Medicaid Expansion: It’s Not a Jobs Bill, It’s a Hospital Bill


 

By Jessica Smith
 

For the last two years, the Platte Institute has provided research on the detrimental impact Medicaid expansion would have on Nebraskans and the need for an alternative of Medicaid reform. Medicaid expansion has presented a series of unworkable mandates, uncontrollable and unpredictable costs, and the prioritization of healthy adults over the truly vulnerable.[1] However, a persistent argument has been made that Medicaid expansion is a “jobs bill” that will lead to economic stimulus, most recently rehashed in a study financed and touted by the hospital industry in Nebraska. [2]


Where Medicaid expansion has been tried, promises of job creation do not have a great record. Here are four important reasons why:

 

1) Medicaid expansion is causing workers to drop out of the workforce.
 

Proponents for Medicaid expansion vastly underestimate the number of Nebraskans who may change their current work and life plans given the chance to receive a free or virtually-free health care entitlement. Some people near the range of eligibility may drop their current private insurance coverage, which remains too costly for many Nebraskans, and work fewer hours to become eligible.
 

According to the Congressional Budget Office, Medicaid expansion will cause a drop in labor as some enrollees withdraw from the workforce altogether to remain eligible.[3] The National Bureau of Economic Research reached a similar conclusion, finding enrollment in public insurance could reduce employment among eligible populations by as much as 10 percentage points.[4]  The same report also found past Medicaid expansions had decreased employment and reduced earnings among the newly eligible population.[5]

According to the Foundation for Government Accountability, states that have expanded the program are confirming these findings. [6] Only half of new Medicaid enrollees in Ohio are presently employed, while 40 percent of Arkansas and Michigan’s expansion population has no reportable income.[7] The report estimates in Nebraska that as many as 13,655 workers could exit the state labor force.[8]
 

2) Spending on special interests isn’t economic growth – it is crony capitalism.

According to Harvard researchers in the New England Journal of Medicine, salaries for health care jobs are not manufactured out of thin air – they are produced by someone paying higher taxes, a patient paying more for health care, or an employee taking home lower wages because higher health insurance premiums are deducted from his or her paycheck.[9]
 

The UNK study on Medicaid expansion’s economic impact was commissioned[10] by the Nebraska Hospital Association and the AARP – organizations that have a financial interest in the $2.1 billion in federal funding guaranteed for Medicaid expansion, which would grow the pool of taxpayer support for their industry.
 

3) Medicaid expansion creates perverse incentives that trap low-income Nebraskans.
 

In addition to incentives to drop out of the workforce or to stop paying for private insurance, Medicaid expansion would make welfare cliffs in Nebraska an even worse barrier to upward mobility for low-income Nebraskans. Medicaid expansion would introduce yet another new welfare cliff that will increase health care costs by as much as $2,000 for single adults moving above 139 percent of the federal poverty level.[11]


4) Federal taxpayer dollars are still paid by Nebraskans, and they aren’t “free”.
 

Proponents state Nebraska would lose out on this money without Medicaid expansion. But this federal funding certainly is not free, nor would it be directed to other states if Nebraska continues to reject Medicaid expansion, which is financed through higher taxes, currency inflation, borrowing from China or simply adding to the nation’s $18 trillion debt.

 

Eventually this spending bill for the politically-connected medical industry will mean a bigger state and federal tax bill for all Nebraskans, and at an opportunity cost to family budgets and funding for other public priorities.[12] In 2016, the federal government will begin scaling back its matching funds, leaving expansion states to cover the deficit.
 

Medicaid expansion will not create economic growth that would not otherwise occur. Rather, it will redirect dollars that would be spent in other ways, discourage employment among Nebraska’s workforce and increase health care costs for those above the eligibility threshold.
 

If economic stimulus is the goal, broad-based tax relief and consumer-driven health care reforms that increase competition and truly reduce the market cost of coverage and care should be made higher priorities in the Nebraska Legislature. 

 


[1] Ingram, Jonathan and Nic Horton. “Medicaid Expansion: A Bad Prescription for Nebraska.” The Platte Institute. February 2014, Accessed Apr. 6, 2015. p. 3 [URL: http://www.platteinstitute.org/Library/DocLib/Platte-Medicaid-Policy-Study-Final-020914.pdf]

[2] Young, Joanne. “Study: Medicaid expansion could save $1B over five years.” Lincoln Journal Star. Apr. 1, 2015. Accessed Apr. 6, 2015. http://journalstar.com/legislature/study-medicaid-expansion-could-save-b-over-five-years/article_c71dd138-1153-54b7-80fa-57fcd74595af.html

[3] “Labor Market Effects of the Affordable Care Act: Updated Estimates.” Congressional Budget Office. The Budget and Economic Outlook: 2014 to 2024. February 2014, Accessed Apr. 6, 2015. p. 121. [URL: http://www.cbo.gov/sites/default/files/cbofiles/attachments/45010-breakout-AppendixC.pdf]

[4] Dague, Laura et al. “The Effects of Public Insurance Coverage for Childless Adults on Labor Supply.” The National Bureau of Economic Research. May 2014, Accessed Apr. 6, 2015. http://www.nber.org/papers/w20111.pdf?new_window=1

[5] Ibid.

[6] Ingram, Jonathan. “Work Requirements Work Well for Welfare, But They Still Cannot Turn a Terrible Policy Into a Good One.” The Foundation for Government Accountability. February 2015, Accessed Apr. 6, 2015. p. 4 [URL: http://thefga.org/wp-content/uploads/2015/03/UO-WorkWell-PRINT.pdf]

[7] Ibid.

[8] Ibid p. 7

[9] Baicker, Katherine, Ph.D. and Amitabh Chandra, Ph.D. “The Health Care Jobs Fallacy.” New England Journal of Medicine. June 28, 2012, Accessed Apr. 6, 2015. http://www.nejm.org/doi/full/10.1056/NEJMp1204891

[10] Jenkins, Allan, Ph.D. and Ron Konecny, Ph.D. “Nebraska Medicaid Expansion.” Prepared for the Nebraska Hospital Association & AARP Nebraska. April 1, 2015, Accessed Apr. 6, 2015. http://www.nebraskahospitals.org/file_download/inline/9eb5a4d7-8725-4385-959f-0f404c895128

[11] Ingram, Jonathan et al. “Obamacare’s Medicaid Expansion Could Cause 2.6 Million Able-Bodied Adults To Drop Out Of Labor Force.” Forbes. Feb. 24, 2015, Accessed Apr. 7, 2015. http://www.forbes.com/sites/theapothecary/2015/02/24/obamacares-medicaid-expansion-could-cause-2-6-million-able-bodied-adults-to-drop-out-of-labor-force/

[12] Book, Robert, Ph.D. “The Fallacy of Health Care Reform as Economic Stimulus.” The Heritage Foundation, January 2009, Accessed Apr. 6, 2015. http://www.heritage.org/research/reports/2009/01/the-fallacy-of-health-care-reform-as-economic-stimulus

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