiscally harmful to Mississippi and has vowed to resist the expansion.
In a July 23 column posted on his web site, Bryant said the expansion “could result in one in three Mississippians being on Medicaid, with an additional cost starting at $68 million and increasing to an additional cost of $427 million annually.
“That’s a large burden for the Mississippi taxpayer to assume,” he said.
While the governor may have made up his mind, Neal said he has a crucial job ahead in weighing the economic consequences for the state’s overall economy
“It may be the most important topic I have addressed in my lifetime as an economist,” said Neal, who has been an economist with the Mississippi Institutions of Higher Learning for a dozen years.
“It’s an intricate, complex and politically contentious issue,” added Neal, who noted he is grateful for the insulation from political pressure he enjoys as a staff member at the Institutions of Higher Learning.
His task: Weigh the economic consequences for the state of either accepting or rejecting the federal government’s offer to fully fund an expansion of the state’s Medicaid rolls to cover uninsured Mississippians with incomes within 133 percent of the federal poverty level. “Using the IRS definition” the actual percentage is closer to 138 percent, Neal said.
The expansion would cover many of the state’s working poor who can’t afford health insurance and now rely on hospital emergency rooms for medical care.
The rub for the state is that the federal support begins dropping after three years and falls by 10 percent by 2020. State tax dollars would have to fill the gap.
On the other hand, the federal money that goes to help Mississippi hospitals care for the uninsured — about $152 million this year — will disappear once the Affordable Care Act goes into effect in 2014.
The Medicaid expansion is designed to offset the lost money. But if state officials reject the expansion hospitals still must bear the burden but without federal money to pay for it.
“Definitely that will be a component,” Neal said of the loss of the federal cost-shifting money hospitals have relied on for years.
Neal said the analysis should be completed by mid-September but the uncertainties left by the yet-to-be-formulated rules and regulations for the Affordable Care Act make it difficult to reach firm conclusions.
“We’re shooting at a moving target,” Neal said.
He said in giving his analysis to Bryant and members of the Legislature he will caution that the assumptions he’s made are subject to change. “I think we’ll go in knowing we can expect to change them,” he said.
The Center for Mississippi Health Policy and the various medical-care provider organizations in the state have initiated their own economic examinations.
The independent, non-profit Center for Mississippi Health Policy expects to complete its analysis by early September.
The examinations were set into motion by the late-June U.S. Supreme Court ruling on the federal Affordable Care Act. The ruling upheld the so-called individual insurance mandate but struck down a provision that would have let the government withhold Medicaid funds to states that refuse to expand Medicaid to uninsured adults with incomes within 133 percent of the federal poverty level.
In Mississippi, an opt-in would add about 256,920 people to the program between 20014 and 2019, according to an analysis by the Kaiser Commission on Medicaid and the Uninsured. The 256.920 enrollees would represent a 54.9 percent reduction in the number of Mississippians without health insurance, the analysis reported.
An estimated $10 billion would flow to Mississippi from the federal government from 2014 through 2019. The Kaiser analysis says the state’s general fund share for that period would rise to around $421 million.
The $421 million general fund share could be an inaccurately low estimate because it uses a base of $169 million from fiscal 2012 (the most recent figures available for the Kaiser study). The 2012 general fund figure of $169 million came in artificially low because it received a supplemental carry-over from the previous year, according to the Mississippi Division of Medicaid.
For fiscal 2013, the Division of Medicaid says it budgeted $396 million from the general fund.
An analysis done for the Center for Mississippi Health Care Policy by the Georgia Health Policy Center determined that under the Medicaid expansion and other provisions of the new health care law, the percentage of uninsured Mississippians would drop from a current 20 percent to 7 percent. Enrollment in Medicaid and the Children’s Health Insurance Program would rise from today’s 22 percent to 32 percent.
The study projects 270,000 additional people on Medicaid rolls, with annual Medicaid expenditures of $1.6 billion annually.
“Over the period from 2014 to 2019 state expenditures for the newly eligible Medicaid recipients will be about $11.4 billion, with the federal government paying 97 percent of those costs,” the study done on behalf of the Center for Mississippi Health Policy concludes.
Estimates are that current spending on Medicaid injects about $2 billion annually into Mississippi’s economy.
For hospitals in the state, Medicaid today makes up 16 percent of all revenue, the Mississippi Hospital Association says. That comes from treating children, pregnant women, the disabled and Medicaid-eligible elderly.
Neal, meanwhile, said he wants to present a comprehensive analysis in September but expects his work on the economics of the issue will continue for at least a couple more years.
“We will revisit the topic and firm up the study to reflect the new and better information going forward,” he said. “I expect to review this topic for the next two years and, perhaps, for the remainder of my time in this office.”
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