Medicaid Expansion Report

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The Grand Canyon Institute, a centrist public policy think-tank, has released a new analysis of Medicaid expansion in Arizona. The report examines three scenarios regarding Medicaid expansion over the first three full years of implementation. David Wells, research director for the institute, will talk about the report.

Ted Simons: The Grand Canyon Institute is a public policy think tank that's just released a new analysis of Medicaid expansion in Arizona. The report looks at the economic impact of three possible expansion scenarios. Here to tell us about the study is the Grand Canyon Institute's research director David Wells. Good to see you again, thanks for joining us.

David Wells: Thank you.

Ted Simons: What exactly did the report look at?

David Wells: A lot of conservative lawmakers are really concerned the federal government won't live up to its obligations, and they've also proposed about expanding Medicaid. With the Affordable Care Act and the kind of federal payments expected under it, along with Governor Brewer's expected threshold, the 80%. We compare that to continuing on what we currently have, only covering childless adults and having a freeze on enrollment. The federal government has told us as of January 1, 2014, they are not going to pay for that at all.

Ted Simons: They are not likely to pay for it, that's for sure. We're looking at three scenarios. What is the time frame for these three scenarios?

David Wells: We chose to look at fiscal years 2015, 16' and 17'. And we want to have a fair comparison because technically 2014, that runs from July 1st, 2013, to June 30th, 2014 . So the Medicare expansion Affordable Care Act kicks in on January 1st, in the middle of the fiscal year. If you look at the numbers for that, the costs for the state-only plan is pretty excessive in that one year, because you have to take over 56,000 people January 1st and start to pay for the whole thing. Medicare expansion, people will gradually start enrolling in October and start to ramp up and that's not happening so quickly.

Ted Simons: You took out the front-loaded aspect of all this.

David Wells: From a fiscal standpoint we thought it would be what we thought was a fair comparison.

Ted Simons: Let's go to the first scenario. This is a straight Affordable Care Act deal, correct?

David Wells: Again, looking at the optional expansion populations here. They come in two ways, we've got the childless adults for under 100% of the poverty line and all adults from 100% to 133% of the poverty line. In that case we find it'll cost the state about half a billion dollars. But the Governor has proposed that being funded through a hospital assessment. That's going to bring in actually a bit more than half a billion dollars. It's going to be a net plus to the general fund.

Ted Simons: No hit at all in that first scenario, the Governor's plan, and the one most businesses and hospitals are pushing.

David Wells: Right, that's correct.

Ted Simons: Second scenario. This is the Governor's plan, though, and again, the circuit breaker is at 80%.

David Wells: That's correct.

Ted Simons: Feds have to come up with at least 80% or else the whole thing falls through. What did you find there?

David Wells: Typically they are supposed pay on average of about 90%. If they pay 80%, the state's costs effective double. The assessment is going to be about a billion dollars versus a million dollars. The assessment is going to be about 575 million so it's not going to cover it. You have about $425 million that's going to have to come out of the general fund to help pay for it, or $450 million, something like that. There has to be some degree of funding to the general fund because the assessment won't be quite enough.

Ted Simons: That's not the absolutely worst case scenario, the worst case scenario is if the federal government goes bankrupt and we all run screaming into the streets.

David Wells: The conservatives are really concerned about the federal government not living up to its obligations. I think it's fair to look at what does that circuit breaker scenario look like.

Ted Simons: The third option is keeping the freeze intact. The Senate President is about ready to release a budget that has that in place. What did you find there?

David Wells: Looking at that case, we put a freeze on childless adults with the federal government's permission in July of 2011. At that time we had about 220,000 people on that list. But what happens is if you fall off of it for any reason, or because of income or any other reason, you can't get back on. That list has gone down to around 80,000 and is expected next fiscal year to be 54,000, and then down to 45,000 and it moves down. We found for the fiscal year 2015-2017 the state's going to have to pay for the whole thing. It's going to cost the state almost $900 million and there will be no hospital assessment coming in to help pay for that. That's $900 million, almost twice as much out of the general fund as what it would cost to -- in Governor Brewer's threshold case. That's just the general fund part of it.

Ted Simons: Does that take the rainy day fund, including that, does it factor that in, as well?

David Wells: Basically the rainy day fund is different, it's $450 million.

Ted Simons: Right.

David Wells: We didn't look at fiscal year 2014, that's a year that's going to cost about $200 million, compared to about $50 million. You're already using a lot of the rainy day fund.

Ted Simons: Indeed.

David Wells: And on top of that we looked at uncompensated care. There's about 200,000 people not getting health coverage if we don't expand Medicaid. Those people still get sick. When they get sick and they go for hospital care, a lot of them will wait and not get as much care. When they do, they probably won't be able to pay for it. We went through a pretty sophisticated analysis, we found there was an additional $450 million cost over those three years in add uncompensated care costs imposed on the public and private sector, hospitals, private insurance and some public hospitals.

Ted Simons: It sounds like quite a variable to factor in there. That had to be sophisticated.

David Wells: It's quite important to look at. Hospitals have already noted their percent of uncompensated care has doubled since the freeze has gone in place. The number of people not having insurance, they will simply be locked out. There are some folks above 100% of the poverty line who can get insurance through the exchange. Not as many will do that, they will have to pay 2% of their income in premium. The percentage under that would be locked out completely and uninsured.

Ted Simons: For those who say that you can't trust the Feds to live up to the deal, and if they fall through, then Arizona is stuck. There's a lot more to it. Does the study take that kind of ideological thought into account when they look at things like this?

David Wells: That way of thinking is actually wrong. The state is allowed to pull out any time they want to. Governor Brewer said the idea is that we're going to commit. If the federal government is not able to commit 80%, then we will pull out. I think that's a pretty fair way to go about it. I really don't think the idea that we're committing to this and we somehow can't get out is just not true. If there's a problem that the federal government doesn't fund its portion, and if it's also below 80%, we just wouldn't participate or we'd have another debate about it.

Ted Simons: And that becomes a third option, does it not?

David Wells: Certainly a very viable and reasonable option.

Ted Simons: Last question. What do we take from the study?

David Wells: Ideally, legislators would look at this and say, it's a really bad idea not to expand Medicaid. The best idea is to expand Medicaid. Even under Governor Brewer's threshold of 80% payment by the federal government and 20% by the State, it's still a much better deal for taxpayers, much better deal for generally the people of Arizona. The more people with health coverage, there's less uncompensated care and more jobs. Lots of pluses happen even at the threshold level.

Ted Simons: Provided you can get past the ideological arguments against taxes and assessments and taking federal money and those sorts of things. That's a whole different study, right?

David Wells: That's the challenge of trying to get policy here in Arizona.

Ted Simons: Good to have you here, thanks for joining us.

David Wells: I Appreciate it.

David Wells:Research Director, Grand Canyon Institute;

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