Increasing costs
Elias Tsapelas

Medicaid expansion was never going to be “free” for Missouri, and now we have even more evidence that expansion would be a catastrophe for the state’s budget. Recently, the Missouri House of Representatives Budget Committee met to discuss the fiscal implications of Medicaid expansion. Testimony delivered during the hearing reinforced what’s been obvious for a while now: The promised taxpayer savings from the Medicaid expansion proposal are fictional.

Nearly five months ago, I wrote about my concerns with the widely cited Washington University expansion model. Last week during testimony before the committee, the Missouri Department of Social Services (DSS) confirmed that my concerns were valid. DSS officials explained in no uncertain terms that it would be illegal to enroll disabled Missourians into the Medicaid expansion population. This means that currently disabled Missourians would only be eligible for the current lower matching rate for federal funds, instead of the much more generous matching federal rate for the expansion population. And as I outlined in February, without that assumption, there’s a billion-dollar hole in the Washington University model’s cost estimates.

DSS also released its own estimates for the budgetary impact of Medicaid expansion. The projections are based on Missouri’s current Medicaid costs, its economic conditions, and what is known about the state’s low-income population, and they show that expansion will cost more than $2.7 billion in total each year. The federal government will pay the majority of that $2.7 billion, but state taxpayers still pay federal taxes. In state general revenue spending, DSS estimates it will cost more than $167 million per year, which will amount to more than $870 million in state income and sales tax dollars between 2022 and 2026.

These estimates are a far cry from “savings,” which is especially important because these costs will come on top of the current Medicaid program’s growth. It is also important to understand why the Washington University expansion model varied so significantly from our own state Medicaid agency’s predictions. In the end, it comes down to a series of faulty assumptions.

Not only were the authors of the model wrong about what could be done with Missouri’s disabled population, but they also vastly underestimated the number of Missourians that would enroll in expansion and the associated cost of their care. Instead of roughly 230,000 newly eligible adults enrolling, DSS suggests the total will be closer to 286,000. And the monthly cost of each new enrollee will be more than $730 per month, as opposed to the Washington University assumption of $425.

With updated DSS numbers and corrected assumptions about disabled enrollment, the WashU model’s conclusion of a financial boon for Missouri is unattainable. Based on this new information, and given the severity of our state’s current economic downturn, it’s time to stop pretending Medicaid expansion will not break Missouri’s budget.

 

About the Author

Elias - Web
Elias Tsapelas
Senior Analyst

Elias Tsapelas earned his Master of Arts in Economics from the University of Missouri in 2016. His research interests include economic development, health policy, and budget-related issues.