KHI News Service

The Medicaid Math

By | July 31, 2012

Sheldon Weisgrau, director of Health Reform Resource Project.

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The recent Supreme Court decision on the Affordable Care Act, or ACA, could have a big impact on the number of Kansans who are covered by health insurance. The court ruled that the ACA’s Medicaid expansion is optional for states, placing a key coverage and economic decision in the hands of governors and state legislators.

A number of conservative governors immediately announced that their states would not participate in the Medicaid expansion, citing the program’s high costs. Kansas Gov. Sam Brownback hasn’t taken a position on this issue, preferring to wait until after the November elections to decide the state’s course in implementing that and other ACA provisions.

But providing Medicaid or other health insurance to those who were previously uninsured has clear benefits.

The evidence is overwhelming that those with insurance have better access to care and are healthier as a result. A recent issue of the New England Journal of Medicine, for example, reported that previous state Medicaid expansions were associated with a significant reduction in deaths.

Economically, the analysis is more complex, but no less positive.

For individuals, having Medicaid coverage can mean avoiding agonizing decisions about whether to take a child to the doctor or pay for food or utilities. Those with health insurance are better able to hold jobs and earn more than those without.

At the state level, there are benefits as well. Today Medicaid covers more than 380,000 low-income, elderly, and disabled Kansans. The state pays about 40 percent of program costs, approximately $1.1 billion in the last year. The federal government picks up the balance of the tab, more than $1.6 billion.

The expanded program is expected to cover about 130,000 more Kansans. The federal government would pay all new costs for three years. After that, its contribution would be gradually reduced, settling at 90 percent at the end of this decade.

The Kaiser Family Foundation, a respected non-partisan health policy organization, estimates that this arrangement will bring nearly 3.5 billion new federal dollars into Kansas from 2014-2019. At a cost to the state of $166 million, the return on the Kansas investment would be better than 20 to one.

Opponents of Medicaid expansion point out that the state share is not trivial, particularly during an economic slowdown that challenges efforts to balance the budget. In addition, the cost of the Medicaid program, like that of all health insurance programs, has been rapidly increasing. Spending more on Medicaid could mean spending less on other priorities, such as education and public safety.

The economic impact, however, goes beyond federal and state government budgets. Providing health insurance coverage to 130,000 more Kansans won’t just affect their lives. It will also impact the economic vitality of the health care providers that serve them and the communities where they live.

The huge number of uninsured Kansans – currently more than 350,000, or 13 percent of the state population – drives government spending in a number of ways.

For example, the state directly funds safety net clinics, public health departments, and other groups that provide care to the uninsured.

State and local governments pay for prisons and jails to house and feed thousands of uninsured mentally ill Kansans who do not get the care they need.

Local governments provide millions in tax support to publicly owned hospitals, most located in small rural communities, to care for the uninsured.

And we all pay an indirect “tax,” as well, through higher prices for health care services and more expensive insurance premiums to subsidize the costs of those who cannot pay.

Expanding the Medicaid program won’t eliminate taxpayer contributions to these services. But it will reduce what we spend on them.

Medicaid expansion would result in an enormous amount of new dollars flowing into Kansas. Circulating through local economies, they’d create jobs and enhance tax revenues.

As with other aspects of the ACA, there will be a fierce debate in Kansas about the Medicaid expansion and its impact on the uninsured, health care providers, taxpayers, and the state budget. As we engage in this discussion, we should clearly understand the implications.

Refusing the Medicaid expansion will increase the crushing uncompensated care burden faced by hospitals and other providers and deprive communities of an enormous economic infusion.

Other states will take advantage of this generous program. If Kansas doesn’t, we’ll be sending our tax dollars out of state to finance Medicaid expansions elsewhere.

Kansans deserve better. Let’s do the math.

—Sheldon Weisgrau is the director of Health Reform Resource Project. The opinions in the columns solely reflect those of the author. They aren't endorsed by the Kansas Health Institute, which seeks a broad range of opinion to stimulate discussion.