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Utah Can Keep the Title of ‘Best Managed State’ by Expanding Medicaid

By Dr R Scott Poppen

     Utahis among a handful of states still making a decision about the Affordable Care Act’s optional Medicaid expansion.  In a state that prides itself on fiscal responsibility, balanced state budgets, and claims to be the best managed state government in the U.S., an essential aspect of whether to expand Medicaid is projecting upfront and downstream costs to the state.  A report released last month would suggest that Utah can continue its proud record of brilliant fiscal management by expanding Medicaid in 2014.

     The Utah State Department of Health contracted withBostonbased Public Consulting Group (PCG) to “model and project the impacts of expanding or not expandingUtah’s Medicaid program.”  PCG looked at five scenarios:  no expansion, full expansion to 138% of Federal Poverty Level (FPL) with traditional Medicaid benefits, full expansion with partial benefits, partial expansion to 100% of FPL with traditional benefits, and partial expansion with partial benefits.

     If the state ops out of the expansion it will still incur increased costs due to mandatory Medicaid expansion in the ACA not invalidated by the Supreme Court and due to the “woodwork effect”…providing coverage to the population currently eligible for Medicaid but not enrolled but will enroll when insurance becomes mandatory in 2014.  Under this scenario, over a ten year period, the state will enroll an additional 60,000 adults and children and see service costs of $195.2 million and administrative costs of $17.4 million not covered by the federal government, for a total cost of $213 million.  This will be offset by $20 million and $16 million in new state and county taxes, respectively, for a total net cost of $177 million.  Interestingly, even with no Medicaid expansion, implementation of the ACA is projected to create 747 new state jobs and create $516 million in new statewide economic activity.

   Compare these numbers with the full expansion of Medicaid with traditional benefits.  Again looking out ten years, full expansion will insure an additional 124,000 Utahns with service and administrative costs of $213.4 million and $46.9 million, respectively, for a total cost of $260 million.  That’s a cost of $47 million more than not expanding but insures an additional 64,000 lives; more than double what the decision not to expand insures.

     Now here’s the good news.  Full expansion will generate $113 million and $90 million in new state and county taxes, or about $167 million more in revenue than with no expansion.  In addition, state public assistance programs will save $156 million and county assistance programs $39 million.  That’s $203 million in new revenue and $195 million in savings on existing assistance programs, giving the state an extra $398 million through 2023.  Balance those savings against the $260 million price tag to fully expand Medicaid and the state pockets an additional $138 million.    

     There is even more good news.  Hospitals will save $814 million in uncompensated care.  Also, with full Medicaid expansion the state can expect a whopping $2.9 billion in new economic activity and 4160 new jobs. 

     How do the other scenarios look?  Full expansion with partial benefits is still a cash cow coming in around $123 million in savings.  But the two partial expansion options to 100% of FPL are budgetary losers, putting the state anywhere between $110 million to $260 million in the hole.  These last two scenarios, which cannot partake of the federal government’s 100% funding of the expansion in the first two years and 90% thereafter, are financial albatrosses around the state’s neck.

    Utah’s political leaders are still digesting the PCG study.  There has been some initial grousing about the study over-estimating savings to the state’s high risk insurance pools and savings in uncompensated care.  Expansion proponents counter that even if these savings estimates are way-off, full expansion is still a clear money generator.  One of the consultants from PCG will be in town this week for a public presentation and, no doubt, grilling by the study’s skeptics.

     You would think that the nation’s best budget balancers couldn’t wait to let the torrent of federal dollars flow intoUtah’s coffers.  But you would be wrong.  Full Medicaid expansion inUtahis still a long-shot.  The bottom line is that the full expansion is viewed as an Obamacare program and is therefore completely unacceptable to many in the legislature.  The more rational of these critics would cite increasing Medicaid growth and costs that would devour state budgets 20, 30 or more years out.   They would also scoff at the idea that a fiscally challenged federal government is a reliable funder.

     The big guns in the debate, the Utah Medical Association, the hospitals, and the business community, have not signed on to the Medicaid expansion.  They will need to do so to provideUtah’s very conservative governor, Gary Herbert, the political cover he will need to make a gutsy call later this year.  

     But the long hot summer brings the possibility for minds to change and champions to appear.  The PCG study pretty much drives a stake in the heart of any partial Medicaid expansion that cannot capture full federal 90-100% funding.  It opens the door for modified Medicaid expansions, palatable to the Obama Administration, as are on the drawing board inArkansas andOklahoma.  Attach a cute, locally crafted name, that doesn’t have any “Obama” in it, and you may actually have something.  You’d have a valuable program for the low income uninsured that red state leaders would be able to embrace, call their own, declare it wasn’t spawned in Washington DC, yet gets hundreds of thousands of folks something they have long wanted; access to affordable quality healthcare.  

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