Meridian Star

May 26, 2013

Medicaid expansion makes economic sense

The Meridian Star

MERIDIAN —     Since the end of the legislative session, much of the public conversation around Medicaid and expansion has revolved around assigning blame for the current stand-off. The reality is that Republicans and Democrats in the House of Representatives used legislative procedure to create the predicament.  

    In contrast, a bipartisan effort was undertaken in Arkansas to develop a plan to pull down hundreds of millions of dollars in federal funding made available through the Affordable Care Act to connect working families to health insurance.      When completed, the plan looked very different from the stereotypical characterizations of Obamacare.  

    The Arkansas plan provides coverage through the private insurance market and people who sign up for the program are required to pay for part of the benefits received. A bipartisan supermajority embraced the plan because it was not an entitlement, and was good policy for workers and business. Such an approach represents sound policy for Mississippi and Lauderdale County.

    In Lauderdale County, there are over 5,000 adults who are uninsured who could gain coverage through an expansion of Medicaid through the private market.  These working adults earn too much to qualify for the current Medicaid program but too little to qualify for subsidies to purchase insurance through the soon to be implemented health insurance exchange.

    To illustrate, if nothing changes, next year, a two parent family with two children earning an annual household income of $25,000 will receive a subsidy to purchase insurance in Mississippi. The parents in a similar family with an annual household income of $15,000 (too much to qualify for Medicaid) will receive nothing.  

    Analysis of the uninsured who would be eligible for coverage through expansion reveals that these individuals work in the occupations that form the bedrock of Mississippi’s economy – cashiers, truck drivers and construction workers to name a few. Ultimately, by providing health coverage to working Mississippians in Lauderdale County, the region would reap the benefits of a more healthy and productive workforce that misses less work – increasing the competitive edge of the region.

    Talk to any hospital administrator in Lauderdale County, and he or she will communicate that the hospital emergency rooms are already providing coverage to the uninsured. They will also tell you that it’s the most expensive and inefficient form of care and that the uninsured often enter their facilities with ailments and diseases that if diagnosed earlier would have been much less expensive to treat.   

    Unfortunately, policy changes at the federal level have rendered this approach unsustainable. Scheduled reductions in payments to hospitals to provide care to the uninsured will force layoffs and service cuts at Meridian’s hospitals if another source of revenue is not found. The expansion of Medicaid through the private insurance market is one of the only ways to replace part of the lost revenue at meaningful levels.  

    The situation is direr in rural areas. Approximately half of the hospitals in Mississippi are losing money or just breaking even. In the absence of a means to pay for the provision of care to the uninsured – as required by law – over a dozen hospitals in Mississippi could face closure. The hospitals most at risk are located in rural communities.   

    The economic consequences of losing a hospital are serious. Often one of the largest employers in many rural towns, when people lose their job at the hospital, other small businesses in the community suffer as less money is spent locally. Furthermore, a rural community without a hospital is at a severe disadvantage when trying to recruit industry.  

    Opponents of Medicaid expansion frequently aggregate the state costs over many years for the purpose of creating a nifty sound bite. The reality is that if the Mississippi legislature expands Medicaid through the private market, it will not cost the state a single dime for the first three years, because the federal government will pay 100 percent of the costs for medical services. Down the line, the state will have to pay for a small share – 10 percent.  

    To show the full impact, in 2020, the first year in which the state would be responsible for its full match, the net cost to the state would be $65 million which would bring in over $1 billion from the federal government. The influx in federal money would support approximately 9,000 new jobs.

    Unfortunately space constraints limit the sharing of research that shows that Medicaid recipients have improved health outcomes compared to the uninsured and that the absence of expansion will increase taxes on Mississippi businesses by $22-$33 million annually.  

    Regardless, lawmakers in Arkansas found a solution, based on conservative principles, that works in a Southern state. Given the gravity of the situation in Mississippi, lawmakers from both sides of the aisle should come together to develop a Mississippi solution that can be debated during the special session when called.  

    Ed Sivak is the director of the Mississippi Economic Policy Center.