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Nixon administration: Missouri could gain from Medicaid

Nixon administration: Missouri could gain from Medicaid

December 24th, 2012 by David A. Lieb, Associated Press in News

JEFFERSON CITY, Mo. (AP) - Although the federal government would spend billions of dollars, an expansion of Missouri's Medicaid program could actually generate millions of dollars of new revenues and savings for the state's budget, according to an analysis by Gov. Jay Nixon's administration.

The Democratic governor plans to use the figures to bolster his argument to skeptical Republican legislators that the state should embrace a key part of President Barack Obama's health care law and expend Medicaid eligibility to hundreds of thousands of lower-income adults.

The projections released this past week by Nixon's budget office show Missouri could see a nearly $47 million increase in general revenues during the first year of the Medicaid expansion in 2014. That boost in state revenues would grow to nearly $140 million in 2016 before gradually declining to a slightly better than break-even point in 2021.

As called for under Obama's health care law, the federal government would pay the full cost for the first three years of the Medicaid expansion before states gradually pick up a 10 percent share. The analysis concludes that Missouri stands to benefit because it would no longer have to spend state money for certain health care expenses, and because the flow of federal money to medical providers would generate higher state income and sales tax revenues.

"This, to us, points out that we do believe this is something that is affordable for the state of Missouri to do," said Nixon's budget director, Linda Luebbering.

To expand Medicaid, however, will require the consent of Missouri's Republican-led Legislature, which has opposed almost anything associated with Obama's health care law. Republican legislative leaders have cited concerns about long-term costs to the state of a Medicaid expansion, as well as the cost to an already indebted federal government. They also have raised philosophical objections to enlarging social programs.

Republican senators recently discussed the potential Medicaid expansion at a closed-door caucus meeting. That meeting was before Nixon's administration publicly released its analysis but after other groups had already produced studies outlining the costs and benefits of a Medicaid expansion.

"Everyone was of the same mind as they were in November, that we have serious concerns, long term, about its impact on the state and our ability to meet our other obligations," said Senate President Pro Tem Tom Dempsey, R-St. Charles. "There wasn't any movement there on Medicaid expansion."

The analysis by Nixon's administration projects that 259,499 adults would enroll in Medicaid in the 2014 fiscal year if eligibility thresholds are raised to 138 percent of the federal poverty level, which equates to an annual income of $15,415 for an individual or $26,344 for a family of three. By 2021, the additional enrollment is expected to reach 307,542.

The swelling of Missouri's Medicaid rolls would cost the federal government $907 million in 2014 and the state nothing. By 2021, the federal cost would rise to $2.3 billion; the state's 10 percent share would include $143 million paid from general revenues and additional $116 million paid from other state sources such as existing taxes on hospitals and pharmacies.

But the analysis concludes that the state's costs would be more than offset. Because of the Medicaid expansion, Missouri would no longer have to pay as much to provide mental health services to some people. The expanded eligibility also would cover some disabled residents and pregnant women at a higher federal payment rate than would otherwise exist under Missouri's current Medicaid program. That would free up state money currently spent on those efforts.

The total projected savings: $31 million in 2014 and $78 million by 2021.

The analysis by Nixon's administration also assumes that medical providers would use a portion of their increased federal payments to boost their payrolls, which in turn would increase state income taxes collected from those employees. Those businesses and employees also would spend a portion of their increased incomes, resulting in additional state sales tax collections.

The total additional projected tax revenues: Nearly $16 million in 2014, rising to almost $70 million by 2021.

State Rep. Chris Kelly, D-Columbia, who is a member of the House Budget Committee, said he agrees with the general conclusion that the Medicaid expansion can save the state money.

"All the talk that it's going to cost Missouri money is simply an expression of opposition to Obamacare," Kelly said. "No one who says those things is demonstrating any analysis that gives a basis for that conclusion."