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Medicaid expansion would be a winner for Louisiana

Posted on July 12, 2012

By Steve Spires

A new report says expanding Louisiana’s Medicaid program will not only help hundreds of thousands of low-income residents get the health care they need, but would also be a good deal for the state budget and overall economy.

The report by the Center on Budget and Policy Priorities comes as Gov. Bobby Jindal and a handful of other governors have announced plans to reject the coming expansion of Medicaid, which is part of the landmark health-reform law that Congress approved in 2010.

While the national debate over the Affordable Care Act has become mired in the election-year politics, the latest report does an excellent job of breaking down how the Medicaid expansion will affect state budgets. And the answer is: not by much.

Starting in 2014, adults with incomes up to 133 percent of the federal poverty line—an annual income of about $14,850 for an individual and $30,650 for a family of four—would qualify for health coverage under the Medicaid expansion. Louisiana’s Medicaid program currently covers low-income seniors and people with disabilities, pregnant mothers and children in households up to 200 percent of poverty but provides virtually no eligibility for working-age adults.

In Louisiana, the expansion means as many as 400,000 adults, mostly the “working poor,” will get coverage, with the lion’s share paid for by the federal government. It means grocery clerks, home-health aides, construction workers and other low-wage employees will get access to care—many for the first time.

The federal government will pay the full cost—100 percent—of the Medicaid expansion for the first three years (2014-2016), with the state beginning to contribute after that. In 2020 the federal government will still pay for 90 percent of the expansion on a permanent basis, with the state only having to pay 10 percent.

By comparison, the federal government currently pays around 68 percent of the cost of Medicaid in Louisiana, with the state paying the rest.

According to CBPP and the Urban Institute, Louisiana’s state spending on Medicaid will increase by only 1.7 to 2.8 percent over what the state would have spent between 2014-2019 without the expansion. Put another way: Louisiana can reduce its uninsured rate by nearly half, with 93 percent of the cost over the first 10 years being borne by Washington.

While spending on Medicaid would rise slightly, Louisiana health providers (and state government) are likely to save money in other ways as fewer uninsured people crowd emergency rooms and clinics in search of free care. The Urban Institute estimates that the cost of “uncompensated care” will drop by as much as $938 million over six years. As the CBPP study notes:

By shrinking the number of uninsured people and having the federal government pick up the overwhelming bulk of the tab, the Medicaid expansion will ease cost pressures on states stemming from uncompensated hospital care, mental health care, and other health care services.  Urban Institute researcher John Holahan has observed: “There are a number of states that have state-funded programs that will no longer be necessary and virtually every state and localities within those states make payments for uncompensated care to support the uninsured.  A lot of that can go away and those savings would offset any new state spending on Medicaid.”

But if Louisiana follows through on the governor’s threat to reject the Medicaid expansion, the need for uncompensated care will continue to rise, increasing the financial strains on the system and raising the cost of private coverage as hospitals and doctors try to recover their costs.

Meanwhile, the injection of billions in new federal dollars will be a boost to Louisiana’s economy, in much the same way that federal dollars helped the state’s economy recover from Hurricane Katrina. The money will help both directly – by creating jobs in the health care sector – and indirectly, by supporting jobs that provide goods and services to the health-care industry.

 

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