What Alabama Loses by Refusing Medicaid Expansion

Feb 10, 2014 at 02:01 pm by steve

David Becker, PhD

Alabama has so far turned down the opportunity to expand the Medicaid program and, according to a UAB study, add hundreds of millions of dollars to state coffers. “The main purpose of our study is to provide information to the state and the legislature on what is an incredibly important decision for Alabama,” says David Becker, PhD, an economist at UAB’s School of Public Health.

The 2012 report, titled “An Economic Evaluation of Medicaid Expansion in Alabama Under the Affordable Care Act” was authored by Becker and Michael A. Morrisey, PhD.

The report predicts the financial and workforce impact of accepting the opportunity offered to states by the healthcare law to expand the number of citizens eligible for Medicaid. The parameters would broaden to include adults between 19 and 64 years old with family incomes of less than 138 percent of the federal poverty level. That would make an additional 292,000 Alabamians eligible.

According to the study, the ongoing financial benefits for Alabama far outweigh the expense of running the program. The expansion would increase overall business activity from about $22 billion to $47 billion, jump the GDP by roughly $15 billion, and boost worker earnings by approximately $9 billion.

To kick-start the expansion, the federal government would match 100 percent of Medicaid claims for the new enrollees in 2014 through 2016, 95 percent in 2017, 94 percent in 2018, 93 percent in 2019, and 90 percent from 2020 on. In comparison, the federal government reimburses only 68.5 percent of Alabama’s costs for current Medicaid enrollees.

In the first three years, the state would only outlay for administrative costs. The report estimates those expenses at less than $40 million a year. But Alabama would reap the benefit of an additional $220 million in new tax revenues. “That’s over $600 million in the first three years,” Becker says. “That’s the important big financial windfall, so a lot of the benefits of participating really hinge on the state getting in early.”

From 2020 on, when the federal government covers 90 percent of the Medicaid claims for those additional Medicaid recipients, the state will basically break even.

This year, another study detailed how the expansion would impact specific industries in Alabama. Commissioned by the Alabama Hospital Association, an estimated 30,700 new jobs would be created over a six-year period if only a mid-range number of eligible Alabamians enrolled. If everyone eligible enrolled, it could mean 51,918 more jobs.

“Clearly most of the jobs are in healthcare, about 11,300 in that sector alone, and then because pharmacy and medical equipment fall into retail trade, that sector adds another 6,390 jobs,” says Samuel Addy, PhD, Director and Research Economist for the Center for Business and Economic Research at The University of Alabama. He authored the study along with Ahmad Ijaz.

Other industries gaining jobs include 5,490 in professional, scientific and technical services; 1,423 in administrative and other support services; 1,247 in accommodation and food service; and 1,095 in the finance and insurance industry. “Basically every industry would benefit, because every industry is intertwined,” Addy says.

The 30,000 additional jobs would create $1.3 billion of earnings a year on average and contribute $2.1 billion on average each year to the state’s Gross Domestic Product. “When income increases, people consume,” Addy says. “And you can see how that money spreads into lots of other industries. It’s what we call multipliers.”

The numbers clearly state a financial advantage for Alabama. “We don’t have a real economic reason not to participate,” Addy says. He believes state politicians may be saying no to the expansion because of the state’s two-fund operating budget system. “In Alabama, that’s a crucial problem.”  

Right now, Medicaid costs get pulled from the general fund but the reimbursements paid from the federal government land in the education trust fund. “So unless there is enough growth of the general fund tax dollars to cover the expanded Medicaid portion, we would probably have to come up with a law to shoot some money from the education trust to the general fund,” Addy says. “I suspect that may have made our government decline the expansion.”

Addy adds that right now the hospitals, in essence, pay for the medical coverage of the uninsured that would become covered in the expansion. “So we all pay for it, but in a more inefficient manner,” he says. “Whereas with this kind of structure, people are in a program. It’s just economical. You get better health outcomes, and you control health expenses better.”  

Becker says the hospitals also have the most to lose from Alabama not participating. “What the Affordable Care Act is really doing is changing the way we care for uninsured folks,” he says.

Currently Medicaid and Medicare pay hospitals a small amount for the uncompensated care they provide to the uninsured. “It’s how they’re able to deal with people who show up and need care, and hospitals are dependent on these funds. It’s not a great deal, but it’s better than nothing,” Becker says.

But with the Medicaid expansion, those “uncompensated care” payments will decrease nationwide, because the government expects most of those people to fit into the expanded Medicaid program. “If the state doesn’t expand Medicaid, it doesn’t prevent the feds from pulling that compensation, and that’s where hospitals will get into big trouble in terms of lost revenue,” Becker says. “And they’ll still have this uninsured population to care for.”

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Mar 20, 2024 at 11:19 am by kbarrettalley

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