Highly anticipated report on first year of Medicaid expansion says Kentucky can afford it even with higher-than-expected enrollment

By Melissa Patrick
Kentucky Health News

FRANKFORT, Ky. — Kentucky’s decision to expand Medicaid under federal health reform is a better deal than previously projected and will more than pay for itself, Gov. Steve Beshear said as he unveiled a top consulting and accounting firm’s study of the expansion’s first year and projections for the next seven.

“For all the naysayers who claimed that expanding Medicaid was a budget-busting boondoggle, take a look at the facts. It’s working, and it’s literally paying off. The state is saving money, hospitals are earning more, and our people are getting healthier,” Beshear said.

The report was conducted by Deloitte Consulting and the University of Louisville‘s Urban Studies Institute and cost $140,000, which was paid from Medicaid’s administrative budget, half state funds and half federal.

Beshear said a study from Deloitte is “about as reliable as any study can be” and conclusively, with “an avalanche of facts,” informs the critics that Kentucky can afford to pay for Medicaid expansion.

“Kentucky can indeed take care of its people, In fact, we can’t afford not to do so,” he said.

The report says that through 2021, Medicaid expansion will add 40,000 new jobs with an average annual salary of $41,000, putting $30 billion into the state’s economy, and adding nearly $820 million to state and local budgets.

That, the report says, will cover the estimated cost of the matching funds that the state will have to pay for care of the newly eligible enrollees, those between 69 percent and 138 percent of the federal poverty level. The match will start at 5 percent of the cost in 2017 and rise to the law’s cap of 10 percent in 2020.

For the next two budget years, from July 2016 to June 2018, the report estimates Kentucky will pay $74.4 million and $173.2 million, respectively. The report says this will be offset by $511.8 million of General Fund savings and tax revenues expected from the increased economic activity resulting from additional health care spending.

“These are conservative estimates,” Beshear said, without any estimated savings from better health that he said will result from more people getting health care.

A Gallup poll released this summer said that Kentucky saw the second largest decrease of any state in its uninsured rate, dropping to 12 percent from 20 percent.

The study’s projections were more favorable than those in a study by the PriceWaterhouseCoopers accounting and consulting firm, which Beshear cited when he announced in May 2013 that he would expand Medicaid. That study estimated the expansion would create 7,600 new jobs in 2014, but Beshear said the actual number was more than 12,000, including 5,400 in health care. Pricewaterhouse estimated 17,000 new jobs through 2021, well under Deloitte’s forecast of more than 40,000.

Pricewaterhouse also underestimated the enrollment in Medicaid. In the first year, more than 375,000 people enrolled, about double the number that the firm estimated would enroll by 2020. That means the cost of the state’s match will be higher than expected, but covered by jobs and taxes resulting from the higher enrollment.

“People can have whatever opinion they want, but they aren’t entitled to their own facts,” Beshear said. “It’s one thing just not to like [Medicaid expansion] because the president has his name on it, and if that’s the reason they want to take health care away from 500,000 Kentuckians, then that’s their opinion and people oughta know that. This report answers the questions, will it work, and yes it is working in Kentucky, and can we afford it, and yes we can.”

The report is online at Governor.ky.gov. For county-by-county data, go to http://governor.ky.gov/healthierky/Documents/medicaid/Medicaid_Hospital_Report.pdf.

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