The math of Medicaid expansion in North Carolina

To summarize yesterday’s post, if North Carolina undertook the Medicaid expansion, the impact on State expenditures from 2013-2022 would be (based on KFF/Urban Institute study):

  • Reduce State spending on uncompensated care by $1.350 Billion (cumulative savings over 10 years)
  • Increase State spending via North Carolina’s share of the expansion by $3.075 Billion (cumulative, 10 years).
  • This is a net increase in State spending of $1.725 Billion over the 10 years

A key policy question is always is the net increase in State spending worth it?

The most direct benefit is providing people with Medicaid who would otherwise be uninsured (not getting into economic multiplier effects, but someone else could look at this) and the study provides detailed analysis of this question for 2016. For North Carolina, the math of a full Medicaid expansion goes like this:

  • 2016 State expenditures would increase by $39 Million (Table 4)
  • Reduction in number of uninsured due solely to Medicaid expansion = 377,000 (Table 2)
  • The total Medicaid enrollment increase in 2016 is 478,000 under expansion (Table 1). This includes increases in enrollment that would take place regardless of expansion (a mix of aging which yields more dual eligibles, crowd in of Medicaid eligible not signed up but who were already eligible for Medicaid who sign up for Medicaid due to more attention on these issues, and crowd out from private insurance).
  • State cost per person covered by Medicaid who otherwise would be uninsured in 2016 is $103.45 ($39 Million divided by 377,000).
  • Note that this is not the total cost of insuring the person via Medicaid, because most of the cost is paid by the federal government. That is the point of this aspect of the ACA, to make it as financially easier for States as possible to cover people via Medicaid

$103.45 in extra State spending in 2016 per person who is newly covered so that 377,000 of our fellow citizens will be covered by Medicaid instead of being uninsured.

I get that many people don’t like President Obama, and they thought he would lose the last election and that the ACA would be repealed. That didn’t happen. And I get it is hard for Republicans who are now at the apex of their power in North Carolina to take the Medicaid expansion given the words they have spilled about it. However, they need to grow up, and govern our State in the practical tradition that has long defined North Carolina.

Nothing about taking the Medicaid expansion forestalls future reform efforts. I even wrote a book that suggests a long term strategy of buying low income persons who are not dual eligibles or disabled into private insurance, which makes my my liberal friends nuts. Expansion doesn’t forestall my brilliant ideas, nor yours, but it will start the process by which our State can develop a North Carolina specific health reform strategy. We will never be done with the job of health reform, but we need to get started.

cross posted at freeforall

Author: Don Taylor

Don Taylor is an Associate Professor of Public Policy at Duke University, where his teaching and research focuses on health policy, with a focus on Medicare generally, and on hospice and palliative care, specifically. He increasingly works at the intersection of health policy and the federal budget. Past research topics have included health workforce and the economics of smoking. He began blogging in June 2009 and wrote columns on health reform for the Raleigh, (N.C.) News and Observer. He blogged at The Incidental Economist from March 2011 to March 2012. He is the author of a book, Balancing the Budget is a Progressive Priority that will be published by Springer in May 2012.

8 thoughts on “The math of Medicaid expansion in North Carolina”

  1. However, they need to grow up, and govern our State in the practical tradition that has long defined North Carolina.

    My own impression of North Carolina is that of a state that always seems to stand on the brink of being a sensible place, occasionally slips a toe across the line, but then retreats sharply. I suspect it will stay like that for many years.

  2. Your penultimate paragraph says it all, and the essence of it applies far beyond one state. Good luck with that, we are rooting for you.

  3. This is really informative Don. I am surprised the state business community isn’t advocating for the government to expand Medicaid in that (a) They will not have to cover the insurance of workers who go on Medicaid and (b) There should be benefits to insuring employees in terms of reducing absenteeism and presentism (for example, if the Oregon results can be generalized, by reducing depression).

  4. I think for states, which are actually supposed to balance their budgets, the question is always also, “Even assuming it’s worth it, can we afford it?” Limited resources imply routinely not doing a wide range of things that would be “worth it” if you had the money.

    1. First, rhetoric notwithstanding, states don’t balance their budgets in the way that some would, foolishly, like the federal government be required to do. Just check out the level of state debt outstanding, for NC or any other state, and you will be quickly disabused of the notion that states that states don’t borrow.

      Second, this is a good thing. Things that are worth it should be done, even if it’s necessary to borrow. Businesses correctly do this all the time. So should governments.

  5. ” … not getting into economic multiplier effects, but someone else could look at this …”

    To a first approximation states operate under balanced budgets, so that the multiplier for increased State expenditure is the balanced-budget one. This is positive only because of the redistributive effect of a higher balanced budget. Since US states finance themselves to a considerable extent by regressive sales taxes, balancing progressive property taxes, to a first approximation we can ignore this.

    The Medicaid expansion brings in new Federal spending in the state. Suppose, conservatively, that this is financed nationally by a balanced budget. Any one state’s share of the increased taxation is negligible, and in the Medicaid case it’s independent of the state-level expansion decision. So to a first approximation the national taxes can be ignored, and we can just take the spending multiplier in the state. States are highly trade-dependent between each other. Say out-of-state trade plus federal taxes is 50% of random spending. That would give an intrastate multiplier of at most 2. The trade percentage will vary a lot between big and small states; most of the Republican holdouts, apart from Texas and Florida, are small, with low multipliers, which may affect any rational calculations going on by the hidden Coffee Party faction.

  6. Don,

    Your point about the math behind Medicaid expansion in our state is convincing but I can also tell you that, as a small business, so-called Obamacare is going to hit us particularly hard due to the fact that will have to cover so many more workers under it then before. Still, there’s no use crying over spilt milk; we’ll just have to find other ways to pay for it.

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