Study says state sacrificing billions of dollars, 20,000 jobs in refusing Medicaid expansion

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Published: December 12,2013

Tags: Business, healthcare, Mississippi, Obamacare

Mississippi walked away from a long-term economic development bonanza in rejecting Medicaid expansion under the federal Affordable Care Act.

TABLE 9 estimated-impact_rgbSo says an economic impact report researched and written by University of Alabama at Birmingham economists David Becker and Michael Morrissey. The report by Becker and Morrissey of the university’s Department of Health Care Organization and Policy School of Public Health concluded that adding 217,111 of Mississippi’s working poor to Medicaid would generate $14.1 billion of economic impact and create 20,000 new jobs between 2014 and 2020.

That economic punch would come from a federal investment of $8.7 billion and a state investment of $579 million, says the study done for the Mississippi Health Advocacy Program, a Jackson-based organization that describes itself as an advocate for improved health care for Mississippians whose health is threatened by poverty, racism, malnutrition and violence.

Under the Affordable Care Act, the federal government is paying states 100 percent of their costs of expanding Medicaid for the years 2014-2017, then gradually reducing that share to 90 percent starting in 2020.

In working to defeat Medicaid expansion in the last legislative session, Gov. Phil Bryant and the Legislature’s Republican leadership cited the uncertainty of how the state would pay its increased share toward the end of the decade.

A U.S. Supreme Court ruling on the Affordable Care Act in July 2012 made the expansion optional for states. The state’s Medicaid program now serves about 800,000 poor children, pregnant women, disabled people and the elderly. Mississippi’s legislators struggle each year to come up with the hundreds of millions of dollars needed to pay the state’s share for current Medicaid patients, frequently removing money from special funds established for other purposes.

Est-Impact-Medicaid_rgbIn an October 2012 economic impact analysis that looked at the years 2014 to 2025, Mississippi Senior State Economist Bob Neal concluded that the state’s participation in Medicaid expansion would provide short-term gains, but may cost the state more in the long term. For instance, Neal projected the state would spend $78.5 million in 2018 but get back for its general fund only $47.8 million. The same pattern would follow the years afterward, with the state spending $92.1 million in 2019 and getting back $50.6 million; the state would spend $117 million in 2020 and see an additional $53 million go into the general fund. By 2025, the state’s share would climb to $95.8 million, according to Neal.

One constant in the latter five years of the study, Neal said, is the expectation that the state’s costs will grow while the federal share will remain the same. The growth in state costs is simple supply-and-demand, he noted.

Becker and Morrissey included increased sales and property taxes streaming to city and county governments in their projection that Mississippi state and local governments would gain $1.43 billion in new tax revenue from 2014 to 2020, with a net of $848 million after state Medicaid spending.

Neal, in a cursory assessment of the Becker and Morrissey study, acknowledged the different findings but insisted “their study and ours are not comparable.”

For instance, Neal said, the Alabama economists included “social assistance” in their study, a sector Neal’s study did not factor in.

Moreover, Becker and Morrissey used enrollment assumptions different from Neal’s study. “Ours was 95 percent, 85 percent and 75 percent while theirs was 100 percent, 75 percent and 48 percent,” Neal said.

They assume, he said, that the number of new enrollees would be approximately 13 to 18 percent greater than we assumed,” Neal said.

Another departure in the two studies, Neal noted, was that Becker and Morrissey projected vastly more healthcare spending (88 percent greater) for new Medicaid enrollees than he did.

Becker, in an interview Tuesday, said Neal is correct that the level of participation in Medicaid expansion would affect the “magnitude” of the economic impact. “But the bottom-line story is driven by what share of costs the federal government is carrying,” he said,

Yes, more people enrolled would cost the state more, he said, but “it would generate all this additional federal money rolling in.”

The arrangement can be looked at as “federal money that is going to be spent on private business,” Becker said. “It is not that much different from when you take federal highway money and give it to private contractors.”

Neal emphasized in his 2012 analysis that state policy makers would have intangibles to weigh, something his study did not do. These include having a healthier population and the lower costs of treating an illness before it becomes chronic, Neal said.

“Let’s face it: Good common sense tells us that there is certainly the opportunity that increased access to health care would make” Mississippians “more productive in their workplace and would enhance Mississippi’s economy in the long term,” Neal said at the time.

“Economics isn’t the only thing that comes into play here.”

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One Response to “Study says state sacrificing billions of dollars, 20,000 jobs in refusing Medicaid expansion”

  1. Only 6% of uninsured Mississippians have gotten covered through healthcare reform. What gives? | Rethink Mississippi Says:

    […] development programs, the infusion of federal funds to the state’s economy would create thousands of tax-paying jobs. Expansion would also save dozens of rural hospitals that are being forced into […]

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