Money, Health and Jobs: The Implications of Opting Out of Medicaid Expansion

By Jennifer Larson, contributor

July 17, 2013 - The states that have chosen to not expand Medicaid as outlined under the federal health reform law will be losing out on huge sums of money and leaving millions of their residents without health coverage.

That’s the prediction from a team of researchers from the nonprofit research organization RAND that recently published an analysis in the June issue of Health Affairs

The team, led by Carter Price and Christine Eibner, looked at the 14 states that had then publicly expressed opposition to the expansion of Medicaid and were widely expected to refuse expansion. Those states would lose $8.4 billion in annual federal transfer payments and 3.6 million fewer people would be insured.

The RAND researchers wrote, “[T]he cost to states of expanding Medicaid would generally be lower than the cost of uncompensated care borne by states and localities after the implementation of the Affordable Care Act.”

After the Supreme Court ruled on the Affordable Care Act in June 2012, states were given the option to expand Medicaid or not. The expansion would broaden the qualifying income level to include families earning up to 138 percent of the federal poverty level.

As of June 14, the governors of 13 states had said their states will not participate in the expansion of Medicaid. Those states were Texas, Oklahoma, Louisiana, Idaho, South Dakota, Wisconsin, Pennsylvania, Maine, Alabama, Georgia, Mississippi, South Carolina and North Carolina; six more were “leaning toward” not expanding, according to The Advisory Board Company. According to the Kaiser Family Foundation, 24 states were still moving forward with the Medicaid expansion as of July 1.

Molly Collins Offner, an American Hospital Association (AHA) director of policy, noted that people will still need and seek care, even if their state leaders choose not to expand Medicaid. And that will definitely impact hospitals.

“What it would mean for hospitals is more uncompensated care,” she said.

And higher costs are associated with uncompensated care, said Price. “Those states will see less federal money being spent in their state, despite their paying into it,” he said. “And there will be millions of fewer people with health insurance, with the effects that go along with that.”

The RAND report noted that the 14 states would collectively spend $1 billion more on uncompensated care in 2016 than they would if they expanded Medicaid.

According to Leonard Marquez, director of government relations for the Association of American Medical Colleges (AAMC), concern is a natural reaction to anything that potentially destabilizes a hospital’s ability to cover costs.

“The concern would be that you are asking teaching hospitals to do more with less, because they may not be seeing that increased number of insured people coming in through their doors,” he said.

Since the AAMC is already concerned about the need for more residency slots to continue the education process for the nation’s future physician workforce, the Medicaid expansion issue is just another item in a series that could have an impact on the ability to train enough doctors who will be needed to meet the growing demand for care.

The impact on the healthcare workforce

It may be too early to predict the impact that the lack of expansion could have on the healthcare workforce--present or future--in those states.

But with less revenue due to fewer insured patients, hospitals and other employers might wind up hiring fewer people in the future, said John Holahan, PhD, director of Urban Institute's Health Policy Center and a national expert on Medicaid.

“There will be an adverse effect on the healthcare workforce,” he said. “It’s hard to imagine it wouldn’t.”

Price agreed. “It certainly could” affect health care jobs, he said.

Some within the hospital industry in those states are already concerned--for example, in North Carolina.

According to the Kaiser Family Foundation, North Carolina passed legislation that barred implementation of the Medicaid expansion without legislative approval. The state’s governor is opposed to expansion.

“The decision by the leadership of North Carolina to, so far, neither expand Medicaid nor provide an alternative coverage option for the state's must vulnerable citizens is one of several issues that threaten jobs both inside and outside our hospitals,” said Don Dalton, spokesman for the North Carolina Hospital Association (NCHA).

Dalton said the NCHA is already uneasy because the North Carolina legislature is considering cutting Medicaid outpatient rates from 80 percent of hospitals’ costs to 70 percent, as well as retaining “higher amounts of federal Medicaid matching funds that hospitals generate by paying the state’s share through an assessment.”

He continued, “Our math is that for every two hospital jobs that will be lost under this gathering storm, another job in the surrounding communities will be lost also.”

There is not a deadline for the states to participate in Medicaid expansion, so the number of states choosing to expand coverage could continue to change. Theoretically, a state’s leaders could examine the economic predictions and change course. Some state legislatures are out of session, but they could pick the issue back up again in a future session.

“I suspect what will happen is these legislatures will be asked to continually think of these issues,” said Offner.

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