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Forbes.com

 

If New Hampshire Expands Medicaid, State Hospitals Will Lose Millions

August 27, 2013

By Avik Roy

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In states that remain undecided about whether or not to expand Medicaid, as Obamacare prescribes, hospitals have lobbied furiously in expansion’s favor. That’s not surprising, on its face; hospital executives’ eyes widen at the possibility of hundreds of billions in additional taxpayer subsidies under the law. But an analysis from the Lewin Group, a prominent health care consulting firm, finds that if New Hampshire expands Medicaid, Granite State hospitals will actually lose $228 million in revenue over the next seven years. How is that possible? Read on.

Democrats control the House, Republicans the Senate

Half of Obamacare’s effort to expand coverage to the uninsured flows through an expansion of Medicaid, America’s government-run health care program for the poor. Thanks to the Supreme Court, states get to choose whether or not to participate in the Medicaid expansion.

The General Court of New Hampshire—the state legislature—must pass a law in order to expand Medicaid; today, party control in Concord is split. Democrats hold a 42-seat majority in the House, while Republicans carry a two-seat majority in the Senate. Maggie Hassan, the governor, is a Democrat. So the expansion will go through if Democrats can convince two Senate Republicans to sign on.

In 2012, the Lewin Group set out to analyze whether or not New Hampshire should expand its Medicaid program, as Obamacare prescribes. Their report, authored by Megan Cole, Randy Haught, and Mengxi Shen, reflects some of the most comprehensive work yet done in a state considering the Medicaid expansion.

Moving people with private coverage into Medicaid

Their findings are revealing. While expanding Medicaid will cost New Hampshire billions of dollars in unfunded liabilities, the expansion would only reduce the number of uninsured individuals in the state by 22,300. A larger number would be moved out of higher-quality, private insurance, and into the dysfunctional Medicaid program.

“Taking into account all other provisions of the ACA,” they write, “our estimates show that if the state expands Medicaid, the number of uninsured in New Hampshire would be reduced by 99,100 compared to pre-ACA uninsurance rates…Absent an expansion, the number of uninsured would be reduced by 76,800 compared to pre-ACA uninsurance rates.” The difference between those two outcomes represents less than 1.7 percent of the New Hampshire population.

Why is the difference so small? Three factors, according to the Lewin authors. First, the Medicaid expansion will crowd out those with private insurance; they estimate that 20,500 individuals, already privately covered, will end up on Medicaid due to the expansion. Another 11,620 will gain eligibility on Obamacare’s subsidized insurance exchanges, because that eligibility expands in states that don’t expand Medicaid. Another 3,600 are already eligible for today’s Medicaid program, without expansion; Obamacare streamlines the application process so that these individuals can gain coverage either way.

Hence, if New Hampshire expands Medicaid, the state will reduce its uninsured population by 22,300. But 32,120 New Hampshirites will be moved from higher-quality private coverage into the broken Medicaid system. And we know that Medicaid is so poorly run that the program’s enrollees fare no better on health outcomes than those without any insurance at all.

Medicaid’s poor outcomes are due to the fact that the program pays doctors and hospitals very poorly. In New Hampshire, in 2008, for every dollar a private insurer paid a doctor to care for a patient, Medicaid paid 54 cents.

Less uncompensated care offset by greater Medicaid shortfalls

If you’ve followed the health care debate over the last several years, you’ve heard about the (overrated) uncompensated care problem, whereby hospitals are required to provide free emergency care to people without health insurance. The Lewin Group finds that, over the seven-year period from 2014 to 2020, expanding the Medicaid program would reduce uncompensated care by $490 million. But that reduction would be almost entirely offset by a $476 million increase in undercompensated care: shortfalls caused by the fact that Medicaid underpays hospitals for the cost of caring for Medicaid patients.

Hospitals would actually lose money on the change: $228 million in total from 2014 to 2020. Other providers, such as doctors, clinics, and pharmacies, would see a partial revenue increase. Overall, New Hampshire providers would lose more than $45 million a year in net income if the state expands Medicaid. This is, again, because providers would be shifting from higher-paying private insurance into poorly-paying Medicaid.

The Medicaid expansion isn’t free

Will the expansion—and all the federal dollars that will flow into the state—lead to more New Hampshire jobs? Underwhelmingly yes, say the Lewin authors. New Hampshire will gain “about 700 more jobs across all sectors under expansion, compared to no expansion.”

How much will Granite Staters pay in order to gain those 700 jobs? From 2014-2022, according to the Heritage Foundation, expanding Medicaid will impose upon New Hampshire taxpayers an additional $126 million in liabilities. This is in famously anti-tax New Hampshire, a state that already spends 47 percent of state taxpayer funds on health and social services. It’s hard to imagine that, over the long run, New Hampshire can continue to go without an income tax or a sales tax if the state expands Medicaid.

Every state is different. But it would be interesting to see the Lewin study replicated in other states, like Michigan and Ohio, that remain undecided about the Medicaid expansion. Hospital lobbyists keep clamoring for more government subsidies. But it’s far from clear whether they’re doing their clients a favor. And if you’re a taxpayer, or a low-income American who has worked hard to gain private coverage, you just might fare even worse.

Original Source: http://www.forbes.com/sites/howardhusock/2013/08/27/public-service-loan-forgiveness-a-flawed-white-house-aid-plan/

 

 
 
 

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