U-M study: Medicaid expansion generates economic benefit in Michigan

From the Detroit Free Press

Even though the state’s bills for the expansion of Medicaid to more than 640,000 low-income Michiganders is growing from $152 million this year to $399 million in 2021, the economic benefit of providing the health care will more than make up for the cost to the state, according to a study released Jan. 4 by the University of Michigan.

The study, commissioned by the New York-based Commonwealth Fund and published in the New England Journal of Medicine on Wednesday, reports that cost savings to the state include $235 million the state isn’t spending for health care services, such as for prisoners in the state’s correctional facilities and mental health care for poor residents. The federal government, through the Affordable Care Act, is picking up those costs.

In addition, the Medicaid expansion has resulted in the creation of an estimated 30,000 jobs each year – many in the health industry and other private sector jobs – bringing in $150 million a year in revenues to the state from income and sales taxes.

“As we think of the costs and benefits of the expansion, it’s important to think about the benefits to employment and revenues from taxes coming into government,” said Dr. John Ayanian, lead author of the study and director of the U-M Institute for Healthcare Policy and Innovation. "We worked closely with economists at U-M who are regularly involved with economic forecasts for the state. And we applied the forecasts to the health care system."

The study, which shows the economic benefit to the state will be $432 million this year and fall to $162.3 million by 2021, will be a powerful tool that can be used to convince lawmakers in Lansing and Washington D.C. that the Medicaid expansion is worth the expenditure of taxpayer dollars.

“Our hope is that the findings in our study will be useful to state and federal legislators. In the 31 states that have expanded Medicaid, it’s bringing health care to low income adults," Ayanian said. "But what we also found is there is also economic benefit from a state aspect."

The state officials said that the numbers in the U-M study seem solid, although they can't confirm that the income and sales tax revenue increases will meet U-M's predictions. But other numbers provide evidence that the expansion – dubbed Healthy Michigan – has not only had significant benefits for low-income residents who previously hadn’t had insurance or adequate health care, but for the state’s economy as well.

“The Governor remains happy that more than 600,000 people remain covered by insurance,” said Kurt Weiss, spokesman for state budget director John Roberts. “We’re supportive of Healthy Michigan, but we also want to see what the federal government is going to do.”

Congress has tried dozens of times to repeal the Affordable Care Act since it was passed, but knew they would never be able to get enough votes to override a veto from President Barack Obama, who spearheaded the health care policy. But with President-elect Donald Trump promising to repeal Obamacare as soon as he takes office in two weeks, the future of the program, along with the Medicaid expansion is in peril.

The Legislature passed Medicaid expansion in 2013 with a bare minimum of votes and with plenty of opposition from Republicans. The opposition has only grown as Obamacare premiums have risen in the last year.

The bill helped implement a portion of the Affordable Care Act, which required that all people have health care coverage. The federal government paid 100% of the cost of the Medicaid expansion program through 2017 and then that match will decline to 90% by 2020. Medicaid recipients, who fall within 133% of the federal poverty level, have to contribute 5% of their health care costs and 7% after four years.

The expansion quickly exceeded the state’s expectations of 400,000 people enrolling in the program and it grew to more than 640,000 as well as the more than 20 million people nationwide who got insurance through the Affordable Care Act.

The sheer numbers will make it hard for Congress to outright repeal the health care programs, predicted Larry Martin, professor of economics at Michigan State University.

“It’s a very difficult issue because it’s such a major bill and they want to keep some things. But you can’t ban the denying of care for pre-existing conditions and then allow insurance coverage to be voluntary,” he said. “We’ve never tried to get rid of an entitlement program before so disentangling it will be quite a job.”