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Ohio and the ACA Medicaid Expansion

As many people know, the U.S. Supreme Court, in its June 28 decision on the ACA, upheld the entire law, with one important exception: The Court invalidated the penalty that would withhold all federal Medicaid funding for any state that refused to implement the law’s Medicaid expansion. (It’s important, however, to note that the law’s requirement to expand Medicaid still stands. However, the penalty for failing to do so was removed.)

The ACA’s Medicaid expansion will bring in all uninsured adults with incomes under 138% of Federal Poverty Level.[i] In Ohio, those who are currently ineligible for Medicaid include parents with incomes above 90% FPL and non-disabled adults without minor children. They will all become eligible for Medicaid – more than half of Ohio’s 1.5 million uninsured. And the federal government pays 100% for the newly eligible people for 3 years, gradually reducing their contribution down to 90% in 2020 – a huge bargain!

Governor Kasich’s administration must decide whether to implement the ACA’s Medicaid expansion. But they are under no time immediate deadlines. I give the administration a lot of credit for not rushing its decision. Instead, the administration is studying the benefits and costs – especially the impact of the expansion on future state budgets – and will announce its decision in the context of the budget process (probably in late November 2012). That gives supporters of the Medicaid expansion time to analyze the issue from all angles, provide the administration will helpful research, and build public support for the expansion as good for Ohio.

What the administration is worried about, as far as we know: If and when the state offers Medicaid to people who previously were not eligible, people who were eligible previously may also enroll in significant numbers — and the state is responsible for its usual matching rate for those latter folks. The state and advocates are struggling to come up with a reasonable estimate of how many previously eligible people will come into the system, because that cost will need to be part of the state’s FY’14-15 budget (the one that the Governor introduces in early 2013 and goes into effect on July 1, 2013).

Although the cost of currently eligible people enrolling will likely be significant, it’s important to recognize a few things: (1) The state would be financially responsible for them today, if they enrolled; and (2) they are likely to enroll in 2014, whether or not Ohio implements the ACA Medicaid expansion.  Starting on January 1, 2014, when the other ACA coverage expansions go into effect – the new “Exchange” (insurance marketplace), subsidies to make coverage affordable, and the requirement to have coverage (the “mandate”) – people will start signing up for coverage, including people who were already eligible for Medicaid. Thus, while we share the state’s concerns about balancing the state’s budget as more people enroll in Medicaid, that burden exists whether or not the expansion happens. So why not do the expansion?

A Few Ways in Which the Expansion Would Benefit Ohio:  

The Medicaid expansion represents an amazingly huge investment in Ohio. The federal government will pay 100% of costs for the newly eligible people for the years 2014-2016. Between 2017 and 2019, the federal share gradually goes down to 93%. Thus, between 2014 and 2019, the federal government pays, on average, 95% of the costs. Using 2010 figures, Kaiser estimated that Ohio would receive $17,130,000,000 in federal funding and Ohio would pay only $830 million.[ii]

These federal funds will produce a tremendous stimulus effect on Ohio’s economy and create many jobs, including in Ohio’s hardest-hit counties. In 2009, the Kaiser Commission on Medicaid and the Uninsured compiled the findings of 29 studies in 23 states analyzing the impact of Medicaid spending on state and local economies.[iii] They found:

Medicaid spending generates economic activity including jobs, income and state tax revenues at the state level. Medicaid’s economic impact is intensified because of federal matching dollars – state spending pulls federal dollars into the economy. Medicaid funding supports jobs and generates income within the health care sector and throughout other sectors of the economy due to the multiplier effect.[iv]

Families USA’s “Medicaid calculator” estimates that injecting $17.13 billion in federal dollars into Ohio over six years would create an estimated $67.321 billion in business activity and create 635,523 jobs. These are rough estimates, but it is safe to conclude that the infusion of federal dollars more than makes up for Ohio’s investment in the expansion.

Reducing the uninsured is vital to controlling health care spending. Because the costs of treating uninsured people are passed on to payers, care to the uninsured drives up overall health care spending. Uninsured people tend to delay seeking care until they are sicker and obtain fragmented care in more expensive settings. By bringing 800,000 additional uninsured low-income adults into Medicaid, we will be able to improve care and lower costs for 800,000 people, some of whom would otherwise present later at great expense to the system.

The expansion is a long-term investment in prevention. If we provide more people with continuous primary care, Ohio will gradually realize both a financial benefit and a health benefit. By providing continuing health care services to people with lower incomes, we will greatly reduce future costs for older, sicker people who went without ongoing care for decades.

If we don’t do the expansion: The Exchange will offer tax credits only to people between 100-400% FPL, so people with incomes below 100% FPL who are not eligible for Medicaid would not receive a subsidy to make insurance affordable. In addition, the tax credits available to people between 100-138% FPL will probably be inadequate to make coverage affordable, leaving most of them uninsured. People with the lowest incomes will continue to delay seeking health care until they are sicker. And then they will seek needed care – in expensive settings, in uncoordinated ways, when they are sicker, reducing the length and quality of their lives while driving up health care spending.

[i] 138% FPL, in 2012, is yearly for # in family: $15,420 for 1; $20,880 for 2; $26,352 for 3; $31,812 for 4.

[ii], citing a Kaiser Family Foundation Report, May 2010.

[iii] Kaiser Commission on Medicaid and the Uninsured, The Role of Medicaid in State Economies: A Look at the Research, January 2009.

[iv] Ibid.