Ken Hare In Depth: Not expanding Medicaid could cost state more than expanding

MONTGOMERY, AL (WSFA) - Opponents of expanding the Medicaid program in Alabama totake advantage of the federal dollars available under Obamacare havepointed out that it would be difficult to find the state dollars needed tomatch the program in future years.

But a new economic study by a respected independentresearch organization strongly suggests that it could cost Alabama stategovernment more not to expandMedicaid than it would to expand it.

The study by the Rand Corporation looked at the 14 states-- including Alabama -- that have said to date they would not expand theMedicaid program to cover citizens up to 138 percent of the poverty level,despite the fact that the federal government would cover 100 percent of thecost in the first three years and 90 percent or more in the years after that.

Randresearchers found that the 14 states collectively will spend $1 billion more on uncompensatedcare in 2016 than they would if Medicaid is expanded. Those 14 stategovernments also would pass up $8.4 billion annually in federal payments and anadditional 3.6 million people will be left uninsured.

In otherwords, if Alabama's political leaders choose not to take advantage of thefederal money available to expand Medicaid, it does not mean that the statusquo will remain in place for Medicaid funding in the state.

That'sbecause the Affordable Care Act assumes that states will see a reduction in thenumber of uninsured patients because of Medicaid expansion. So the act reducescurrent payments made to the states -- largely to hospitals -- foruncompensated medical care for uninsured patients.

The report states that if astate chooses not to expand Medicaid, the changes "could shift the costfor uncompensated care from the federal government to states, localities, andhospitals."

"Statepolicymakers should be aware that if they do not expand Medicaid, fewer peoplewill have health insurance, and state and local governments will have to bearhigher costs for uncompensated care," the authors of the report, CarterPrice and Christine Eibner, write. "We estimated states' costs forexpansion to be less than the reduction in their costs for uncompensatedcare."

Of course, other studies alreadyhave shown that expanding Medicaid in Alabama not only would increase healthcare access for some 300,000 Alabamians, it would spur job growth and generateadditional state revenue that would more than pay for the state's share of thecost of expansion.

That'sbecause economists estimate that an expansion, which would be paid for almostentirely with federal dollars, would have a $20 billion economic impact inAlabama.

If Alabama went along with expanding Medicaidunder the federal Affordable Care Act starting in 2014, the federal governmentwould assume almost the full cost of the expansion through 2016. The statewould have to start assuming a larger share of the cost after that, but thestate's share would top out at 10 percent starting in 2020.

Thetotal cost to the state through 2020 is estimated at about $771 million. Duringthat seven-year span, the federal government would pump an additional $11.7billion into Alabama health care.

Ifyou look at the program over the next 10 years, the Kaiser Commission on Medicaidand the Uninsured estimates that Alabama would spend about $1 billion for theexpanded Medicaid coverage while getting about $14 billion in additionalfederal support. After 10 years, the state would get $10 for every $1invested.

AsI have noted several times before, any industry that promised to pump that muchmoney into Alabama's economy -- money that could create 12,000 new jobs,according to one study -- would have the governor and legislators falling allover themselves trying to find the incentive money to make ithappen.

Astudy by two respected economists at the University of Alabama Birminghamestimates the  new economic activity from expanding Medicaid in Alabamawould generate $1.7 billion in new tax revenue for the state from 2014 to 2020.So subtract the $771 million in state costs for the expansion from the $1.7billion in new tax revenues, and state government revenues would come out aheadby almost a billion dollars, according to the study.

(Muchof that new revenue would be earmarked for public schools and public collegesin Alabama, so ironically expanding Medicaid could prove an economic boon forpublic education in the state.)

Butdespite the growing evidence of both the economic and health benefits ofexpanding Medicaid, the politics of expansion appear frozen in time in Alabama.On Thursday, Gov. Robert Bentley reiterated that he does not foresee anexpansion at this time. And except for the politically inconsequentialDemocratic minority in the Legislature, there has been little discussion amonglegislators about an expansion.

Bentleyhas said that his focus will remain on reforming the delivery approach forMedicaid in Alabama to improve efficiencies and health outcomes. That certainlyis crucial.

Butunless Alabama moves soon to address the expansion issue, it stands to losehundreds of millions of dollars for its economy during the first few years ofthe program.  And 300,000 Alabamianscould remain without health insurance coverage.

Itis not surprising that Republican elected officials in Alabama opposeObamacare. But they should not let that blind them to the economic realities oftaking advantage of the program now that it is the law of the land.

AverageAlabamians seem to be able to draw that distinction. A recent poll showed thatonly 35 percent of Alabamians questioned view Obamacare favorably, but 64percent favor expanding Medicaid under the act.

Ifso many everyday Alabamians can see the wisdom of looking beyond politics to dowhat is best for the state's economy and health, political leaders should beable to do so as well.


Ken Hare was a longtimeAlabama newspaper editorial writer and editorial page editor who now writes aregular column for WSFA's web site. Email him at

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