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Tuesday, November 5, 2019

Medicaid Expansion in Wyoming, Part 1

If someone tells you that if you spend $100 to get $90, you'll be better off, what do you do? Exactly. You assume he is a politician spending taxpayers' money.

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According to the Laramie Boomerang, Revenue Committee Co-Chair Dan Zwonitzer thinks that Medicaid Expansion
is one of the strongest and easiest revenue possibilities to pursue in the state
Next week, at its meeting in Cheyenne November 11-12, the Revenue Committee is going to consider a bill to approve Medicaid Expansion in Wyoming. 

This is such a bad idea from so many angles that I cannot cover them in one, or even two articles. Let us therefore start with the most obvious problem: expected enrollment. Later articles will address the cost trajectory, the alleged economic impact of Medicaid Expansion, and the destructive consequences for private insurance.

We do, however, have to make a brief mention already here, of the cost problem. In fiscal year 2017, the latest for which the Center for Medicare and Medicaid Services and the Kaiser Family Foundation have published complete Medicaid Expansion spending data, the 31 states and the D.C. with an up-and-running Expansion program, spent a total of $59.2 billion on Expansion. 

Of that money, the federal government supplied $55.9 billion. The states had to chip in $3.3 billion. For sure, that is only 5.6 percent of the cost of Medicaid Expansion for 2017, but it still means this: the states spent more than they got from the federal government. 

Medicaid Expansion was a net cost to the states. Chairman Zwonitzer, suggesting that Medicaid Expansion is a new revenue stream, seems to believe that it adds net revenue. 

I am at loss trying to understand how the state's finances are improved by spending $100 to get $94.40. 

And that is under the assumption that Wyoming would get 94-95 percent of Medicaid Expansion covered by the federal government. The Kaiser Family Foundation numbers on Expansion spending show a significant difference between the states in terms of how much the states have to spend:

Table 1: State share of Medicaid Expansion as of FY2017*

State share
MASSACHUSETTS 14.2%
VERMONT 13.2%
DELAWARE 12.2%
CONNECTICUT 12.0%
INDIANA 10.9%
ARIZONA 8.1%
OHIO 6.9%
IOWA 6.5%
ILLINOIS 6.2%
HAWAII 6.0%
NORTH DAKOTA 5.9%
MICHIGAN 5.3%
MONTANA 4.7%
WEST VIRGINIA 4.4%
NEW HAMPSHIRE 4.1%
KENTUCKY 4.0%
COLORADO 4.0%
NEW MEXICO 4.0%
WASHINGTON 3.9%
DISTRICT OF COLUMBIA 3.9%
OREGON 3.9%
RHODE ISLAND 3.9%
NEW JERSEY 3.8%
ARKANSAS 3.7%
MARYLAND 3.7%
NEVADA 3.6%
MINNESOTA 3.5%
LOUISIANA 3.4%
PENNSYLVANIA 3.1%
ALASKA 2.5%
Source of raw data: Kaiser Family Foundation
*) California and New York are not reported due to a one-time, multi-year adjustment of state and federal spending. This adjustment put state spending in the negative for 2017, thus distorting the actual funding balance between the states and the federal government. 

Now for the enrollment issue. The federal government has promised to cover almost all Expansion costs for the states, but the promise is not based on actual enrollment numbers. It is based on a projection of enrollment made prior to the state's enactment of Medicaid Expansion. If actual enrollment exceeds projections, the states are left to pick up the entire cost for the "excess" enrollment. 

This mismatch between projections and actual enrollment is very important, especially in Wyoming. The Wyoming Tribune Eagle reminds us that
consideration of Medicaid expansion comes nearly a year after the state House of Representatives killed a similar bill during the 2019 legislative session. 
The Tribune Eagle also notes:
Projections show the expansion could eventually cover about 27,000 residents, according to a 2018 report from the Wyoming Department of Health. The federal government would pick up 90% of the costs associated with the expansion, while Wyoming would pay the rest – an estimated $33 million during its initial biennium of implementation. 
That would be $16.5 million per fiscal year. In 2018 the total cost of Medicaid in Wyoming was $602.6 million, split practically 50/50 between the state and the federal government. With the estimate that the Tribune Eagle reports, the total cost for Medicaid Expansion would be $165 million, in other words a 27-percent growth in Medicaid costs (based again on FY2018 numbers). 

Expansion would cost just over $6,100 per new enrollee, a figure to be compared to almost $10,400 per enrollee in the existing Medicaid program. The lower figure for Expansion enrollees is due to the fact that they are expected to be employed, working adults, in other words people who would be able to get health insurance through their employers. 

This is the age group 19-64, where in Wyoming today only 6.3 percent are enrolled in Medicaid. Two thirds get their insurance through employers. If we assume that all the 27,000 Expansion enrollees are adults in this group (with their kids already being enrolled in SCHIP), the total number of Medicaid enrollees in this age group would increase by more than 128 percent. 

If these are all uninsured today, it would reduce that segment of the adult population by 55 percent. 

However, the story does not stop here. Let us make the not-entirely unreasonable assumption that employers respond to the new incentive created by the state. Suppose businesses are struggling to pay the new corporate income tax that they Revenue Committee has already passed, plus the higher property taxes they also want. As a way to alleviate their costs, they now drop health insurance benefits and dump their employees into Medicaid Expansion. 

What would happen then? Based on the latest IRS tax-filing data for Wyoming, there are an estimated 23,600 households in Wyoming who have more than a single filer, and who make $25,000-35,500 per year. This income bracket approximates the 100-138 percent of the federal poverty limit for a family of four. 

Suppose we dump all of them into Medicaid Expansion. Since these are households that do not file as single, they have more than one household member who is in the 19-64 age group.

Bluntly: if all of them joined Medicaid Expansion, this new program would enroll 47,200 individuals.

Or, put the other way: to make sure we stick within the 27,000 enrollment cap that the Medicaid Expansion proponents have set, they would need to make sure only half of the working adults eligible for Medicaid Expansion, actually enroll.

If actual Expansion enrollment exceeded the 27,000 as estimated here, and if we assume that every enrolled person costs taxpayers $6,100 on average, the state's cost for Medicaid Expansion would be $123 million for the extra enrollees, plus the $16.5 million the state itself estimates. 

In other words, the net cost to taxpayers in Wyoming would be $139.5 million. In one year. 

This is about five times more than the Revenue Committee says they will take in from the new corporate income tax. Who is going to pay the extra taxes?

Even if the state manages to keep Expansion exactly within its 27,000-enrollment cap, there is still the question of the extra $16.5 million. This is a net annual cost to the state, even when we take into account the federal money that Chairman Zwonitzer referred to. 

Where is that money going to come from?

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