A report that claims Medicaid expansion infused $1.85 billion into Louisiana’s economy and created nearly 19,200 jobs in 2017 is “factually inaccurate” because it ignores costs associated with a nearly 50-percent decline in health insurance exchange enrollment, an analysis by the Pelican Institute for Public Policy, a New Orleans-based free-market think tank, says.
“The [state] report needs to be corrected or retracted. It is not an accurate report,” said Chris Jacobs, a senior fellow at the Pelican Institute and author of a policy brief, ‘Debunking The Government’s Pro-Medicaid Report.’
Since the state opted into Medicaid expansion two years ago, enrollment in Louisiana’s health insurance exchange has fallen from 170,806 in March 2016 to 93,865 earlier this year, Jacobs said.
A significant decline in exchange enrollment is also cited by Louise Norris, author of ‘The Insider’s Guide to Obamacare’s Open Enrollment,’ in a healthinsurance.org analysis.
“Enrollment in the exchange has dropped sharply since 2016, but that’s due in large part to the state’s late expansion of Medicaid, where enrollment has continued to grow,” Norris writes. “Not coincidentally, enrollment in private plans in the exchange has dropped from 214,148 people in 2016 to under 110,000 in 2018.”
While enrollment in private plans decline, on average, by 5 percent in states that opt into Medicaid expansion, “enrollment in Louisiana’s exchange dropped by more than 23 percent — the largest drop in the country,” according to Norris.
Jacobs, the founder and CEO of Juniper Research Group, said the state’s Legislative Fiscal Office in 2015 assumed approximately 20 percent of exchange enrollees would give up other private coverage to enroll in Medicaid.
If Medicaid enrollees dropped employer-sponsored coverage to enroll in expansion, he said, the “new” federal subsidy dollars actually supplant existing coverage subsidies provided by employers.
“The report does not acknowledge this trade-off,” he said. “The pro-Medicaid report made no attempt to do that. It only looks at Medicaid-specific dollars and assumes all the quote unquote ‘new’ federal dollars is ‘new’ spending that is not substituting for spending elsewhere.”
According to the Congressional Budget Office, exchange subsidies average about $9,000 a year while Medicaid coverage costs, on average, about $6,000 annually.
The state loses about $3,000 in federal subsidies and subsequent economic impact for each person who opts out of an exchange policy to enroll in Medicaid expansion. If 20 percent of those who cancelled exchange policies enrolled in Medicaid, the state could be losing up to $70 million.
“For those individuals who would have qualified for discounted exchange policies, their Medicaid coverage may have actually cost Louisiana additional federal dollars – and jobs – because Medicaid could cost less than federal insurance subsidies,” Jacobs said.
Louisiana State University (LSU) Public Administration Institute Economics Professor Dr. James Richardson, who co-authored the April 10 ’Medicaid Expansion and the Louisiana Economy’ report, said Jacobs’ analysis incorrectly assumes at least 20 percent of those who opted out of the exchange enrolled directly into Medicaid.
“We have something less than 1 percent going over” to Medicaid, Richardson said, noting the Legislative Fiscal Office’s 20-percent ratio was a worst-case estimate.
“At the end of the day,” he said, “that was a small number – at least based on the information that we now have.”
Nevertheless, Richardson said, “We are keeping track of that right now. (LDH) is combing the books to see what happening.”
Other findings in Jacob’s analysis:
• The state report only examines federal spending on Medicaid, and not the tax increases used to finance that federal spending.
“It is a one-sided analysis to begin with because it only looks at the impact of spending and not the taxes used to fund that spending,” he said. “Those tax increases cause job losses, but the report makes no attempt to count them.”
• Medicaid creates a disincentive for work. The CBO concludes Obamacare would, nationwide, reduce the workforce by 2.5 million because employment would cause individuals to lose Medicaid eligibility and subject them to sizable premiums and deductibles for Exchange coverage.
Medicaid expansion “effectively creates a tax on additional earnings” that “reduces the incentive to work,” Jacobs said.
“The state is keeping track of that very carefully to see if that is happening and it has not shown up in the data at all,” Richardson said.
• Health care is not a jobs program. To illustrate this point, Jacobs quotes Harvard University researchers: “It is tempting to think that rising health care employment is a boon, but if the same outcomes can be achieved with lower employment and fewer resources, that leaves extra money to devote to other important public and private priorities."
“The priorities of the program is not to be a job program or economic development,” Richardson agreed. “It is a health insurance program that has the side-effect of having a positive impact on the economy of a net new flow of $1.85 billion.”
Richardson said expansion money creates medical jobs and those jobs translate into people having money to spend which, in turn, creates more jobs.
• Medicaid expansion has made the state’s economy more reliant on the federal government, Jacobs said.
According to a Pew Charitable Trusts analysis, Louisiana’s state budget “remains the most dependent on spending from Washington” than any other state budget.
Pew says that in 2015, before Medicaid expansion took effect in Louisiana, 42.2 percent of the state budget came from Washington. That percentage will increase, Jacobs said,
“With the federal government facing a $21 trillion debt, making Louisiana even more dependent on Washington’s largesse represents a recipe for fiscal ruin,” he said.
• Implementing fees and taxes solely to draw more federal dollars is “a budget gimmick” that amounts to “essentially, money laundering,” Jacobs said.
“Taking the (LDH report) to its logical conclusion, to maximize the generous federal match rate for Medicaid expansion, Louisiana should, for instance, start paying doctors $5,000 for a simple office visit,” he said. “That added Medicaid spending would create even more jobs and economic growth – as would a government program paying individuals to dig ditches and fill them in again.”
“This is a national policy and we have to look at this,” Richardson said. “This is a good deal for us. The federal government is saying we are putting up a lot money. This is something we should take, like any other federal program.”
Jacobs said he is surprised “nobody has questioned the integrity of the analysis. No one has said you got numbers wrong or anything like that.”
But one indication that the Legislature is not convinced that Medicaid expansion has created an economic benefit is that “they are considering a reinsurance program.”
House Bill 246 and HB 472, both sponsored by Rep. Major Thibaut, D-New Orleans, would create a state-based reinsurance program to subsidize individual health insurance policyholders by assessing those enrolled in group insurance plans between $2.50 and $5 a month.
“One of the reasons why they are considering a reinsurance program is because a lot of subsidized individuals dropped their exchange policy” to enroll in the expanded Medicaid, Jacobs said. “It illustrates the problems and ramifications of Medicare expansion not mentioned in the report.”