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Experts dispel fears that Medicaid expansion is too costly for Mississippi

National studies and experts in Medicaid expansion states refute concerns voiced in Mississippi’s legislative conference committee that costs to the state would exceed projections.

Among those dispelling that fear are experts and a former governor in Kentucky – one state Mississippi conferee and Senate Medicaid Chairman Kevin Blackwell referred to as an example of where expansion has been expensive.

One study in the National Bureau of Economic Research that analyzed state budget data over an eight-year period found that changes in state spending were “modest and non-significant” after Medicaid expansion, and “state projections (of cost) in the aggregate were reasonably accurate, with expansion states projecting average Medicaid spending from 2014-2018 within 2 percent of the actual amounts, and in fact overestimating Medicaid spending in most years.”

Senate negotiators on Tuesday said they fear more people than estimated would enroll in Medicaid under expansion, and that this would result in higher-than-estimated costs to the state. 

House Medicaid Chairwoman Missy McGee, R-Hattiesburg, reiterated that multiple studies – including one done this month on expansion’s potential impact in Mississippi by a nonpartisan research organization – found that traditional expansion would result in savings to the state, not increased costs.

Rep. Missy McGee, R-Hattiesburg, in talks regarding Medicaid expansion during a public meeting at the state Capitol, Tuesday, April 23, 2023.
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Rep. Missy McGee, R-Hattiesburg, in talks regarding Medicaid expansion during a public meeting at the state Capitol, Tuesday, April 23, 2023. Credit: Vickie D. King/Mississippi Today

The study found that traditional expansion – insuring those making up to 138% of the federal poverty level or about $20,000 annually for an individual – would cost the state nothing in the first four years of implementation, and roughly $3 million the following year. It would stimulate the economy, putting about $1.2 billion into circulation that the state would not see otherwise and creating 11,000 new jobs in Mississippi, in addition to providing health insurance for poor working people and cutting uncompensated care costs for state- and locally owned hospitals by 60% each year. 

While Medicaid enrollment after expansion could exceed projections, that possibility was taken into account by Hilltop’s report, which estimated 95% of enrollees would be newly eligible. According to the study, about 200,000 Mississippians would enroll in Medicaid post-expansion. 

Sen. Brice Wiggins, R-Pascagoula, said he believes the Senate’s original plan is a pragmatic proposal that offers savings – “whereas 44 other states have not been that,” he said, referencing the 40 – not 44 – expansion states. The original Senate plan covers fewer people than the House plan, includes a stringent work requirement unlikely to be approved by the federal government, and doesn’t qualify for increased federal funding.

Blackwell also made a similar comment, asking his House counterpart “Have any of (the states) – I guess how many exceeded the number of population they estimated at onset? I think 40.”

Blackwell later offhandedly told a reporter he heard from a fellow lawmaker in Kentucky expansion had been expensive.

Asked what their sources were regarding their statements about Medicaid expansion costs, Wiggins referred questions to fellow conferee Sen. Nicole Boyd, R-Oxford, who declined to comment. Blackwell said he was unable to provide any sources because they “are still working on the bill” and suggested the reporter read an opinion piece by a conservative columnist whose past views have aligned with those of Gov. Tate Reeves, a Medicaid expansion opponent. 

Dr. Ben Sommers, a health economist and primary care physician based in Boston, is the author of the National Bureau of Economic Research study that found minimal changes in state spending in expansion states. He shared three additional publications with Mississippi Today that show there is no evidence of expansion negatively impacting state budgets.  

“There’s a difference between saying that enrollment was higher than expected and that the state budget impact was worse than expected. More people enrolling than projected doesn’t mean that states lost money … expansion states were able to bring in 90% federal funding which often replaced things like behavioral health and uncompensated care spending that the state was previously paying for with 100% state dollars,” Sommers told Mississippi Today.

Morgan Henderson, one of the authors on the Hilltop report, echoed Sommers. And even with a lower matching rate from the federal government in current years, Henderson, who has a PhD in economics, believes the costs to states are still offset by other benefits.  

“Higher enrollment than expected in the expansion group can lead to higher costs than expected, but this relationship likely won’t be one-for-one. More new enrollees can also mean more cost offsets – such as premium tax revenue and other state tax revenue due to the increased economic activity in the state – which significantly mitigate the costs of expansion,” he told Mississippi Today.

Experts and a former governor in Kentucky – one state Blackwell referred to as an example of where expansion has been costly – said that Sommers’ and Henderson’s characterizations are accurate for what their state experienced post-expansion. 

A study published by the University of Louisville Commonwealth Institute of Kentucky found that while Kentucky did experience an increase in its Medicaid budget, the increase has been offset by other benefits, such as savings in general state funds “related to care for vulnerable groups who were ineligible for Medicaid prior to expansion.” 

Expansion funneled $2.9 billion into the state’s health care system within the first two years, which reduced costs of charity care and collections for medical debts, the study said.

Even if the number of enrollees is higher than originally estimated, that doesn’t necessarily bode poorly for the state’s budget, Sommers said. On top of the 90% federal match and the increased federal incentives for newly expanded states, the leftover portion the state is responsible for under expansion is mitigated by increased tax revenue, reduced uncompensated care costs to hospitals, and other program cost offsets, Sommers explained.

While the state does put up a small amount of money for each new enrollee under expansion, it is less expensive than the amount of money the state pays pre-expansion to cover uninsured individuals who seek care in emergency rooms and inpatient hospital settings – the most expensive places to receive care and often the only option for uninsured people.

Mississippi hospitals incur around $600 million in uncompensated care annually. Kentucky’s hospitals saw a 64% decrease in uncompensated care costs from 2013 to 2017, according to the Center on Budget and Policy Priorities

“Everybody’s got heartburn over people ‘getting something they don’t deserve,’” Dr. Dustin Gentry, a rural physician from Louisville, Mississippi, and self-described conservative, said. “But they’re getting it anyway. They go to the ER, they get free care, they don’t pay for it, but that doesn’t bother anybody. But if they get Medicaid, which will actually pay the hospitals for the work they do, all of a sudden everybody’s got heartburn.”

One report estimates that nearly half of all Mississippi’s rural hospitals are at risk of closure.

And while the original House and the Senate plans both cover those in the coverage gap – those making too much to qualify for Medicaid currently but too little to afford private insurance plans – the House proposal would draw down $1 billion federal dollars the original Senate plan would not, since it is not considered true “expansion” according to the Affordable Care Act. That means the state would have to shell out more money, receiving its typical 77% federal match instead of 90%, and would not qualify for the additional funds that would make expansion free to the state for the first four years under the House plan. 

In the last 10 years, as 40 states have chosen to expand Medicaid to cover the working poor, the poorest and sickest state has held out. 

After leaving House conferees alone at the negotiating table Thursday afternoon, the Senate announced its own compromise plan Friday morning. The option extends coverage to those making up to 138% of the federal poverty level and draws down the maximum amount of federal dollars available.

Lawmakers have until Monday to pass a final bill, according to current deadlines.

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