Health care advocates in Kansas and Missouri are hopeful that 2019 will be the year that hundreds of thousands of people can get health care coverage through expansion of Medicaid.
It’s been blocked in both states by Republicans who question the price tag, but now that many states have had expanded Medicaid for several years, there’s a small but growing body of evidence about its actual costs.
About five years ago, lawmakers in Iowa steered the state down a different course from many other Midwestern states when it opted to expand Medicaid.
Within the first year, the uninsured rates for nonelderly adults dropped in half. Just as striking was expansion’s effect on the state’s economy.
Shot in the arm
As Iowa State economist Dave Swenson discovered, the injection of hundreds of millions of federal expansion dollars into Iowa led to the creation of new jobs and $500 million in additional income for workers.
“Not only did it benefit the recipients, of course, because they have access to health care, it gave a nice shot in the arm to the state’s economy in terms of expanding the health care industry and the health supplies and prescription drugs and other health-providing industries,” Swenson says.
Beginning next year, however, the federal government’s contribution will phase down to 90 percent from the current 93 percent of expansion costs. That means states like Iowa will be on the hook for more money, and advocates who continue to push for expansion in Kansas and Missouri will have an even tougher sell to make.
In Kansas, the expansion plan endorsed by newly elected Gov. Laura Kelly is basically the same as a plan vetoed by former Gov. Sam Brownback in 2017.
Back then, the state estimated that total costs of care for 180 thousand new people under expanded Medicaid would add up to just over a billion dollars. Most of that would have been assumed by the federal government.
Beginning next year, states will have to shoulder 10 percent of expansion costs. But supporters say that, on balance, the final cost to the state will end up being much lower. That’s because the state won’t have to spend as much on other health and social services, not to mention the increased tax revenue that expansion will generate and rebates on drugs.
“They used, in some states, this opportunity to really try to address their opioid addiction problem, so that instead of having to use the block grant funding that they had to provide coverage for people with opioid addiction, they were able to enroll them in Medicaid and therefore receive the federal reimbursement for their treatment,” says Diane Rowland, a health policy expert and executive vice president at the Kaiser Family Foundation.
Many opponents of Medicaid expansion, including Missouri Gov. Mike Parson, balk at the idea of expanding what’s already one of the state’s biggest budget items. They point to unexpectedly high Medicaid enrollment rates in expansion states and rising health care costs.
In Missouri, it’s estimated that around 350,000 additional people would gain coverage if Medicaid is expanded in that state.
But Rowland says many of the costs associated with Medicaid expansion haven’t been as high as expected.
“The new people coming on were not as health-challenged as many of the traditional Medicaid population, which includes people, of course, with severe disabilities,” Rowland says.
And even though prices for many drugs have been going up, the overall rate of healthcare cost increases in the U.S. has leveled off in recent years.
Paying for itself
In fact, in some states, expansion has paid for itself. The University of Montana’s Bureau of Business and Economic Research, for example, estimated that Montana’s 2016 expansion, which provided coverage to 94,000 Montanans, added $270 million in personal income and more than $500 million in additional economic output to the state’s economy per year and generated 5,000 new jobs.
“Although Montana pays for a share of this new coverage, the study also found that savings and revenue generated by increased economic activity more than offset the cost to the state,” the Montana Healthcare Foundation wrote about the study.
In Iowa, Swenson estimates the cost of Medicaid expansion could reach $100 million dollars in the next year or two. But that’s without accounting for the extra tax revenue it will generate or spending offsets in other areas.
Yet even if it winds up costing the state money, Swenson thinks it’s worth it.
“As economists, we will say, ‘Is the state of Iowa realizing more than a hundred million dollars’ worth of aggregated benefits, not just to the economy, but also to the well-being of its citizens?’ And the answer is inarguably yes,” Swenson says.
Healthcare advocates hope that’s a conclusion lawmakers in Kansas and Missouri will reach as they consider Medicaid expansion.
