UAB Report: Medicaid Expansion Could Mean $1 Billion in Revenue for Alabama
A big deadline is looming today for state's like Alabama. Washington wants to know which states plan to create their own health insurance exchanges, as part of the Affordable Care Act. Each state that says “no” will leave that job up to the federal government. Today's deadline comes just days after the University of Alabama at Birmingham released a report related to the expansion of Medicaid under the act. The report says if Alabama opts into the Medicaid expansion, it could mean a billion dollars in new tax revenue for the state. Doctor Michael Morrisey is professor of economics at the UAB School of Public Health and co-authored the report.
[Morrisey]: "If we wanted to implement the expansion, the federal government picks up the direct cost for the first three years. And after that it declines until 2020, the federal government picks up 90% and Alabama would be on the hook for 10%. So over that time period, between 2014 and 2020, Alabama would have to put up about $770 million. The federal government in contrast would contribute $11.7 billion to provide care for the newly eligible folks. The implications of the seven years of the initial expansion, is that the new income coming into the state would be almost $20 billion. If you take that and kind of think about the new tax revenues that would come to Alabama as a result of that, some of that comes with the state income tax, some of that comes with greater sales tax because people are buying things, our estimate is that those new federal dollars and the spinoff on spending would result in new tax revenues of $1.7 billion."
[Martin]: "Governor Robert Bentley has already come out and said that he’s not going to set up a state health exchange in Alabama. He set up the Alabama Medicaid Advisory Commission two months ago to come up with a plan to lower Medicaid costs in the state. In your opinion, is it more effective for Alabama to tighten its spending belt or to use the money the federal government is offering?"
[Morrisey]: “There are sort of two issues there. One has to do with Alabama’s current Medicaid crisis. And there what the governor’s trying to do is to find ways to economize on services and the cost of services and how they’re organized. And that’s largely the charge the Commission is faced with. The second issue comes from the Affordable Care Act and the opportunity that states have to expand their Medicaid program to adults 19 -64 who have sufficiently low income. And those are, in some sense, two related by different questions. And our study of course looked at the potential costs and revenue and tax implications of expanding the Medicaid program in Alabama.”
[Martin]: "According the Governor Robert Bentley’s office, he is still against Medicaid expansion under the Affordable Care Act despite your report. What’s your reaction?"
[Morrisey]: “He didn’t quite say that. What he said was he wasn’t prepared to see the state expand the Medicaid program under the existing Medicaid arrangements. And so part of the job of that commission is to come up with ways to streamline and make the existing Medicaid program more effective. So I’m more optimistic that the commission can meet its charge, and as a consequence the governor will have a change of view to the expansion.”
[Martin]: "Does Alabama's decision to opt out of a state health exchange put us at a disadvantage to other states who are choosing to run their own exchange?"
[Morrisey]: “No, I don’t think so. I think the governor’s made the right decision in this case. The issues with the exchanges are first of all, the federal government has been quite slow coming forth with the regulations and guidance and all of that to tell the states what’s expected of them. Nonetheless, they’re supposed to have an exchange up and running by October 1, 2013 to allow people an open enrollment period so they can begin participating January 1, 2014.That’s an extraordinarily tight time schedule, particularly when you don’t have full guidance on what’s expected of you. And then, on the other hand, come one year in 2015, the state insurance exchange is supposed to be totally self-sufficient. Which means that there won’t be federal support for running the exchange. And so given that financial risk and the uncertainty as to what an exchange is supposed to do and the risk of not being able to do it effectively, it seems to me that the governor’s made the right decision in this case. And I suspect that a number of states will similarly allow the federal government to run the exchange in their states.”