The Economic Benefits And Perils Of Adopting Medicaid Expansion

(Jackie Fortier / StateImpact Oklahoma)

The campaigns on both sides of State Question 802 have made numerous claims about the potential benefits and perils of Medicaid expansion, which is being voted on today.

Medicaid expansion is just one complex element of the larger, even more complex healthcare machine. There’s not enough time to look at every potential economic impact Medicaid expansion may have. But perhaps the best starting point is something no one disputes: Oklahoma would get a little more than $1 billion from the Federal government.

“That one billion dollars is Oklahoma taxpayer money that we’ve been sending to Washington, D.C. that we’ve just been leaving on the table,” said Amber England, the Yes on 802 campaign manager.

Every state helps fund Medicaid expansion through the provisions of the Patient Protection and Affordable Care Act, or ACA. England argues that Oklahoma should reap the benefit of that investment just as 36 other states have done. That $1 billion is 90 percent of the cost to cover the estimated 200,000 people who would become eligible for Medicaid.

Kaitlyn Finley is a policy research fellow at the Oklahoma Council on Public Affairs, an organization opposed to Medicaid expansion. She argues the state’s 10 percent share is a new expense Oklahoma can’t afford and that State Question 802 amounts to an unfunded mandate.

“We saw from the legislature earlier this year that they were unable to pass a funding mechanism for even Governor Stitt’s plan to expand Medicaid. So there’s just no good fiscal reason to expand something that doesn’t have any funding behind it,” Finley said. “It could create many budgetary problems next year especially because of all the fallout to COVID and oil prices tanking in Oklahoma.”

A peer-reviewed study of Medicaid expansion’s impact on state budgets was recently published by the New England Journal of Medicine. The study found that expansion did lead to a big increase in total state spending.

“When we broke it out by source of funds, the federal revenue…bore the full cost of this expansion. States were not spending any more of their own state revenue based on the Medicaid expansion,” said Dr. Benjamin Sommers, a professor of health policy and economics at the Harvard School of Public Health and one of the study’s authors. “One of the fears of states that are considering expansion is, well, if we do this, we’re gonna run out of money for our schools or for transportation and other sorts of infrastructure. We see no evidence that states that expanded Medicaid had to cut back in those areas.”

Sommers says the 90 percent Federal match paid for care and subsidies previously funded entirely by state dollars. And it enabled states to tackle uncompensated care because more patients were covered.

But Finley calls this cost shifting a shell game.

“Shifting costs from the states to the Federal government is not really saving any taxpayer money…it’s more like putting it on a different credit card because in the end we are all Federal taxpayers,” said Finley.

The money from Medicaid expansion means healthcare providers get reimbursed for services they might have just written off. And that could help rural hospitals, more than 100 of which have closed across the country since 2010.

But Finley contends Medicaid can’t shore up healthcare in rural areas because of Medicaid’s low reimbursement rates.

“That money doesn’t necessarily entice more doctors to start up practices in those areas…because they lose money on those types of patients,” Finley said. “And then rural hospitals, like I said…they’re expanding their pool of patients they lose money on.”

However, researchers at the University of Colorado’s School of Public Health published findings in the journal Health Affairs showing a lower likelihood of rural hospital closure in states that have expanded Medicaid compared to those that haven’t.

But, says Dr. Sommers says lower risk doesn’t mean zero risk.

“Yes, you can find hospitals that have closed in rural areas in states that expanded Medicaid,” Dr. Sommers said. “But to attribute it to Medicaid expansion doesn’t really make any sense. It flies in the face of the evidence that these closures are happening more often in non-expansion states.”

These aren’t the only economic issues surrounding State Question 802.

The Oklahoma Hospital Association commissioned a study that predicts expansion will create more than 27,000 jobs. Dr. Sommers thinks it’s plausible. But he’s seen no direct evidence of a link between expansion and job creation.

For its part, the Oklahoma Council on Public Affairs would like to see ever-increasing health care costs addressed before expansion is considered.

But amidst all the research and position papers, all the claims and counterclaims, one fact remains: no state that’s expanded Medicaid has undone that decision.