Let me explain how that happened. There are two populations that we discuss regarding Obamacare’s Medicaid expansion. The more obvious of the two is the population that would become “newly eligible” under the law — those who, by virtue of the law’s passage, would now qualify for Medicaid coverage up to 133 percent of the federal poverty level. The Kaiser Family Foundation (KFF) estimated that had Missouri expanded its broken Medicaid program after the law passed, the newly eligible population would have cost the state more than a billion dollars from 2013 to 2022. The House expansion bill’s hypothetical budget only really integrates that group into its calculation starting in 2015.

It’s the second population, however, that is an even bigger budgetary concern, and it is substantively ignored in the expansion bill. That group is the “currently eligible” population: those who currently qualify for Medicaid but only become enrolled as part of the expansion’s enrollment push. The phenomenon is sometimes called the “woodwork effect,” as this population that has always been eligible emerges and begins leveraging the Medicaid entitlement for the first time. KFF estimated that over that same period, Missouri would pay $1.6 billion for those new enrollees. That’s more than a doubling of the expansion’s total costs. Without even addressing any of the other problems in the bill’s budgetary forecast, how would the state pay the currently eligible cost of the expansion? I haven’t heard an answer to that question for years now.

You can read more about the issue here. So far without expansion, Medicaid enrollment in Missouri has actually declined; under the circumstances, it is reasonable to suggest that implementation of the expansion itself would initiate the uptick in woodwork costs that KFF forecasted. It is inexcusable that these costs have not been accounted for in the House proposal, but rest assured, this isn’t the first Medicaid expansion proposal I’ve read that failed to integrate these expenses.

Spending is no substitute for reform of a thoroughly broken Medicaid program, especially when the forecasted costs are so woefully understated. If it wasn’t clear before, it should be now: reform is where the legislature should focus its attention, particularly this late in the session.

The post Inexcusably, Medicaid Expansion Proposal Omits More Than $1 Billion In New State Costs appeared first on Show-Me Institute.

The cost of the expansion would be enormous. Obamacare’s 90/10 “enhanced match” — that is, how much the federal government pays for Medicaid versus how much the state pays — only kicks in for newly eligible enrollees, not currently eligible enrollees. A 2012 study by the Kaiser Family Foundation suggests the cost to the state of that new population would be well north of a billion dollars over the next decade; the added cost of the currently eligible population, due to the Affordable Care Act, would be closer to $2 billion. It’s still not clear yet how the state would pay for any of this new spending.

The bill would also adopt a variation of the Arkansas expansion plan to try and use Medicaid funds to pay for private insurance for those between 100 percent and 138 percent of poverty. Again, the plan would be very expensive to the state. However, as often as Arkansas comes up in Missouri’s Medicaid conversation these days, what if I told you that even Arkansas is second-guessing the Arkansas model?

The State House for a second day in a row defeated a compromise plan to expand Medicaid by using federal Medicaid funds to buy private insurance for low-income residents. The program was approved last year as an alternative to expanding Medicaid’s enrollment under the federal health law. The House speaker, Davy Carter, has said the House will keep voting on the measure until it passes.

Reform must precede any proposed expansion in Missouri. Arkansas’ plan — which despite current opposition could still end up getting passed in that state by year’s end — isn’t so much a reform as it is a grab for federally financed deficit spending, which is why the expansion is alluring to politicians nationwide. That might fit with the way elected officials think, but that isn’t the way Missouri families try to run their households day-to-day.

That brings us back to Missouri’s sensibilities. Missouri’s motto (and the name of this Institute) stem from a saying that W.D. Vandiver popularized many years ago.  While the origin of the saying – “I’m from Missouri; you’ll have to show me” — is subject to some dispute, Mr. Vandiver described its meaning thusly in a letter published in 1922 (emphasis mine):

“The public has not seemed to care for any prepared formula and has apparently accepted the ‘Show Me’ as properly indicative of the inquiring spirit and the cautious habit, about as given by the Literary Digest and the dictionary which defines it as the attitude of ‘one not easily taken in.’ “

Prudence: it’s one of Missouri’s hallmarks. And that’s why if we recognize that Medicaid is a failed program, expanding without first fixing it is a fool’s errand — one lacking in prudence. It is clearly irresponsible to set into motion a new entitlement whose foundation is in substance the current Medicaid program; that’s what this new bill seems to do.

The post Medicaid Expansion Proponents Should Be Faithful To Missouri’s Values appeared first on Show-Me Institute.

Local governments should provide services that government is best suited to provide and that the private sector cannot serve as effectively. This includes streets, police, fire protection, and neighborhood parks. The list does not include hospitals. The private sector, including both non-profit and for-profit hospitals, has long provided fantastic health services to our country. Indeed, to many Americans, the idea of a government hospital probably feels like a relic.

As with many privatization efforts, the fears of turning a beloved public asset over to the profit-mongering private sector are vastly overstated. The Kaiser Foundation found in a 1999 study of public hospital ownership changes that, “In most instances, access to care for low-income patients has been preserved after conversion and teaching programs have not been cut.”

A 2001 study for the National Bureau of Economic Research concluded: “In many respects, the empirical evidence from hospital conversions is reassuring. … On the whole, hospitals’ missions appear to be preserved post-conversion.” The studies note that the government should carefully negotiate the contracts and monitor the operations after the sale to ensure compliance with public goals and protect the public interest. Missouri law already requires the state attorney general to review any hospital sales, as it did when Sweet Springs, Mo., sold its hospital to a for-profit company in 2009. No more state regulation is needed, especially changes that outright prevent sales to for-profit companies.

Private hospitals, both non-profit and for-profit, are a cornerstone of our health care system. They treat the uninsured and poor as part of their mission, and they do it well. The idea that only a government hospital can take care of society’s needy is as ill-founded as the idea that government should make clothes and grow food for the poor because the private sector is not capable of doing those things, either.

There is nothing wrong with North Kansas City making money off the sale of the hospital if that is what it chooses to do. That money would not disappear in a sinkhole — it would be invested back in the city or returned to city taxpayers via lower tax rates. In particular, if a for-profit hospital took over operation, the tax base of the city would be greatly enhanced. The money from the sale or new taxes could allow the city to do many things, including investing in a lower-cost health care clinic if it chose. Clinics are a far more responsible long-term strategy for local governments than large hospitals. Such a change would not be new to Missouri. Saint Louis County now operates three clinics after closing its public hospital more than two decades ago.

North Kansas City officials deserve credit for launching a careful effort to investigate the best options for the city. They are not doing this as part of a fire sale. If city leaders determine that a sale of the hospital to a private company is best for the city and its residents, they should be allowed to do so without new state regulations blocking the way. Limiting the city’s options, which recent bills filed in the state legislature would do, has no real benefit. If residents and voters do not like North Kansas City officials’ ultimate decisions, they have numerous ways to send that message.

Privatizing the hospital will benefit North Kansas City. Health care services under private operation would continue just as they have for decades under public ownership. North Kansas City should not be expected to hold back against a nationwide trend toward converting public hospitals because of erroneous fears of private operation.

David Stokes is a policy analyst at the Show-Me Institute, which promotes market solutions for Missouri public policy.

The post North Kansas City Should Privatize Its Hospital appeared first on Show-Me Institute.

He did not even bother to pay lip service to the weighty question of how he would fund it in his nearly 6,000-word address. He argued that the federal government — you and me — would pick up the entire tab until 2017, as if splitting the expansion across public credit cards mitigates the cost. That is some creative accounting that conceals an awful reality — that we would be expanding an entitlement today out of debt imposed on our children and grandchildren tomorrow. Simply inexcusable, and not addressed in his speech.

The governor cited the fact that the Missouri Chamber of Commerce supports his Medicaid expansion plans, but just because the Chamber of Commerce supports expanding Medicaid it does not make it the “right thing to do.” The Chamber’s imprimatur does not imply that the conscience of good government has been satisfied; in fact, it sometimes expresses the opposite. Lest we forget, the Chamber also endorsed Aerotropolis and later savaged legislators who have vehemently opposed corporate welfare in the state. The Chamber endorses bad policy all the time, and make no mistake, it has done so yet again with the Medicaid expansion.

Let’s be clear here:

• According to Missouri’s Office of Administration, services for newly eligible Medicaid enrollees would cost the state $54 million in fiscal year 2017, $124 million in fiscal year 2018, $155 million in fiscal year 2019, $212 million in fiscal year 2020, and $258 million in fiscal year 2021.
• In a report released last November, the Kaiser Family Foundation (KFF) found that Missouri could expect to spend more than $1.15 billion between 2013 and 2022 just on these newly eligible enrollees.
• Moreover, those figures do not account for growth in the current Medicaid population and the attendant costs of that growth. As a result of the Patient Protection and Affordable Care Act (PPACA), states can expect to see increased enrollment in their current Medicaid programs as federal promotion of the expansion ratchets up and potential enrollees find out they qualify for state assistance. KFF found that between 2013 and 2022, Missouri could expect to pay an additional $1.6 billion for those enrollees.

If the state expands its Medicaid program, from now through 2022, Missouri would have nearly $3 billion in new Medicaid expenses — the cost of services for newly eligible enrollees plus the cost of services for currently eligible enrollees joining the program. Unfortunately, the governor chose not to address this reality.

You can read the governor’s speech here. Your thoughts are welcome in the comments.

The post State Of The State Address: Simply Irresponsible To Propose Medicaid Expansion appeared first on Show-Me Institute.

Although one could describe Gov. Nixon’s announcement in a number of ways, “smart” and “right” would not appear in the parade of appropriate adjectives. And amazingly, in a time of record deficits, budget shortfalls, and fiscal cliffs, it appears that the governor has no plan to actually pay for the new entitlement he is advocating.

So, how would the expansion work?

Like any good purveyor of smack would do, the first few hits of new federal Medicaid money will be on the house. Under ObamaCare, the federal government would cover the lion’s share of the expansion in the early years, but by 2017, Missouri would have to kick in tens of millions of dollars to support the program. Starting in 2020, new state Medicaid expenditures would top $100 million annually and into the foreseeable future. The Kaiser Family Foundation projects that the overall cost of a state Medicaid expansion under ObamaCare could top $1 billion over the next 10 years.

Of course, Gov. Nixon will be on his way out of Jefferson City when most of these new Medicaid costs would hit in earnest; indeed, the governor would never truly have to face the fiscal consequences of a fully enacted Medicaid expansion. The real pain to the state will only come after he leaves office.

While disappointing, the tactic is not altogether unexpected. For decades, American politicians have feasted on the dangerous public misconception that federal spending through the states is essentially free money.

It is not. Missouri taxpayers are also federal taxpayers, liable for the debts that the federal government incurs in their names. In the case of ObamaCare’s new Medicaid spending, it is all debt, and there is no level of government cost splitting that can change the fact that Missourians will have to account for that spending binge now and in the future through higher taxes, fewer services, and almost certainly higher debt burdens on our children and grandchildren. The governor is already having trouble admitting to this reality as he hawks his plan around the state, but this truth is inescapable.

This is not “smart” or “right.” This is “business as usual,” and Missourians cannot afford it.

The post On the Proposed Medicaid Expansion appeared first on Show-Me Institute.

Here’s the math. Under the ACA, Washington, D.C., will pay 100 percent of the cost of expanding Medicaid for three years starting in 2014. Then the federal share of that cost in any state that expands its program drops gradually over four years to 90 percent, and it remains there forever. Missouri’s budget director estimates that the state would receive about $2 billion on average each year from the federal government during the first 10 years of expansion. Meanwhile, Missouri would pay, on average, about $80 million per year. That cost would be divided among most of Missouri’s roughly 6 million residents. After excluding Missouri’s children and poor adults, about 4 million residents would share that average annual cost. Eighty million dollars divided by 4 million people equals $20.

Prof. Gatter is, unfortunately, just wrong. The cost of expanding Medicaid would not be $20 per Missourian. It would be much more.

First, Gatter lowballs the state cost of the expansion. As I have written before, the Kaiser Family Foundation estimates that the new program could cost the state almost $800 million in the program’?s first five years — twice what most news outlets have been reporting as the program’s potential cost to the state — and on an annual basis, likely over $100 million in the years that followed. Gatter’s “$20 per person” assumption is based on a rosy baseline that considers only the state budgetary costs in supporters’ ideal budgetary scenario. For a state already facing a battery of budgetary problems, such programmatic ambiguity is dangerous — and especially dangerous if that ambiguity is not admitted.

But the state contribution to the expansion is only a fraction of the cost to Missourians. Again, we are the federal government. Federal money that would go toward a Medicaid expansion is not, despite what the Post-Dispatch has called it, a ?”windfall.”? It is our money, being paid back to us from our own pockets. Taking this into account and dividing Gatter’?s annual $2 billion cost to the feds between his four million Missourians, taxpayers can expect to pay closer to $500 total each year to expand Medicaid, not $20. (I say “closer” because there is, as with so much of this stuff, some taxing and spending nuance involved here.)

That said, and in Gatter’?s own words, those costs then ?”remain there forever” — unless, of course, the law is repealed.

It is bad policy to let politicians essentially split their programs onto different credit cards and for us to act like one or both cards are free money, rather than a liability. If the cost of one bill rises, taxpayers’ overall bill rises. It i?s not an “investment” for a husband to spend $20 out of one family account and $500 out of another, and then to tell his wife he only spent $20 of the family’s money. It is, at best, a shell game, and one that will eventually bite all involved. The result? For Missourians, it means higher taxes, fewer services, or both, with a ?reform? that does not credibly control health care costs.

And a word on Prof. Gatter’s assertion that the Medicaid expansion would produce net savings to the state economy. The professor writes that Missouri experiences “an annual loss to [the] economy of $720 million to $1.5 billion for the 308,000 Missourians [who the proposed] Medicaid expansion would cover.” But does spending $2 billion-plus in taxpayer money each year — state and federal money, much of it likely borrowed — to recoup even $1.5 billion in presumably taxable economic activity really make economic sense? Even liberally construing all of the savings Gatter contemplates in his piece to the maximum, his case for “savings” is far from made, both for individuals and for the government.

Missourians will not get off cheaply with an ACA Medicaid expansion, and in a very real way, much of the cost of the expanded program would just go to another, already maxed-out credit card also in the taxpayers’ name. That is a problem.

The post No, It Will Cost Missourians Considerably More Than ‘$20 Per Person’ To Expand Medicaid appeared first on Show-Me Institute.

But would it really cost the state $431 million?

The source of the Post-Dispatch‘s figure is a Kaiser Family Foundation report, published in May 2010. The document lists the costs and federal benefits that would come to each state when the state joined the expanded Medicaid program. And they list two participation scenarios: first, a “standard” scenario, where participation in the program is moderate, and an “enhanced” scenario where, as they put it, there would be a “more aggressive outreach and enrollment campaign by federal and state governments as well as key stakeholders including community based organizations and providers that would promote more robust participation” in the expansion. Would the government aggressively market the expansion? Almost certainly, and the feds already have aggressively promoted other parts of the ACA (to wit: “The agency [Health and Human Services] also is launching a more aggressive marketing campaign . . .”)

Long story short, things could get a lot more expensive for Missouri to participate in Medicaid than the Post-Dispatch‘s report would indicate. Kaiser’s “standard” participation scenario indeed predicts that Missouri would have to pick up $431 million in new spending. But, if the program’s participation rate is higher, the state could be stuck with somewhere around $773 million in new spending. And that is just for the years 2014-19. Legislators can count on at least an extra $100 million to $150 million each year after that to pay for the expansion, and possibly much, much more if participation rates are higher.

And where, exactly, would all of that money come from? You, of course, through higher taxes and/or reduced state services elsewhere. And that is completely neglecting the fact that Missourians would not be getting a “windfall” of federal dollars. Taxpayers are the government. We would be paying ourselves. If participation in Missouri’s Medicaid program rises, the cost to the federal government will increase, meaning not only will taxpayers be spending more money through the state, but they will have to spend more money through the feds, as well.

Some “windfall.” Taxpayers and policymakers deserve to know when they are being sold a bill of goods. This is one of those times.

The post Some ‘Windfall’: Would It Actually Cost Missouri Nearly $800 Million To Expand Medicaid? appeared first on Show-Me Institute.

Currently, a bipartisan group of more than 20 state attorneys general and elected officials are asking a judge in Florida to invalidate the federal health care reform law. Missourians should encourage their attorney general, Chris Koster, to join this multistate lawsuit, which resumes on Jan. 10. In my view, the precedent that Missourians set by approving Proposition C could be continued if Attorney General Chris Koster joined the lawsuit.

The following are some facts related to the lawsuit:

• Twenty attorneys general are challenging the Affordable Care Act (ACA), the health care reform law that Congress passed earlier this year, in a courtroom in Pensacola, Fla. They are arguing that the law is unconstitutional and would set a dangerous precedent.
• The case involves two arguments. The first is that the requirement for all Americans to purchase insurance is unconstitutional. The second is that expanding the eligibility requirements for Medicaid, the joint federal-state health insurance program for the poor, threatens state sovereignty and will burden state budgets.
• The states party to the suit are Florida, South Carolina, Nebraska, Texas, Utah, Louisiana, Alabama, Michigan, Colorado, Pennsylvania, Washington, Idaho, South Dakota, Indiana, North Dakota, Mississippi, Arizona, Nevada, Georgia, and Alaska. Additional states, such as Wisconsin, are considering joining.
• Americans are divided in their support for the health care legislation. Only 42 percent of Americans say they have a generally favorable view of the law, while 41 percent say the opposite, according to a poll by the Kaiser Family Foundation in December 2010.

Missouri voters were the first to oppose this attempt by the federal government to take control over health care. As Missourians, we live in a democracy. We should have a government that represents the demonstrated wishes of Missourians in this matter, thereby advancing liberty with responsibility by promoting market solutions for health care policy.

I will discuss the effort to encourage Attorney General Koster to join the Florida lawsuit on the Mike Ferguson show on the Eagle 93.9 FM tomorrow, Jan. 6 at 5:00 p.m in Columbia. I encourage our readers to tune in or listen online.

The post Attorney General Chris Koster Should Join the Multistate Health Care Lawsuit in Florida appeared first on Show-Me Institute.

These numbers, though, may not matter for too long. The federal health legislation, set to go into effect in 2014, is expected to expand the Medicaid pool drastically and add at least $1.34 billion total cost over 10 years.

The Kaiser Family State Health Facts website has data on Medicaid spending per enrollee, as well as on total state expenditures. Unfortunately, the site did not have both Medicaid spending data and total state expenditure data available for the same ranges of years, so my comparisons are not perfect. They do, however, serve to illuminate the spirit of the argument. The figures for Medicaid spending per enrollee are from 2006, the state expenditure figures are from 2004, and total Medicaid spending is from 2007.

Here are some spending facts for Missouri:

According to American Academy of Pediatrics in Missouri in 2007, the state will lose $1.60 in federal matching funds for every $1 it cuts from its state Medicaid budget.  The governor proposed a $120 million cut from the Medicaid budget, so assuming that proportion does not change, we can extrapolate that to be about $312 million total from the Medicaid budget.  As of September 2009, MO HealthNet had 865,477 enrollees, and $312 million averages to around $360.49 in cuts per enrollee.  This means that the cut amounts to approximately 8 percent of the 2006 amount per enrollee.

So, even without a close analysis of which services are being cut, it is clear that this amount is not as alarming as might be expected.  (It would place Missouri  43rd in the country on per-capita expenditure, based on the numbers from 2006.)

Frankly, I believe the real issue is how these cuts are made. Medicaid and Medicare are large black holes for resources that have the potential to swallow the state and federal budgets. It is not sustainable for them to grow continuously, and would be better if they could be shifted into the private sector via vouchers or well-designed cuts. Spending large amounts of money on Medicaid, if not spent in the right manner, can be even more detrimental than a smaller amount because it can distort the market and incentive structures. A closer analysis of how these cuts are being done is necessary to come to any distinct conclusions, but the numbers by themselves are not as frightening as some may believe.

The post Medicaid Cuts: As Scary as They Look? appeared first on Show-Me Institute.

Legislators have suggested provisions to further expand Medicaid. From an article on Kaiser Health News:

Currently, many low-income adults are not eligible for Medicaid, but they could be if Congress decides to “make income alone the determinant of Medicaid coverage. Under the health reform bill now being considered by the House, all non-elderly people earning at or below 133% of poverty — about $14,400 for an individual, and $29,300 for a family of four — would be eligible.” The House bill would have the federal government “pick up the entire cost of those newly covered under Medicaid — $438 billion over 10 years,” while a Senate finance draft version “would have the feds paying the additional cost for only five years, after which the states would have to pick up their typical share of existing Medicaid costs, which averages over 40%” (Tumulty, 7/21).

As Show-Me Institute intern Abhi Sivasailam said in an earlier blog entry, economist Arthur Laffer recently published an op-ed in the Wall Street Journal about the proposed federal health care reform. The main cause of out-of-control spending in the existing health care system has been the “health-care wedge,” the distance that a patient/consumer has from the actual cost of a procedure. Medicaid exacerbates this wedge by completely separating the patient from any responsibility. The payment structure of Medicaid (which compensates for a lesser amount than some procedures cost) encourages doctors to order more tests than necessary in order to recoup costs. This cycle only raises taxpayer expenses and the cost of health care in general.

Regarding Medicaid, Missouri has relatively low expenditures compared to the rest of the country. Missouri spent $6.6 billion on Medicaid in 2007, approximately 2.06 percent of what the United States spent that year. During the past 10 years, Medicaid spending in Missouri has grown at a slower rate than the national average, but it is still growing. Every dollar that Missouri spends sees some percentage of a match (based on a varying multiplier rate) from the federal government. In 2008, the federal government paid for 62.4 percent of Medicaid’s cost; in 2009, that percentage has jumped to 71.2. This creates an even larger wedge for states that have less of a responsibility for each enrolled individual, but are making payment decisions. Some other states have already (or almost) run out of money to pay for Medicaid, including New Hampshire, Georgia, Illinois, and Mississipi. With compensation decreasing to a point lower than procedural cost, more doctors are refusing to accept new Medicaid and Medicare patients. It is apparent that Medicaid is not working, and Medicare is set to run out of money by 2017. Expanding Medicaid and creating a similar public option are not workable solutions.

One way to decrease the size of the “health-care wedge” is by encouraging the use of health savings accounts (HSAs), something that the Show-Me Institute has written about, and that Arthur Laffer writes about in his op-ed:

A patient-centered health-care reform begins with individual ownership of insurance policies and leverages Health Savings Accounts, a low-premium, high-deductible alternative to traditional insurance that includes a tax-advantaged savings account. It allows people to purchase insurance policies across state lines and reduces the number of mandated benefits insurers are required to cover. It reallocates the majority of Medicaid spending into a simple voucher for low-income individuals to purchase their own insurance.

Health care vouchers and HSAs may be the best ways to fix the growing health care problem, and to rein in Medicaid before it becomes even more unsustainable than it already is.

The post Reining in Medicaid appeared first on Show-Me Institute.

This is the model of the public option, a top-down plan that takes the individual’s (and doctor’s) agency out of health care. As the Baby Boomer generation becomes eligible for Medicare, the program will inevitably expand — expanding a plan while simultaneously requiring cost cuts is counterintuitive. Cuts are best made through increased efficiency and better preventive care, not because a panel of five people decides to stop covering certain procedures.

The CBO estimates that $2 billion can be saved in the latter half of the next decade. However, this amount is minuscule in comparison to the $1 trillion proposed cost of the public option in that same time period.

Two of the more disturbing recommendations from the CBO letter appear on page 5:

• Setting explicit and feasible quantitative goals for reducing outlays in the Medicare program.
• Incorporating an explicit fall-back mechanism (such as an across-the-board reduction in payments) if goals for cost reduction are not met.

Health care costs have increased significantly since the creation of Medicare. This can be attributed in part to cost floors and the regulations imposed on doctors by Medicaid and Medicare. As it is, some doctors cannot afford to accept Medicare patients, and some are reimbursed for less than the required procedures cost. These added costs are foisted onto private insurance companies.

The Kaiser Family Foundation estimates that Missouri spent $7,029 per enrollee in 2004, slightly below the national average. Could these costs be lowered? Probably, but outright cuts to what treatments will (and won’t) be paid for will only have a dire outcome for the health care system.

Health care costs need to come down, but mandating cuts is not the best way to achieve that. Instead, increasing efficiency by lowering regulatory barriers or lowering fixed costs through tort reform, in order to lower malpractice insurance rates, would help ensure that patient needs continue to be met. Mandated cuts are just another way of imposing health care rationing.

The post Cutting Health Care Costs With a Chainsaw appeared first on Show-Me Institute.