Blog Posts > WV Medicaid Expansion Makes Cents
July 6, 2012

WV Medicaid Expansion Makes Cents

The Daily Mail today is trying to scare folks about the Medicaid expansion contained in the Affordable Care Act. Not only does the Daily Mail fail to mention any of the economic and health benefits of providing health insurance to over 121,000 uninsured low-income working families, they insist on using large numbers out of context.

For example, they say the expansion will cost $166 million over the next six years (Kaiser puts the number at $164 million from 2014-2019). Sounds like a lot of money, right? Not really.

In FY 2013 the state general revenue fund was $4.15 billion and it is expected to grow to $4.67 billion by FY 2017. If the budget continues to grow at 3.3% – the annual average growth rate from projected FY2014 to FY2017-  than the total increase in state Medicaid spending will be approximately 0.6% of general revenue spending over this time period. Between 2014 and 2019, there would be just a 2.1%  increase in state Medicaid spending, or a total of $164 million from 2014 to 2019. Not exactly a budget buster.

The important part to remember is that the federal government will pay 100% for the first three years, 95 percent in 2017, 94 percent in 2018, 93 percent in 2019, and 90 percent in 2020 and beyond. Over the first six years, there will be an increase of over $3.7 billion in new federal dollars coming to West Virginia for health care.

According to a 2003 report from WVU, the federal Medicaid multiplier was 1.6 ($1.133.4 million of federal Medicaid spending created an additional $747.6 million in business volume).  For example, this means for every $100 of federal Medicaid spending in the state economy it creates an additional $60 in economic activity – for a total of $160. Given the 93% match rate over the nine years, the state increase in Medicaid spending might be a net gain in state and local tax revenue (more on this later!). Over the first six years, West Virginia will pay just 4.1% of the total costs of expansion.

The fact is expanding Medicaid is a good deal for West Virginia, both economically and morally. For just $1 for every $13 in increased federal aid, West Virginia can:

1) Cover an estimated 121,635 who presently do not have health insurance.

2) Save money on uncompensated care, for instance for mental health, which means savings for taxpayers (We spend $176 million on behavioral health). According to a recent Washington Post article, states may experience enough savings to offset the small increases in state Medicaid costs. The Urban Institute finds that West Virginia will reduce state spending on uncompensated care between $263 and $563 million from 2014 through 2019 with the enactment of the ACA.

3) Improve the health of the state’s workforce. As everyone knows, West Virginia has the lowest workforce participation rate and the highest disability rate in the country. By providing health insurance to low income working families, it can increase productivity by improving their health and it can increase the number of hours worked and the amount of taxes paid.

West Virginia should act quickly to expand Medicaid. It is good economics and will save lives. The federal Medicaid expansion will allow more people to access affordable care, save the health care system millions in uncompensated care costs and bring more than a $3.7 billion in federal health care dollars to our state. This really is a no brainier.

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