By Katie Kerwin McCrimmon
Expanding Medicaid to an estimated 275,000 additional people will cost Colorado less than the price of not adding them.
That’s the bold prediction from a new study of Medicaid expansion commissioned by the Colorado Health Foundation, which supports expansion, and conducted by seasoned legislative budget analyst Charlie Brown and a team of economists.
Brown and his team found that expanding Medicaid would essentially be a stimulus program for Colorado because so many millions of federal dollars would flow into the state to pay for the new patients’ care. Federal taxes will pay 100 percent of the costs of Medicaid expansion from 2014 to 2016, then taper to 90 percent by 2020. The team analyzed costs and benefits of expansion all the way through the fiscal year, 2025-26. For the full 13-year period, the total cost of Medicaid expansion would be $20.1 billion with the federal government paying $18.2 billion. Over that same time period, the study authors found that economic activity, or GDP, in Colorado would grow by .75 percent or $4.4 billion dollars.
In addition to economic growth, the authors also estimated that Medicaid expansion would create 22,400 jobs. Job creation would begin almost immediately, the study authors predicted, with 14,500 of the total jobs coming in the first 18 months of Medicaid expansion in 2014 and the first half of 2015. That’s a 20 percent jump over the number of jobs that the economists estimate Colorado would create without Medicaid expansion.
“It’s a no-brainer,” said Warren Olson, an independent economic consultant who worked on the study. “The biggest part of this is that the federal government is financing the vast majority of (expansion). We’re showing that the economic impact is good.”
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On top of the positive economic drivers, “ultimately it comes down to hundreds of thousands of people getting care,” Olson said.
“It seems to be a fairly straightforward decision,” said Brown, who conducted the study through his consulting firm, Charles Brown Consulting. Brown also is launching a new public policy institute at Colorado State University called the Colorado Futures Center. http://coloradofutures.colostate.edu/
“You get a stronger economy and it’s less costly to the state,” Brown said. “At the end of the day, over the course of our forecast, the general fund projections are better off with the expansion than without it.”
Gov. John Hickenlooper announced last month that he supports Medicaid expansion and lawmakers expect to introduce a bill in the coming weeks to move forward with it. The new Colorado Health Foundation study follows a similar economic impact study that the Colorado Trust and the Colorado Health Institute released last week. That study found that expanding Medicaid would cost Colorado about $1 billion over 10 years, but would get health coverage for about 240,000 additional people and save at least 629 lives a year.
An earlier study from the Kaiser Commission on Medicaid and the Uninsured found that Colorado would foot the bill for $858 million for new Medicaid enrollees plus $639 million for people already expected to qualify. That brought total state costs for Colorado to $1.5 billion with the feds picking up $11.6 billion for a total of $13.1 billion.
Each study has set out to answer slightly different questions and the newest Colorado Health Foundation report found that Colorado could save millions of dollars by enrolling people in Medicaid whose health care costs the state is now fully funding. This population includes prisoners and indigent people. Currently, Colorado’s Department of Corrections must foot the bill if prisoners have to be hospitalized. If some prisoners become eligible for Medicaid, then federal taxes would pay for any hospital stays, the Brown study found.
Between 2013 and 2026, the study authors found nearly a billion dollars in savings to Colorado’s coffers from four major programs: prisoner hospitalizations, the Department of Human Service’s community mental health, alcohol and drug treatment programs, and an old age pension program.
In the first year alone, the economists estimate $32 million in savings from those programs. That number jumps to $94 million a year by 2025-26 and altogether saves the state about $975 million over the 13-year period.
The bottom line is that Colorado can get the benefit of shifting costs to the federal government or it will end up helping to fund other states that do, the study found.
“If Colorado does not expand Medicaid coverage, Colorado residents will still be subsidizing Medicaid expansion in those states that do expand without the state receiving the benefit of additional federal funding,” the report notes.
The study authors also found a strong “multiplier effect.” Health dollars spent in Colorado tend to have a powerful impact locally because health jobs usually pay well and most people don’t go out of state or out of the country to get medical care.
An infusion of dollars comes into an economy,” said Phyllis Resnick, an economic forecaster who was part of the team. “We start to treat people for their medical needs. We need more nurses, doctors, everyone at the hospital. There’s a direct infusion into the medical system. That creates jobs. Then we need more supplies, etc….and that has a secondary effect.”
Overall, the study found both positive and negative multiplier effects. New health spending would increase expenditures directly in health care and related fields. Some of the cost savings, such as cuts to state spending on drug treatment programs, would put a drag on the economy. Overall, the study authors estimated a .75 percent hike in GDP by 2026.
“We believe that the larger economy plus the savings elsewhere in the general fund are sufficient to protect (Colorado) from an adverse impact of the expansion decision,” Resnick said.
Among other findings of the report:
• Average annual household earnings will be $608 more if the state expands Medicaid.
• Including the costs of expansion, Colorado’s general fund will save about $134 million through 2025-26 if Colorado expands Medicaid.
• Of the 275,000 Coloradans expected to be added to Medicaid rolls, about 209,000 would be adults without children, about 44,000 newly eligible parents and an additional 22,000 eligible, but not yet enrolled children and parents.
• The average of care per person varies by age and health status. On average, covering children costs about $1,500 a year while the most expensive adults without children cost about $5,800 a year.
• Medicaid expansion will reduce the number of uninsured non-elderly Coloradans by 189,000, thus cutting the percentage of uninsured among non-elderly adults from 11.1 percent to 7.7 percent.
While the study did not explore possible increased productivity if more people have health insurance, Shepard Nevel, vice president for policy and evaluation at the Colorado Health Foundation, said there’s a strong correlation between higher rates of health coverage and healthier people.
“Our mission is to make Colorado the healthiest state in the nation and we know that expanding coverage correlates with healthier people,” Nevel said. “We support Medicaid expansion as an important part of achieving our mission.”
Colorado Health Foundation President and CEO Anne Warhover said expansion makes sense both in terms of economics and health.
“Expanding public health insurance to greater numbers of vulnerable Coloradans — in many cases, hard-working families — will bring more jobs, strengthen the state’s economy and generate higher household earnings, which benefit all Coloradans,” Warhover said.
(Editor’s note: www.HealthPolicySolutions.org receives funding from the Colorado Health Foundation and other foundations.)