Dear VICPP Friend,
I’m sure you’ve seen the news about how Virginia is facing a state budget deficit. You probably also heard some very confusing comments about what would happen to the budget deficit if Virginia expanded health coverage by drawing down federal Medicaid dollars.
We’re not sure if our legislators are simply confused by the plethora of studies and numbers or if some are trying to intentionally ignore the facts and mislead the public. But regardless of what is going on, it is important that you know the facts so you can present them to our legislators, friends and the media.
Thus, we’ve developed this fact sheet to help you understand what is going on and to help respond to the confusing statements some legislators are making.
The pending state budget deficit creates an opportunity. We can reduce the budget deficit and expand healthcare to poor people at the same. This would be a win-win for Virginia.
If you haven’t yet communicated your concern to your legislator, click HERE and send a letter to your Delegate and Senator urging them to close part of the deficit by expanding health care in Virginia.
If you want to engage your congregation, click HERE to download VICPP’s health care toolkit.
Thanks for your support and advocacy.
Sincerely,
Kim Bobo, Executive Director, Virginia Interfaith Center for Public Policy
10 REASONS WHY ACCEPTING FEDERAL MEDICAID DOLLARS WOULD BENEFIT VIRGINIANS
FACT ONE: Currently, the only long-term, sustainable way for Virginia to help most of its low-income workers and their families who are without comprehensive health coverage is to draw down federal Medicaid dollars.
BACKGROUND: Currently Virginia has 400,000 people who would gain comprehensive health insurance if Virginia drew down federal Medicaid dollars. These dollars could be used to expand who is covered under Medicaid to include many more low-income people or Virginia could develop its own plan and use federal Medicaid dollars for this Virginia plan.
Instead of creating a uniquely state solution or expanding Medicaid to help hundreds of thousands of Virginians, the General Assembly has increased its funds for free health clinics from $3 million to $6 million, which is a drop in the bucket compared to the $1.2 billion per year that the state could draw down in federal Medicaid dollars. With a budget deficit and many competing needs, Virginia can no longer plug the holes in its healthcare system with largely State taxpayer dollars while a significant pot of Federal dollars goes unused by Virginia for Virginians.
FACT TWO: Drawing down federal Medicaid dollars would reduce the state budget.
BACKGROUND: Even though it appears counterintuitive, drawing down federal Medicaid dollars would not only help low-income families in Virginia get healthcare, but it would actually bring more money into the state than the state would have to spend. Expanding healthcare in Virginia by drawing down federal Medicaid dollars would result in a net savings of $71 million over the current two-year budget. Here’s why:
Currently, the state spends a lot of its money on trying to provide some level of health care to low-income or indigent people. This money is currently paid for 100 percent by the state coffers. The most that Virginia will ever have to pay for the healthcare expansion programs is 10 percent of the costs and that’s not even till 2021. (In 2014-2016, the federal government would have paid for all of the health care expansion costs.) Not only has Virginia already turned down $8 billion in federal funding, but according to a new report by the Virginia Poverty Law Center and The Commonwealth Institute, over the next six years, Virginia could save $1.55 billion it currently spends on various healthcare programs, including the millions the state pays for charity care provided by health systems run by the University of Virginia and Virginia Commonwealth University, community mental health and substance abuse services, and other targeted health programs. In order to save this $1.55 billion, Virginia would need to expand its coverage and draw down federal Medicaid dollars. To do so, the total cost over the next six years would be $1.3 billion. The math is fairly straight-forward: over the next six years, Virginia would bring in $256 million additional dollars over its costs, but ONLY if it expands health coverage.
The Commonwealth Institute and the Virginia Poverty Law Center are not the only ones who believe there will be savings. In 2014, PricewaterhouseCooper analyzed the fiscal impact of the Affordable Care Act. It found that the law’s total affect would be $1.021 billion in savings through 2022, but only $601 million from the expansion of health coverage.
Whatever numbers you choose to believe show that Virginia will bring in more federal dollars than it will spend if it expands health coverage by drawing down federal Medicaid dollars.
FACT THREE: Medicaid expansion has been good economically for states that have expanded.
BACKGROUND: The Robert Wood Johnson Foundation’s Urban Institute published a paper entitled “What is the Result of States Not Expanding Medicaid?” This study found that “for every $1 that a state invests in Medicaid Expansion, $13.41 in federal funds will flow into the state.” Specifically, for Virginia, the study estimated that the Commonwealth would spend $1.326 billion to expand Medicaid over a 10-year period. However, over that same 10-year span, the cost to the state of not expanding Medicaid would be $14.7 billion, plus another $6.2 billion lost in hospital reimbursements.
New Jersey Gov. Chris Christie sang expansion’s praises for his state, which is saving $500 million a year by accepting federal money. “There were many naysayers, both inside the state and around the country, who criticized the choice [to expand Medicaid],” Christie said at a press conference on August 29, 2016. “Suggestions that if we did Medicaid expansion that we would further burden the state budget were wrong then and are now proven wrong.”
Unfortunately, some in the Virginia General Assembly continue to spread confusion. That same day, August 29, one well-known Virginia Senator said, “The program has been a financial drag on states that have expanded… If, in fact, Virginia had expanded Medicaid . . . the shortfall that we would have in revenue would have been exacerbated.”
The economic impacts of Medicaid expansion have been analyzed comprehensively in a total of 16 states. Each of these studies have found that, prior to 2020, expansion on balance will save rather than cost the state money, and that starting in 2020 (when the federal match drops to 90 percent), financial benefits to state governments will be approximately equal to their costs.
Arkansas now projects a net positive impact on its state budget of $637 million from 2017-2021. Kentucky has had a $300 million net positive impact on its state general fund in two years, and projects $820 million in savings from 2014-2021. New Mexico’s expansion is projected to create a $316 million surplus in its state general fund between 2014-2021.
FACT FOUR: Medicaid costs are going up in states, but NOT because of Medicaid expansion or states drawing down federal Medicaid dollars for expansion. And, states that have expanded Medicaid or drawn down federal Medicaid dollars have lower rates of growth in their state general funds spent on Medicaid.
BACKGROUND: This is a bit confusing because many, including some Virginia legislators, confuse the existing Medicaid programs with the expansion programs that either expand Medicaid to serve more people or that use additional federal Medicaid dollars to support a state-developed program to expand healthcare. (Most observers believe that Virginia legislators will not want to simply expand Virginia’s Medicaid program, but will develop a Virginia health care expansion program, similar to one developed a few years ago by Senators Watkins, Stosch and Hanger, that can be supported with the federal Medicaid expansion dollars.)
The “regular” Medicaid program is a public health insurance program for low-income people that was started by the federal government in 1965 to cover low-income seniors, people with disabilities, pregnant women, children, and other vulnerable populations. In Virginia, more than 834,000 people have health coverage through Medicaid, which is jointly funded through federal and state dollars and administered by the state. For most current Medicaid enrollees, every dollar Virginia spends is matched by a dollar in federal funds. So, Virginia and every other state pays a significant share of the costs for its “regular” Medicaid program.
In every state, the regular Medicaid program costs are increasing, largely due to the cost of covering low-income seniors in long-term care. The population is aging, people are living longer, and the costs of the regular Medicaid program are going up. Moreover, as noted by Virginia’s Secretary of Health and Human Services, Dr. Bill Hazel, as people in every state learn more about their coverage options, they find out that they and/or their family members “are already eligible for Medicaid, even without expansion, and they enroll.” Moreover, newly covered people have higher medical costs than previously projected, often due to not receiving needed primary and preventative health services for years. These healthcare costs for caring for uninsured people don’t disappear if they don’t get Medicaid coverage. They are just born by other parts of society in criminal justice, disability, healthcare provider, and other costs. Moreoever – and this is really important to note – as reported by the Kaiser Family Foundation, “state general fund spending on Medicaid costs are growing faster in states that have not expanded health coverage than those that have” (3.4 percent versus 6.9 percent). Finally, Virginia’s projected cost of expansion accounts for the enrollment and cost experience from states that have expanded.
Unfortunately, often when Virginia legislators are talking about expanding health care by drawing down federal Medicaid dollars (the expansion dollars), they make sweeping derogatory statements about how Medicaid programs are a financial drain on the states. Although it is true that the regular Medicaid programs, primarily due to the costs associated with caring for seniors and the disabled, are placing financial strains on states, it is NOT the expansion programs that are the problem.
FACT FIVE: Expanding health care by drawing down federal Medicaid dollars will create jobs.
BACKGROUND: Because so much extra money is coming in to the state for health care coverage and hospitals get reimbursed for more previously uncompensated care, The Commonwealth Institute estimates that expanding health care in Virginia by drawing down these new federal Medicaid dollars will add almost 16,000 jobs to Virginia. The average health care sector job pays about $60,000, so these are good paying jobs with benefits. For rural and/or low-income areas, in particular, these dollars could make healthcare provider practices more financially stable and available, as well as help build the local economy.
A study in Missouri found that expansion states had three times the growth rate in healthcare jobs as those without expansion during 2014. In Kentucky, the accounting firm of Deloitte found that the decision to expand Medicaid created twice the number of new jobs than had been projected.
FACT SIX: Virginia’s Medicaid reforms are working.
BACKGROUND: In 2013, Virginia lawmakers decided to reform the state’s existing (regular) Medicaid program. These reforms have saved the state more than $100 million dollars. Unfortunately, some legislators continue to say things like, “Medicaid is broken.” Although there is always room for improving programs, especially ones as complicated as health care programs, it should not be used as a smokescreen for not providing health care for uninsured Virginians.
FACT SEVEN: The Affordable Care Act is here to stay.
BACKGROUND: The Affordable Care Act will be reformed, changed, and probably expanded and improved, but it is not going away. All other industrialized nations have programs that provide health care for their citizens, because it is the humane and financially sound thing to do. It makes sense that the U.S. would develop and keep such a program.
There are many legislators who do not like the Affordable Care Act. Some think that government shouldn’t fund healthcare and/or people shouldn’t be required to have health insurance coverage. Others believe that the Act should have allowed a public option. Whatever the criticisms of the Act, it is not going to go away and, most agree, that “unwinding” the impact of the law would be a public relations, financial and political problem for those trying to do it. In fact, many legislators who publicly decry the Affordable Care Act, recognize that it will likely stay and that Virginia will “eventually” draw down federal Medicaid dollars to expand health care. It would be better for Virginians if the General Assembly would accept those dollars in 2017 rather than waiting a few years and having thousands of Virginians suffer needlessly and/or not receive preventative and primary care services that could enhance and prolong their lives.
Virginia residents pay their share of federal taxes, but Virginians are not benefitting as much as other states because the state is not tapping those federal Medicaid dollars for health care expansion. Why not enjoy some of the benefits taxpayers are already paying for.
FACT EIGHT: Healthcare continues to change rapidly.
BACKGROUND: Healthcare provision in the U.S. has changed dramatically in the last twenty years and is likely to change a lot more in the next decade. Few doctors want to be in solo practices anymore. Physicians Assistants and Nurse Practitioners are taking on growing roles to allow them and physicians to function at the top of their skill ranges. Hospitals have merged and consolidated. Insurance companies are changing policies and are merging or attempting to merge. Most would admit that our healthcare system needed and continues to need reform in order for the U.S. to compete with other industrialized nations.
In this changing time, hospitals and insurance companies are adjusting to various health care marketplaces. Recent news about various companies pulling out of particular states does not mean that expanding health care is a bad thing to do or that health coverage can’t work in the long-term. Rather, it simply means that health care is continuing to change rapidly. Changes may need to be made in the Affordable Care Act to address some of the rapid changes in health care, but it should not be used as one more excuse for the Virginia General Assembly to delay in expanding health coverage.
FACT NINE: Virginia can back out of the expansion of health care if the federal government doesn’t continue to pay its 90 percent share.
BACKGROUND: Some legislators have expressed concern that the federal government might renege on its promise to pay 90 percent of Medicaid expansion costs starting in 2020. If it does, then costs to the state could increase substantially. Simply put, some legislators do not trust the federal government to keep its word, even though the law has enacted by Congress, signed by the President and upheld by the Supreme Court. The Supreme Court’s decision gives discretion to states relative to if they want to participate in use of Medicaid dollars to expand healthcare coverage.
FACT TEN: Virginia Hospitals proposed a provider tax to cover the state match.
BACKGROUND: Even though the research shows that Virginia would gain more income than it would lose if it drew down Medicaid dollars, the Virginia Hospital and Health Care Association, in December 2015, agreed to support a provider tax to cover the state match required to drawn down the federal Medicaid dollars. This offer essentially guaranteed that the state could not lose money on expanding healthcare. Even so, the General Assembly declined the Hospital and Health Care Association’s offer.
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