01/10/13: The clear benefits of expanding Medicaid

This op-ed appeared in The Virginian-Pilot on the date shown.

WE ARE OFTEN encouraged to take a business-like approach to government. Many candidates tout their success in business as a reason to elect them. They say that government would do better to apply business principles to its operations.

So ask a businessman this: If it would cost less to offer a good or service to your customers than it would to not offer the good or service, which would you do? Looking at his bottom line, I’d wager the businessman would choose to offer the good or service.

The Virginia General Assembly is facing a similar question this session on the expansion of Medicaid. A recent analysis found that it will cost the commonwealth 7 percent less to expand Medicaid coverage to an additional 310,000 Virginians than it would to opt out of the additional coverage.

Will the General Assembly act like a businessman would?

As I mentioned last week, Virginia enjoys the seventh-highest per capita income in the nation, while its per capita spending on Medicaid ranks an abysmal 48th. The biggest reason is that Virginia has adopted the federal minimum requirement for eligibility. It does not, for example, cover childless single adults, unless they are elderly, disabled or pregnant.

Part of the Affordable Care Act is an expansion of Medicaid, aimed at reducing the population of the uninsured. The expansion will extend Medicaid to all under the age of 65 with incomes up to 133 percent of the federal poverty level.

In an analysis prepared for the Virginia Hospital & Health-care Association (www.vhha.com), Richmond-based Chmura Economics & Analytics estimates that an additional 310,000 will enroll in the program, mostly parents, childless adults and individuals without disabilities. The latter category of enrollees have previously been limited to those with incomes of up to 80 percent of the federal poverty level.

Until now, the Medicaid program has been a 50/50 proposition, with the state paying half of the cost and the federal government paying the other half. The Affordable Care Act changes that dynamic, with the federal government picking up the total cost of the additional enrollees for 2014 through 2016, 95 percent of the cost in 2017, 94 percent in 2018, 93 percent in 2019 and 90 percent in 2020. If the state expands Medicaid eligibility, Chmura estimates it will cost $244.7 million per year.

Under the existing criteria, the state’s Medicaid enrollment is expected to increase by 90,000. Those enrollees will be covered under the existing 50/50 rule. If the state elects to forgo Medicaid expansion, Chmura estimates it will cost $261.9 million.

Cover 400,000 at a cost of $244.7 million or 90,000 at a cost of $261.9 million. Put another way, spend 7 percent more to cover 310,000 fewer people. What would a businessman do?

But wait, there’s more!

In November 2012, Virginia’s unemployment rate was 5.6 percent, well below the national average of 7.8 percent. Of course, that means little to the 241,811 Virginians looking for work. Press releases from the governor’s office that month announced new jobs: 50 on Nov. 16 and 100 on Nov. 30.

Chmura’s analysis estimates that expansion of Medicaid will bring nearly 31,000 jobs to Virginia, almost 24,000 more than if the state does not expand.

Low-income households will have their discretionary income increased by the amount they would have spent on out-of-pocket medical costs. Chmura’s analysis estimates that the $338.8 million per year from 2014 to 2019 will be available “to stimulate Virginia’s economy in other areas.”

More people covered means fewer folks going to the emergency room for care, which lowers the state’s contribution to the hospitals for uncompensated care. Businesses can expect modest decreases in health insurance premiums, estimated at $20.2 million per year.

Overall, the estimated economic impact of Medicaid expansion on the Virginia economy is $3.9 billion. Not expanding? $878 million.

Medicaid expansion will cover more people, create more jobs, inject more resources into our economy and cost less, to boot, than not.

I think a businessman would choose to expand Medicaid. I hope the General Assembly will act as he would.