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Study: Rejection of Medicaid expansion costing Kansas, Missouri hospitals billions

New analysis by nonpartisan Urban Institute says 24 nonexpansion states paying a high price

By Jim McLean | August 08, 2014

A new study by the Urban Institute says that not expanding Medicaid will cost hospitals in Kansas and Missouri more than $9 billion over a 10-year period.

The analysis from the nonpartisan research organization pegs the loss to Kansas hospitals at $2.6 billion between 2013 and 2022. Missouri hospitals would forfeit $6.8 billion over the same period.

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Urban Institute Medicaid expansion analysis

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Hospitals in the 24 states that have so far declined to expand Medicaid to cover more low-income adults would lose a combined total of $167.8 billion.

The report says: “First-quarter earnings reports from several interstate hospital chains described major differences between states that expanded Medicaid – where hospital finances improved as uncompensated care fell and Medicaid revenue rose, both by significant amounts – and nonexpanding states, where hospital finances worsened, with uncompensated care and self-pay patient caseloads rising and Medicaid revenue failing.”

The report says while expansion would increase Kansas’ Medicaid costs by $525 million over 10 years, it would generate an additional $5.3 billion in federal funding. Expansion would cost Missouri $1.5 billion over the same period while generating $17.8 billion in additional federal funding.

The Kansas Hospital Association has lobbied for Medicaid expansion over the last two years but has been unable to convince Gov. Sam Brownback and the Republican-controlled Legislature to take up the issue. Legislative leaders have actively blocked consideration of expansion bills.

Brownback and other opponents of Medicaid expansion have said they are not convinced the federal government can be trusted to follow through on its promise to pay 100 percent of expansion costs through 2015 and not less than 90 percent thereafter.

The Urban Institute report says while such concerns “can seem reasonable,” a review of the history of Medicaid spending shows they are largely unfounded. Budget pressures have forced Congress to cut Medicaid spending more than 100 times but only once – in 1981 – have those cuts included a reduction in the amount the federal government sends to states to cover its share of the program’s overall cost.

“More recent budget bills actually raised the federal Medicaid share, even while making other federal Medicaid cuts,” the report says.

Hospitals taking the offensive

In an attempt to force consideration of Medicaid expansion in Kansas, the hospital association is writing its own expansion bill. Tom Bell, KHA president, has said it likely will be modeled on plans crafted by Republican governors in other states.

“Our feeling is that the (Obama) administration wants to approve state plans and we ought to get something in front of them before it’s too late,” Bell said in a recent interview.

The so-called private-sector plans proposed by a handful of GOP governors use federal Medicaid dollars to help adults earning up to 138 percent of the federal poverty level annually – about $16,100 for an individual and $32,900 for a family of four – purchase private coverage. Some of the plans, which require federal approval, also require beneficiaries to work and contribute to the cost of their coverage and care.

Currently in Kansas, able-bodied adults without children aren’t eligible for Medicaid. Adults with children are eligible only if they earn less than 32 percent of the poverty level – annually about $3,730 for an individual and $7,630 for a family of four.

Bell said some policymakers who have resisted talking about expansion because of its connection to the controversial federal health reform law have indicated they might be willing to consider a more private-sector approach after the November election.

“We’ve had a number of people tell us that maybe after the election this is something that will be a little easier to talk about,” he said.

Expansion vs. tax incentives for business

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Leavitt report executive summary

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Like other reports, including one commissioned by the Kansas Hospital Association, the Urban Institute analysis says the increased federal funding triggered by Medicaid expansion significantly “boosts state economic growth and employment.”

The report suggests that expanding Medicaid could be a more cost-effective economic development program than those that some states, including Kansas, are now using to attract business and create private-sector jobs.

The report says the approximately $52 million a year it would cost Kansas to expand Medicaid is dwarfed by the nearly $1.8 billion it spends each year on tax breaks and incentive payments for businesses.

“To place state policy choices in perspective, the 24 states not expanding Medicaid spent an estimated $44.9 billion on tax reductions and other subsidies to attract private business during the most recent single year for which data are available,” the report says. “Nonexpansion states thus spend on these business incentives more than 14 times the $3.16 billion average annual amount that would be required to finance Medicaid expansion during 2013–2022.”



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