Zylstra: Expanding Medicaid is the Fiscally Responsible Choice for Snyder

A few weeks ago, as part of the Affordable Care Act (ACA) ruling, the Supreme Court ruled that individual states can decide whether or not to accept federal funds to expand Medicaid coverage, the joint federal/state health insurance program, without jeopardizing their current Medicaid dollars as the Reform law originally held. Currently the State of Michigan pays approximately 36% of its own Medicaid funding, a 2 to 1 match, for its existing enrollees. Under the expansion, residents up to 133% of the poverty level would be covered, beginning in 2014, with zero initial cost to the State. In 2017, these percentages would change slightly every year so that by 2020, states would pay approximately 10% of its funding for the expanded population, a 9 to 1 match.

Governor Snyder has yet to speak about his intentions regarding the expansion, but will likely need to make a decision relatively soon. It will be an important decision, one where the access to quality health care for up to half a million uninsured Michigan residents hangs in the balance.  While the sticker price cost of coverage to the state in 2020 could be around $200 million, there are many offsetting incentives that should make the decision a relatively easy one, at least based on the fiscal impact.

SNYDER

The first is the fact that the State would see major savings, beginning in 2014, in the Community Mental Health (CMH) non-Medicaid line, as significant numbers of mental health patients served by CMH would become covered by Medicaid. The yearly savings from that change would be approximately $200 million or more. The initial 100% match rate, combined with the CMH non-Medicaid savings, would mean the expansion would lead to that level of net savings to the State beginning in 2014. Even after 2017, when matching levels drop, the 10% portion that correspond to the State of Michigan will still mean a roughly $180 Million savings.

The second is the MI-Child match  At present the State receives roughly a 75% match rate for the program. The Federal legislation would increase that match rate by 23% (capped at 100%) for all states beginning in fiscal year 2015. Michigan's annual cost for the MI-Child program would decrease by roughly $12 million in FY 2015 and in subsequent years.

There is one main disincentive for not participating, namely via Disproportionate Share (DSH) Payments. These are payments set aside for hospitals to help alleviate the costs of their uncompensated care. The Affordable Care Act begins to phase out these payments in 2014 with the thinking that if most Americans have some sort of health coverage, public hospitals would presumably see a reduction in unpaid bills and wouldn’t need the supplemental payments anymore. However, if a state opts out of the Medicaid expansion and therefore does not end up extending coverage to those living below the poverty line, the math changes. The unpaid bills do not disappear, but the DSH dollars do. Barring an act of Congress, those supplemental funds will be largely phased out by 2020.  In 2011, total Michigan DSH payments totaled $265 Million and it's quite conceivable that refusal of the expansion would mean the state would lose a large portion of that.

Looking at the above, there really is a big difference for Michigan to accept or deny Medicaid expansion funding. If Governor Snyder decides to go forward with it, the state could likely save more than $200 million per year from 2014 to 2020, at the same time increase access to Medicaid for a half a million residents. If he declined, the state, through its public hospitals, will continue to spend ever $200 million on uncompensated care, but now will not be reimbursed for that care. Hopefully, Governor Snyder can continue with the independence of mind that he recently showed with the veto of the Republican-sponsored voter-ID laws, and make the right choice for the hundreds of thousands of of Michigan residents who currently lack access to quality health care.

 Douglas Zylstra is a small business owner and the Vice-Chair of the Ottawa County Democratic Party. Connect with Doug on Facebook here