Medicaid is a federal-state health program that provides free or low-cost comprehensive coverage ... [+]
By: Rhett Buttle
Medicaid is a federal-state health program that provides free or low-cost comprehensive coverage which includes doctor visits, yearly check-ups, emergency care, dental care, mental health, and additional services. When it was passed, the Affordable Care Act helped expand health coverage for more people by giving every state the option to expand Medicaid eligibility to individuals with incomes up to 138% of the federal poverty level – about $20,000 per year for single adults, which increases with family size. Research shows that Medicaid is comprehensive coverage, comparable to private insurance, and improves health access and outcomes in a more cost-effective way than private coverage, with low out-of-pocket costs to beneficiaries. In order to motivate states to take up this expansion, the federal government covers 90% of the costs of coverage for the expansion population, with the state responsible for just 10%. This is much more than the federal contribution for traditional Medicaid, which varies from state to state, but ranges from 50-76%.
To date, 40 states and Washington, DC, have expanded their Medicaid programs, while the remaining 10 states have not. In December, North Carolina became the most recent state to expand Medicaid coverage under the ACA, with an estimated 600,000 North Carolinians becoming newly eligible for the program.
Expanding Medicaid has been shown by multiple studies to not just provide better healthcare coverage for underserved individuals, but also to bring in billions of federal dollars to states that expand and help boost state economies. Here are five ways that the economy & Main Street could benefit from Medicaid expansion.
1. A Healthier Workforce
More people receiving health coverage means more people being able to work, saving lost productivity from employees and increasing labor force participation. A recent study by the Department of Health and Human Services’ Office of the Assistant Secretary for Planning and Evaluation found that 47% of enrollees who lived in states that have expanded Medicaid were employed compared to 34% in states that have not. The additional workers means more businesses will have a stable workforce of individuals who are earning a paycheck and contributing to their states’ economies.
2. Decreasing Medical Bankruptcies and Debt
In addition to saving thousands of lives each year through preventative measures, research has shown that expanding Medicaid eligibility reduces medical debt and bankruptcies. One study showed that a 10% increase in Medicaid eligibility resulted in an 8% reduction in personal bankruptcies. Another showed that Medicaid expansions per individual reduced the probability of a medical debt collection balance of $1,000 or more by 1.3% and the probability of a new bankruptcy filing by 2.8%. Debt and bankruptcies are two of the greatest causes of financial instability, and it is clear that expanding Medicaid provides relief in this area.
3. Reducing Financial Pressures on Hospitals - Especially in Rural Areas
Most healthcare providers’ business models are based on insurance reimbursement, but hospitals are also responsible for providing care to those who are un- or under-insured, leading to uncompensated care costs, which place a burden on hospitals’ finances, and can raise the costs for everyone seeking healthcare services. Recent analysis shows that Medicaid expansion dramatically reduces hospitals’ uncompensated care costs and provides significant economic benefit to providers. In fact, these costs dropped by 14% and 13% respectively in Virginia and Maine after they expanded Medicaid in 2019, while the rate nationwide rose 6%. Rural hospitals in particular face enormous challenges with slim operating margins, leading to reduction in services or even closing doors. The financial benefits of Medicaid expansion have been shown to be most concentrated among rural hospitals
4. Supporting Employees Who are Caregivers
The number of individuals caring for an adult continues to grow and AARP estimates that 61% percent of them work either full- or part-time. These caregivers provided 36 billion hours of unpaid care worth $600 billion in 2021, and their responsibilities often impact their mental, physical, and financial health. However, Medicaid expansion can help reduce caregivers’ out-of-pocket expenses and lift some of their workload, improving their quality of life. A recently published study in Review of Economics of the Household found it led to an 8.2% reduction in the feeling of depression and an 8.7% increase in the feeling of happiness.
5. More Money for State Economies
Lawmakers in some states have argued that the cost of expanding Medicaid is too high, but studies show the economic benefit outweighs it. For example, Michigan spent an estimated $399 million for its expansion costs in 2021, but it led to savings of $235 million and an additional $178 million from taxes on hospitals and long-term care, producing a $43 million increase in net revenue. This type of surplus, as well as the other benefits outlined here, drive an increase in jobs and business activity that benefits businesses, and keeps local healthcare providers from closing.
As noted above, the ACA made Medicaid expansion possible. While many states have benefited from this expansion, Alabama, Florida, Georgia, Kansas, Mississippi, South Carolina, Tennessee, Texas, Wisconsin, and Wyoming have not expanded Medicaid eligibility. While not perfect, most states are showing that the Medicaid expansion is working well. The states that have expanded have cited improved health outcomes as well as economic benefits, showing that Medicaid expansion can be good for the economy and good for employers, which may be a call to those states who have not yet chosen to expand their programs to reconsider expansion.
