NC Medicaid Expansion

As servants of the people of North Carolina, government has the responsibility to work in the best interests of the its residents. After careful research and consideration, the conclusion has been drawn the expanding Medicare eligibility, under the guidelines associated with the 2010 Affordable Care Act (ACA), would best meet that interest. This conclusion was based on four factors and determinations listed below: Factor

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Determination

The potential long-term cost to the North Carolina taxpayer

487,000 additional North Carolinians would be afforded health insurance The potential long term benefit of health coverage for uninsured

The additional cost of implementing the Medicaid expansion is estimated to be a 4.5 percent increase from what states would have spent between 2014 and 2022 without the health reform law Readiness of current system to handle expansion

DHHS has accelerated developmental work on a Web-based eligibility simplification and electronic eligibility determination system for income-related programs, including Medicaid

Concern regarding the federal government’s continuing of its obligation for matching funds under the terms of the Medicaid expansion The concern for current Medicaid matching funds is of concern. Appropriate measures for shortfalls, including reduction in benefits and eligibility, that pertain to Medicaid now should be afforded to Medicaid expansion.

While there should be appropriate concern for both readiness and the federal government’s inability to maintain funding, the overriding factors should be cost and benefit. For the period 2013-2022, there would be an approximate 4.5% increase in state Medicaid spending required to insure the additional 487,000 residents estimated to receive coverage under ACA.

By insuring 487,000 more North Carolina residents, there will be a reduction in safety-net providers reimbursements, increased health of our residents, increase worker productivity, increased revenue to the state, and, by creating a more efficient system for caring for the indigent, a reduction of the burden on the North Carolina taxpayer.

Analysis of North Carolina Medicaid Expansion
The health of North Carolina is greatly determined by the health of North Carolina residents, especially the uninsured. North Carolina has a $13 billion Medicaid budget; $10 billion supplied by the federal government, $3 billion from the North Carolina taxpayer.1 Obviously, the costs to North Carolina taxpayers is substantial. With 1.5 million residents unemployed, or 1 in 52, the need for Medicaid is equally substantial.

The economic downturn and slower-than-normal economic recovery has exacerbated both. With the introduction of the 2010 Affordable Care Act (ACA), the federal government has offered North Carolina a solution to the dilemma faced; how best to deal with the issue of the uninsured. By expanding Medicaid to cover those uninsured who would otherwise not have insurance, ACA affords a strategy to meet the challenge.

While the political climate is what it is, as servants of the North Carolina citizens, it is the government’s duty to do what is in the best interest of its citizenry. With that focus in mind, this memo discusses the pros and cons, costs and benefits of using the framework afforded North Carolina, through ACA, to determine if Medicaid expansion is a “good deal.” This determination was be based on four factors:

1. the potential long-term cost of Medicaid expansion to North Carolina taxpayers, 2. the potential long-term benefit of Medicaid expansion to North Carolina residents,

3. the readiness of North Carolina’s governmental bureaucracy to handle expansion, and

4. the probability the federal government will maintain proposed ACA-produced Medicaid funding levels.

While there should be appropriate concern for both readiness and the federal government’s ability to maintain funding, the overriding factors should be cost and benefit. As such, the first area of determination was the cost of Medicaid expansion to North Carolina taxpayers. The potential long-term cost to the North Carolina taxpayer.

Before any meaningful discussion of the long-term cost to the North Carolina taxpayer can be attempted, a look at current cost is appropriate. Yearly state budgetary outlays for Medicaid hover around $3 billion.3 The primary issue with this outlay is the inability to correctly forecast the amount needed. In 2012, the overspending was $418.2 million, or approximately 14%.4 In 2013, the estimate has been reduced to $262 million or approximately 8.5% (of which, $132 million owed to the federal government in from 2012 unpaid shortfall).5

It should be noted that Medicaid shortfalls have a lot to do with the economy. Health policy researcher John Oberlander from the UNC School of Medicine says: “Medicaid is designed to be countercyclical. It’s supposed to expand when the economy gets slower and people lose their jobs.”6 The inference here is, as the North Carolina economy improves, the Medicaid outlays should recede. This should reduce the probability of a shortfall.

The significance of shortfalls in allocation is determined by the ability to meet the shortfall. North Carolina has done an exceptional job in planning for and financing Medicaid funding shortfalls. This year’s contingency funds totaling over $230 million dollars have been set aside for Medicaid shortfalls.7 Additionally, there is $200 million in the state’s “rainy day fund.”8

While there is political quibbling over the extent of shortfalls, there should be a sober understanding that with a total budgetary outlay of $13 billion, even with a $482 million shortfall, the overall percentage of is 3.7%. In layman’s terms, the budget was 96.3% accurate.

With the backdrop of current Medicaid cost is added the potential long-term costs of implementation of ACA-produced Medicaid expansion (“Medicaid expansion”). What appears to be the pre-eminent study on this subject was The Kaiser Family Foundation study on the potential long-term cost of Medicaid expansion in the United states, broken down by state.

The Kaiser Commission on Medicaid and the Uninsured states that, for period 2013-2022, there would be an increased North Carolina budgetary outlay of approximately $3 billion, or 4.5%, for additional coverage of approximately 478,000 residents. With the current ability of North Carolina to handle the pitfalls of Medicaid budgetary forecasting, this appears to be an extremely manageable increase.

Unless otherwise suspected, the state’s economy will improve, receding the need for outlay increase without Medicaid expansion. Coupled with the manageable increases forecasted with ACA, it is determined that the cost of Medicaid expansion under the guidelines of ACA would be not only manageable, but relatively negligible.

However, there cannot be a full accounting of the cost of expansion without the counterbalancing effect of the benefits of Medicaid expansion. The potential long-term benefit to the North Carolina taxpayer.

The benefits of Medicaid expansion are numerous; however, for the sake of brevity, on three will be discussed here: (1) a more efficient way to pay for the health expenses of the uninsured, (2) increased productivity of uninsured workers, and (3) an increase in federal dollars to the North Carolina economy.