July | August 2017






Medicaid—To Expand or Not to Expand?

By Debra Miller, CSG Director of Health Policy
The decision to expand Medicaid eligibility is the most consequential Medicaid decision since 1965, when states could first opt into the federal-state partnership program, said Vernon Smith, a health economist and former Michigan Medicaid director.
Smith was in South Dakota last week, brought there by Senate and House leaders of both parties and CSG Midwest for a special briefing attended by more than 100 participants.
Gov. Dennis Daugaard in January told lawmakers he opposes the Medicaid expansion. A state official testified that Daugaard was highly skeptical that the federal government would be able to keep its promise to cover 90 percent of Medicaid expansion costs.
“It isn’t that I have this boss that’s this coldhearted person and he made the decision based on that,” Deb Bowman, a senior adviser to the governor, said during the hearing, according to The Associated Press. “He made the best decision he could, given the information and facts we have right now and the uncertainty of the future we face.”
Mike McCabe, executive director of The Council of State Governments Midwest, was visiting state legislators in the South Dakota Capitol when the plan to provide legislators more information about the potential costs and benefits of expanding Medicaid was hatched. McCabe said the program was part of an in-state training initiative launched by CSG’s Midwestern Legislative Conference in December.
“The need identified in South Dakota and CSG’s plans and resources aligned perfectly,” he said.
Smith began the briefing by complimenting the state’s Medicaid program. He called “remarkable” the recent audit finding that the state had a zero error rate on determining Medicaid eligibility.
“I can’t tell you how rare this is,” he said. “It just doesn’t happen. It is something to celebrate.”
Smith said several state leaders have expressed opposition to the federal government’s offer to expand Medicaid eligibility to 138 percent of the federal poverty level.
Smith began the briefing citing the major arguments of opponents of Medicaid expansion. Basically, opponents believe expansion is "too costly and risky a proposition,” Smith said, citing commentary from the Cato Institute’s Michael Cannon.
Cannon argues “Medicaid is rife with waste and fraud. It increases the cost of private health care and insurance, crowds out private health insurance and long-term care insurance and discourages enrollees from climbing the economic ladder. There is scant reliable evidence that Medicaid improves health outcomes and no evidence that it is a cost effective way of doing so.”
Governors in Alabama, Florida, Georgia, Idaho, South Carolina and Texas are all on record expressing similar concerns according to Smith.
Mark McClellan, former Medicare and Medicaid administrator under President George W. Bush, also expressed concern earlier this month to the Pittsburgh Post-Gazette.
“It’s the biggest expansion of Medicaid in a long time and the biggest ever in terms of adults covered,” McClellan said. “Although the federal government is on the hook for most of the cost, Medicaid on the whole is one of the biggest items in state budgets and the fastest growing. So there are some understandable concerns about the financial implications and how implementation would work.”
Smith moved on a discussion of supporters' arguments. Most supporters believe Medicaid should be expanded because it will increase the number of insured Americans and will come at a low or no cost to states because of the large federal match and the infusion of funds into the states' economies.
States moving ahead with expansion expect to see savings in health programs that are currently state-funded. The Oklahoma Health Care Authority projects savings of $34 million to the Department of Mental Health, $11.2 million to the Department of Corrections and $2.4 million to the Department of Health, Smith said.
In Michigan, Smith’s home state, fiscal analysis by the House projected net savings of $1.1 billion over 10 years. The Senate’s analysis found general fund savings of at least $200 million each year through 2017. An independent analysis projected net state savings of $1.17 billion for 2014-19, with a small new cost of $41 million in 2020, or $65 per covered enrollee for the year.
Smith said each state’s decision will directly affect the health of many of its residents with ripple effects throughout the health care system, the state budget, the economy, employers and others paying for health insurance.
“Each state has a unique set of budget and health care interests to be weighed by state policymakers, but this ultimately is a political decision for the governor and the legislature,” he said.
South Dakota Sen. Jean Hunhoff, chair of the Senate Health and Human Services Committee and outgoing co-chair of the CSG Midwest Health and Human Services Committee, said the presentation was helpful.
“So much information is coming out on the expansion from different sources that [and] the presentation provided a summation of what other states are doing and why they have selected their course of action,” she said. “It is important to understand the implications of the expansion, so that facts drive the discussion rather than emotions.”

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