Wednesday, March 23, 2016

Wednesday, March 23, 2016

Medicaid expansion saves money; New governor, new priorities; Corporate tax collections still in the red; and U.S. House calls for even more cuts to SNAP

Medicaid expansion saves money

As the Affordable Care Act turns six years old, the evidence is mounting that states across the country are saving money by expanding Medicaid coverage using available federal dollars. The latest is a study by the Robert Wood Johnson Foundation that found states are saving money by exchanging costly safety-net care for the uninsured in favor of a more affordable coverage model, and are seeing economic gains as the influx of federal dollars support new jobs. Elizabeth Crisp of The Advocate reports,

 

In some states, the researchers found that the combined budget savings would offset the cost of expanding Medicaid through 2021 as the state’s match ticks up. “As some states continue to debate whether or not to expand, they need only look as far as their neighbors for evidence of the economic benefits that result,” foundation Vice President Dr. John Lumpkin said in a statement Tuesday. The report notes that women who enroll in Medicaid and later become pregnant would stay on the expansion program, rather than the more costly current program. Arkansas saved $15.2 million that way, about a 50 percent decrease in spending on the program for pregnant women.

 

Gov. John Bel Edwards estimates that Louisiana will save $100 million through expansion in 2016-17 while extending coverage to at least 300,000 working-age adults.

 

Meanwhile, a new economic analysis from Michael Chernew of the Health Affairs Blog looks at the economic “multiplier effects” of the new federal dollars that states can get through coverage expansion. The taxes generated by this economic activity will likely offset the 10 percent cost share that states are responsible for beginning in 2020.

 

A dollar put into an economy creates more than a dollar of economic activity. The magnitude of that multiplier is again subject to debate, but a reasonable estimate could be between 1.5 and 2.0. Thus after 2020, the 90 cents received from the federal government for each dollar in Medicaid spending translates to between $1.35 and $1.80 in state economic activity (crucially assuming enough slack in the economy to absorb the spending). The state in turn taxes that extra economic activity. If the aggregate state tax rate (income tax plus sales taxes etc.) is 10 percent, then the extra economic activity generated by Federal government subsidy generates between 13 and 18 cents in tax revenue. The break-even tax rate (where added revenue due to induced economic activity equals the state share of spending) is about 7.5 percent, which is generally below the tax rate in many states.

 

New governor, new priorities

The 2016 regular legislative session is shaping up to bring big changes to issues related to workers’ rights, the TOPS program, and Louisiana’s school voucher system, guided largely by Gov. John Bel Edwards 2016 agenda. But Nola.com/The Times-Picayune’s Julia O’Donoghue notes that despite Edwards’ endorsement of a wide array of policy proposals, a common thread runs through them all. Bills to cap TOPS, raise the minimum wage, and comply with federal REAL ID requirements, for example, would all undo specific policy decisions made by former Governor Bobby Jindal’s administration. The trend is particularly relevant when considering Edwards’ agenda for the state’s K-12 public schools:

 

Of the 22 bills that make up the governor’s package, nine are related to K-12 education.At least six of Edwards’ bills are aimed at weakening existing laws around charter schools, the voucher program, and teacher evaluations. Jindal pushed to strengthen and expand those programs as governor, particularly in 2012, when most of Jindal’s legislative agenda focused on education issues.Except for his privatization of the old charity hospital system, Jindal’s most significant public policy overhaul was related to primary and secondary education. Edwards was a member of the House Education Committee when Jindal pushed through his charter school, voucher, and teacher evaluation agenda. He was one of the most outspoken critics of Jindal’s initiatives then. So it’s not surprising that Jindal’s education policies are among Edwards’ first targets. … Jindal’s political team has also chastised Edwards for being too focused on his predecessor. “At some point, Governor Edwards will need to stop attacking and blaming, and start leading and persuading,” said Timmy Teepell, Jindal’s chief political consultant, when asked about Edwards’ efforts to roll back Jindal’s agenda.

 

Corporate tax collections still in the red

Louisiana continued to pay out more money to corporations in February than it collected in taxes, the Legislature’s chief economist reported on Tuesday. Greg Albrecht said the trend is due in part to generous tax breaks and credits for businesses. The Advocate’s Tyler Bridges has the details:

 

Albrecht said he is “crossing both fingers” that tax collections will turn sharply positive as usually happens during March, April, May and June. “March and June are usually our best months,” he said. Even if corporate income and franchise tax collections reach the $359 million (official estimate), that amount would mark a sharp drop from what state officials as recently as November when they projected that collections would reach $590 million this year. … Albrecht blames the drop in corporate collections on several factors. One is a state economy dependent enough on oil and gas that it is probably in recession from the drop in oil prices. Another is a three-year amnesty passed in 2013 by the Legislature — to avoid raising taxes — that has caused companies to advance tax payments during the amnesty period. A third could be complications from the Legislature’s decision to trim a number of business tax credits by 20 to 28 percent last year.

 

U.S. House calls for even more cuts to SNAP

A new proposal recently approved by the U.S. House Budget Committee would continue the harmful trend of cuts to the Supplemental Nutrition Assistance Program, or food stamps. The proposal drastically cuts funding for much-needed anti poverty programs and raises eligibility requirements for recipients. One of the most harmful changes would be the establishment of a SNAP block grant – a move that would leave state leaders to decide how to dole out the shrinking benefits. Authors Dottie Rosenbaum and Brynne Keith-Jennings explain how these changes would affect low-income families and individuals who are have already weathered cuts this year:

 

SNAP includes several non-food components, such as job training and related child care; a block-grant structure would enable states to divert funds away from food to these purposes and withdraw state funds currently spent on those activities. … a block grant like the one the House Budget Committee proposes would reverse the recent progress made, on a bipartisan basis, to improve SNAP participation among eligible low-income households.  Viewing SNAP as an important work support and health and nutrition benefit, the last three Administrations and governors from across the political spectrum have sought to boost participation rates — especially among working-poor families and low-income elderly people, the two groups with the lowest participation rates.

 

Number of the day:

$218 million – Amount of net negative collections of corporate income taxes in Louisiana so far this year (Source: The Advocate)