July 9, 2012

Some ‘Windfall’: Would It Actually Cost Missouri Nearly $800 Million To Expand Medicaid?

Since the U.S. Supreme Court ruled that the Affordable Care Act’s Medicaid expansion could not be forced on the states, there has been a lot of talk about whether Missouri should opt into the expanded Medicaid program anyway. The St. Louis Post-Dispatch describes the state-to-federal funding arrangement as a ”windfall” because, they say, the state would “only” have to pony up $431 million to get $8 billion in federal funding.

But would it really cost the state $431 million?

The source of the Post-Dispatch’s figure is a Kaiser Family Foundation report, published in May 2010. The document lists the costs and federal benefits that would come to each state when the state joined the expanded Medicaid program. And they list two participation scenarios: first, a “standard” scenario, where participation in the program is moderate, and an “enhanced” scenario where, as they put it, there would be a ”more aggressive outreach and enrollment campaign by federal and state governments as well as key stakeholders including community based organizations and providers that would promote more robust participation” in the expansion. Would the government aggressively market the expansion? Almost certainly, and the feds already have aggressively promoted other parts of the ACA (to wit: “The agency [Health and Human Services] also is launching a more aggressive marketing campaign . . .”)

Long story short, things could get a lot more expensive for Missouri to participate in Medicaid than the Post-Dispatch’s report would indicate. Kaiser’s “standard” participation scenario indeed predicts that Missouri would have to pick up $431 million in new spending. But, if the program’s participation rate is higher, the state could be stuck with somewhere around $773 million in new spending. And that is just for the years 2014-19. Legislators can count on at least an extra $100 million to $150 million each year after that to pay for the expansion, and possibly much, much more if participation rates are higher.

And where, exactly, would all of that money come from? You, of course, through higher taxes and/or reduced state services elsewhere. And that is completely neglecting the fact that Missourians would not be getting a “windfall” of federal dollars. Taxpayers are the government. We would be paying ourselves. If participation in Missouri’s Medicaid program rises, the cost to the federal government will increase, meaning not only will taxpayers be spending more money through the state, but they will have to spend more money through the feds, as well.

Some “windfall.” Taxpayers and policymakers deserve to know when they are being sold a bill of goods. This is one of those times.

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