SADOW: Fiscal Note On Medicaid Expansion Has Lots Of Holes

Another study on Medicaid expansion, another chance for those with faith in government supervised medical care or who want to bash Gov. Bobby Jindal to demagogue the issue. Don’t be fooled.

This entrant comes courtesy of the Legislative Fiscal Office, which prepares fiscal notes for bills. Several have been filed to force the state to accept expanding eligibility from 25 percent to 138 percent of the Federal Poverty Line; those below already can get it, and those higher will be forced to get insurance or pay a fine, while some will receive subsidies to do so. Jindal opposes accepting this optional provision of the Patient Protection and Affordable Care Act (“Obamacare”), with a good set of reasons explaining why.

The note computes two scenarios, with the more likely claiming state savings of about $533 million over the first five years of the program, and around $185 million over the first ten years – the standard windows of analysis in a fiscal note. No doubt these figures, or the ones under the less likely scenario (which predict over $500 million savings over the decade), will be echoed by supporters of expansion – who also will neglect to mention the conceptual flaws of the analysis and one crucial point.

What really devalues the note – a mistake avoided by the most conceptually sound of these (even if it has minor flaws) from the Department of Health and Hospitals – is that it assumes Medicaid rates paid by the state will not go up in order to achieve program objectives. Every indication is that providers willing to take Medicaid patients will not expand nearly enough to accommodate supply; indeed, supply may even contract. In turn, this will force people to emergency rooms, raising that cost of care where the federal government reimbursement is less favorable. This error alone probably wipes out the presumed 10-year savings.

Other problems exist as well. In using data mined under different assumptions from those part of the Obamacare environment, it likely underestimates the “crowd-out” effect because of the larger number of employers who will opt out of insuring workers, either by paying the penalty or by structuring operations so they don’t have to pay it or provide insurance, dumping clients not accounted for in the analysis into the system and increasing its expense. It also unrealistically assumes that all new entrants will go into the Bayou Health managed capitation or cost share plans; some because of certain medical conditions instead will be put into the less efficient fee-for-service “legacy” Medicaid, which is estimated will continue to carry a quarter of all Medicaid clients.

In addition, it assumes that the federal government neither will increase the mandated minimum of services to be covered nor will lower the match rate that begins at 100 percent but slides down to 90 percent by 2020. Given that regular rates even for this highest state in below 70 percent (Louisiana’s for this year is about 63 percent), it appears almost certain that in the future the federal government will try to blend rates at the very least. And once a state accepts, contrary to disinformation spread by supporters, you’re trapped in it forever.

But the most salient sentence in the note, and consistent with nearly every other report issued on the subject – and the one sure to be ignored and avoided by supporters – is this one: “Both models reflect a net SGF cost beginning in year 7 (2020) [when federal match rate levels at 90 percent], and in future years.” (bracketed words added) Unlike the DHH report, which had an estimate that by 2023 the cost would be $93 million and increasing then by 15 percent year, the note gives no specific number.

Yet the message is quite clear: over the long run, expansion costs taxpayers more than without it, and probably accelerating every year. That was entirely by design of Democrats who shoved the law down America’s throat, to try to fool the people into thinking expansion of government control of health care would reduce costs, by backloading costs. At the time, they did not realize that would come into play on the expansion issue because it didn’t exist; only when the U.S. Supreme Court erroneously upheld the mandate portion of the law by calling failure to do something (buy health insurance) subject to a “tax” did then the logic extend to void the mandatory nature of the expansion for states in what is supposed to be a voluntary grant program.

In short, no argument can be sustained for acceptance on the basis of cost. Maybe other arguments for persuasion could be attempted, but “cost savings” simply is not one of them. And keep in mind this applied just to taxpayers to Louisiana; Louisianans paying federal income taxes will pay more of those, period, as will all U.S taxpayers to finance a program the estimated costs of which continue to spiral out of control and are bumping up premiums.

Naturally, supporters of the bill for which the note was intended and other similar ones will try to deflect attention from these realities. Legislators dealing with these and the attentive public should know not to let themselves get duped.

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