Published Feb. 25, 2013
Before the end of the current legislative session, South Carolina’s lawmakers will either make a smart decision by accepting the Affordable Care Act’s Medicaid expansion or make a colossal fiscal blunder that will reverberate through the state’s economy for years to come.
Here’s the story in a nutshell. If the General Assembly approves the Medicaid expansion, good things will happen:
|Bill Settlemyer, founder of the Charleston Regional Business Journal|
From 2014-2020, $11 billion in federal Medicaid funds will enter the state’s economy, creating as many as 44,000 new jobs.
The combination of federal funds and new state tax revenue generated by the added economic activity will produce a NET SURPLUS to the state’s finances for the period from 2014-2020.
If the General Assembly does not approve the Medicaid expansion, bad things will happen:
Many of the one in five South Carolinians currently uninsured will remain uninsured indefinitely.
The state’s hospitals will lose $3 billion over the next seven years from cuts in non-Medicaid federal health care payments to hospitals. Hospitals will pass the additional costs on to South Carolina businesses and people with employee-sponsored or individual health insurance.
Some hospitals might have to close and some existing jobs may be lost.
The estimated 44,000 jobs the Medicaid expansion would have created will be lost.
You can find the basis for these conclusions from several sources, including a “Medicaid Expansion Q&A” posted on the South Carolina Hospital Association’s website as well as a research report prepared by USC’s Moore School of Business for the S.C. Hospital Association. To find the report, just do a search online for “South Carolina Hospital Association Moore School of Business” and look for a link to the report. Study the report carefully, because you, your employees and your business will suffer the adverse consequences described above if the Medicaid expansion is not approved by the Legislature.
Rejection of the additional Medicaid funds will hit your bottom line and affect economic growth throughout the state, so you need to be informed. Let your state legislators know that we can’t afford to walk away from $11 billion in federal Medicaid dollars and we can’t afford to absorb the additional $3 billion in unfunded health care costs that hospitals will have to pass along to their paying customers if the expansion is not approved.
Medicaid and the Affordable Care Act
Now that the Supreme Court has spoken on the constitutionality of the Affordable Care Act, the clock is ticking toward full implementation in 2014. Love it or hate it, the implementation of the ACA is in full swing and the impact is going to be significant both for health care and the state’s economy.
For all its flaws and complexity, the ACA is a truly comprehensive program designed to reduce the number of people without health coverage. The components of the law work together: The law intends that the majority of people will continue to have health care insurance through their employers. Others will be able to buy coverage through the newly formed insurance exchanges without being charged higher rates or denied coverage because of preexisting conditions. Depending on their income level, many of those who buy coverage through the exchanges will receive premium subsidies to help them afford the coverage.
The final piece of the puzzle is the Medicaid expansion, which extends coverage to people making up to 138% of the Federal Poverty Level. Most of these will be working people who earn low wages and simply cannot afford to buy health insurance.
All of these provisions together, along with the mandate for everyone to have health insurance, were intended to reduce the “free riders” who show up in large numbers at the nation’s emergency rooms and receive hundreds of billions of dollars in unfunded care. Who pays for that care? You and I do, through higher charges that hospitals have to impose on their paying customers to make up for the losses from unfunded care.
The various provisions of the ACA all fit together rather neatly into a comprehensive plan, but the Supreme Court threw a monkey wrench into the gears with its decision that states had the option to reject the Medicaid expansion. Without the expansion, the ACA is like a car with three wheels — the ride will be bumpy, the repairs will be expensive, and the passengers won’t get where they need to go.
Good for business, good for people
As is too often the case, South Carolina ranks 46th when it comes to the health of our citizens, according to a recent report from the United Health Foundation. Almost one in five South Carolinians has no insurance coverage at all. And while access to health care is not the only factor that contributes to our low health ranking, common sense tells us that people with full access to health care are more likely to maintain good health and get proper treatment for injuries or illnesses as compared with those who have no coverage.
One of my concerns for our state is the damage to our economic competitiveness if the General Assembly fails to approve the Medicaid expansion. If you were looking to expand or relocate a business, would you rather do it in a state with a smaller uninsured population or a larger one? Fewer uninsured people means less cost-shifting by hospitals to pass the financial burden of unfunded care on to paying customers, including both individuals and employers who provide health coverage to their employees.
With the Medicaid expansion, most adults under age 65 with incomes up to 138% of the federal poverty level (FPL) — $14,500 for an individual and $29,700 for a family of four in 2011 — will be eligible for Medicaid. This is a benefit of the expansion which will help both employers of low-income workers and the workers themselves.
The numbers tell the story
Read the report prepared for the South Carolina Hospital Association by the Moore School of Business. Then read it again. The numbers tell the story: Rejecting the Medicaid expansion comes with a high cost. With or without the expansion, hospitals will no longer have access to other federal reimbursements that were intended to be replaced by funds under the Medicaid expansion. The hospitals will have to pass the resulting $3 billion annual cost of unfunded care on to other purchasers of health services, including employers, employees and people with individual insurance coverage.
In contrast, the state’s share of the expansion cost would be easily manageable, with the federal government covering 100% of the cost for the first three years. After that, the state’s share will scale up from zero to 10% for 2020 and beyond. The net cost is likely to be around $100 million a year when we hit the 10% level. That may sound like a lot, but remember that the state’s General Fund budget is around $6 billion per year, and $100 million is only 1.6% of that amount. (In reality, the full state budget is much larger than the General Fund at over $21 billion, including about $8 billion in state-funded expenditures outside the General Fund and around $8 billion in federal funds.)
Do the math: $3 billion in additional costs to the private sector every year versus $100 million in state expenditures? If the General Assembly can’t figure that one out, we’re in big trouble, and so are they.
Bill Settlemyer is the founder of the Charleston Regional Business Journal. Email him at firstname.lastname@example.org.