No free money
As he contemplates whether to expand Nevada’s Medicaid program under the Patient Protection and Affordable Care Act, Gov. Brian Sandoval is getting lots of free advice from his Democratic friends.
U.S. Senate Majority Leader Harry Reid, for example, said it would be foolish not to expand the program.
”It’s 100 percent reimbursement for the first few years. One hundred percent,” Reid said on KNPR-FM 88.9’s interview show “State of Nevada.”
And Reid is correct, as far as he goes. But as with most things involving health care and government, there’s a lot more to the story.
It’s true the medical costs of people enrolled under an expansion of Medicaid will be fully reimbursed by the federal government, for the first three calendar years. The percentage declines thereafter until settling at 90 percent in 2020 and beyond.
But it’s not true that those are the only costs associated with complying with the legislation.
First, there are about 49,000 mostly low-income people who currently qualify for Medicaid, but aren’t enrolled. The state estimates that when the Affordable Care Act’s tax penalty goes into effect, they’ll sign up. But the government will reimburse the state only at the regular reimbursement rate, which is 61 percent. Nevada’s share of that is about $60 million.
(On the other hand, because they are low-income, they may be exempt from the law’s tax penalty, so the incentive to sign up may not be as powerful.)
Second, if Sandoval does elect to expand the program, another 72,000 people are expected to be eligible. It’s their medical costs that will be mostly covered by the federal government.
But those aren’t the only costs: There are administrative expenses associated with adding that many new people to the existing Medicaid system, from case workers to new office space to IT systems, says Mike Willden, director of the state Department of Health and Human Services.
For example, Willden says, a new computer program had to be created to accommodate newly eligible people. That system cost $25 million, although the federal government covered about 90 percent of the cost.
Although the state splits Medicaid administrative expenses 50-50 with the federal government, it still must pay to add new people to the program, costs Sandoval’s office characterizes as “significant.” Willden says he’s still working on the bottom line, juggling a variety of factors as actuaries try to peer into the future.
“I’m not on a timeline,” Willden says. “We’ll be at it for awhile.”
Democrats note that the Affordable Care Act is expected to save states money by reducing the amount of uncompensated health care they’d otherwise shoulder. Since more people will have health insurance, and access to preventative health care, projections are that there will be fewer uninsured people showing up very sick on the doorstep of emergency rooms.
But that assumption also carries a cost, a reduction in the so-called disproportionate share funding that hospitals get to pay for that care. The federal government is slashing the pool of such money nationwide between 2014 and 2019, from $11.3 billion to just $5.7 billion. Those cuts will take place whether or not states opt in to an expanded Medicare plan.
A non-financial factor: A Harvard University study published in the New England Journal of Medicine that examined states which have already expanded their Medicaid plans. It found deaths of people ages 20 to 64 declined in states that expanded the program. (One of the study’s authors works as an adviser for the U.S. Department of Health and Human Services, but it was conducted prior to his hiring and was not paid for by the federal government.)
Ultimately, it’s Sandoval’s call on whether to expand the program. But if he does, there’s no doubt it will cost Nevada’s taxpayers more.
Steve Sebelius is a Review-Journal political columnist and author of the blog SlashPolitics.com. Follow him (@SteveSebelius) or reach him at 387-5276 or SSebelius@reviewjournal.com.
