Medicaid Expansion and ACA Set to Cost Kansans $4.7 Billion in Next Decade
Cost Projections for 90 Different Enrollee Categories Illustrate Choice Before Policy Makers
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March 1, 2013 - Wichita - Leaders in Topeka are considering whether to expand Kansas' Medicaid program now that the Affordable Care Act (ACA) has been partially ruled constitutional by the U.S. Supreme Court. In doing so, they are presented with cost estimates from a variety of sources across the state and the country. Kansas Policy Institute's estimate from 2011 said that the "Mandate Effect" of the ACA would cost the state $4.1 billion over ten years while an expansion of Medicaid eligibility would cost an additional $625 million, over the same time period. That analysis was written before Medicaid expansion was a choice and a continuation of that analysis was released today by the same author and KPI. Jagadeesh Gokhale, Ph.D., a sitting member of the Social Security Advisory Board and a former senior economist at the Federal Reserve Bank of Cleveland, disaggregates his earlier analysis in today's "Should Kansas Expand Medicaid Under the Affordable Care Act?"
"Our projections of Kansas' Medicaid cost growth under the ACA suggests that other entities' cost estimates are implausibly low. The ACA is very likely to increase health care costs and health insurance premiums. At best, it will push state health spending to unsustainable levels. At worst, it could cause total chaos because, knowing that they cannot be denied coverage despite pre-existing conditions, people could very likely choose to pay the ACA's "tax" instead of sky-high health insurance premiums - until they actually need insurance and health care services," said Dr. Gokhale, an adjunct health policy fellow at KPI.
Gokhale's analysis is within the range of other estimates for the number of enrollees poised to join the Kansas Medicaid rolls for both the Mandate Effect and the Expansion Effect. The Mandate Effect would account for those individuals currently eligible for Medicaid who could be compelled to join the program under the ACA's individual mandate. KPI's Mandate Effect projection was 102,000 Kansans, well within that 30,000-162,000 range set by two separate studies from the Kansas Health Institute. The Expansion Effect projection from KPI is 130,000 (in 2023) new enrollees and falls between other projections of 100,000 (Kansas Health Institute) and 200,000 (Center for Budget and Policy Priorities).
Where KPI's estimate does differ is in the costs associated with these new enrollees. Gokhale identified 45 different enrollee categories, per gender, and utilized historical trends to determine the different costs associated with each different enrollee category (a sample of these categories is here). These cost projections were then appropriately weighted by the trend-determined shares of future enrollees by demographic (gender/age/income/health) type. This stands in contrast to other studies done that utilize a global per-person cost estimate that is either kept constant or increased at a fixed, relatively low growth rate.
Gokhale writes in the brief, "[The study's] key advantages are, first, the implicit assumption that the same forces that escalated (or reduced) costs per person for particular categories of enrollees in the past would continue to influence cost growth in the future. Second, those cost rates per enrollee are appropriately weighted by the trend-determined shares of future enrollees by demographic (gender/age/income/health) type."
KPI president Dave Trabert said, "If Kansas chooses to spend $625 million on Medicaid expansion, on top of the $4.1 billion we're projected to spend under the ACA, we have to ask where that money is going to come from? And what happens when the federal government finally admits it has to cut spending and can't afford to cover most of the cost? Medicaid's share of general funding revenue increased from 3.7 percent to 17.8 percent between 1998 and 2012 and will reach 31 percent by 2023 with the implementation of ObamaCare and Medicaid expansion. The crowd-out effect that has already occurred on education and other services will only get much worse unless other steps are taken."
"Kansas needs health care reform but the answer is less, not more government intervention. Health care can be made more affordable and accessible by removing restrictions on group formations, allowing people to purchase the coverage they want instead of mandate-heavy policies, allowing insurance to be purchased across state lines and other consumer-focused reforms," concluded Trabert.
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Kansas Policy Institute is an independent think-tank that advocates for free market solutions and the protection of personal freedom for all Kansans. Our work centers on state and local economic policy with primary emphasis on education, fiscal policy and health care. We empower citizens, legislators and other government officials with objective research and creative ideas to promote a low-tax, pro-growth environment that preserves the ability of governments to provide high quality services. To speak with Kansas Policy Institute, please contact James Franko at (316) 634-0218.
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