Reversing its long-standing opposition to Medicaid expansion, the House Appropriations Committee yesterday adopted a budget proposal that would accept more than $3 billion in federal funds to provide Medicaid coverage for more than 300,000 uninsured Virginians.
Here’s the remarkable thing: You can read the news accounts of the Richmond Times-Dispatch, Washington Post, and Daily Press and never discover that the state of Virginia will save more money from “Medicaid Transformation” than the state share of supporting the state-federal program will cost.
I started out this blog post trashing House Appropriations for capitulating on Medicaid expansion. But after absorbing this report of the Health and Human Resources Subcommittee, I had to delete everything I wrote and start all over. It appears that House Appropriations has figured out how to eliminate the biggest objection to the program’s expansion, namely that it would constitute a big, ongoing drain on the General Fund. This turn-about is so extraordinary that I have to say that I, a long-time foe of Medicaid expansion on fiscal grounds, feel compelled to support it now.
Medicaid Transformation would provide coverage to adult Virginians up to 38% above the federal poverty line, injecting billions of federal dollars into Virginia’s health care system. The federal government will provide a 94% match in 2018, 93% in 2019, and 90% in 2020. The state share will level out at 10%.
The estimated cost of the program to Virginia will be $80.8 million in FY 2019 and $226.1 million in FY 2020. But the state expects to save $101.3 million and $269.7 million respectively from programmatic cost reductions.
Where do the savings come from? Primarily from cutting indigent care funding to hospitals, and from reducing expenditures on state-funded community behavioral health, prison inmates, the FAMIS program for pregnant women, and the GAP program for the seriously mentally ill.
The proposed legislation also includes a 0.5% assessment on hospitals’ net patient revenue in FY 2019 and 1.4% assessment in FY 2020 on the grounds that Medicaid expansion will reduce indigent care costs (charity care and bad debts), resulting in significant improvements to hospital bottom lines. I’m not sure why this tax is necessary if the Medicaid Transformation results in a net savings to the General Fund without it. The hospital lobby opposes it, and for once I can sympathize.
I still have long-term concerns. The United States entitlement state is unsustainable, and the recent round of federal tax cuts and spending hikes has done nothing to change my opinion. At some point, the federal government will experience a fiscal crisis that will force it to shift the cost burden of Medicaid to the states, in which case Virginia will have to shoulder a much bigger share of the cost at hideous expense or dump hundreds of thousands of Virginians from the Medicaid rolls. But that’s 15, 20, or 25 years from now. And participating in the program will inject billions of dollars in federal funds into the Virginia health care system and economy right now.
I also question how much Medicaid expansion will actually improve medical outcomes. There’s still a physician shortage, many physicians refuse to take on Medicaid patients, and most add-on patients likely will continue seeking treatment in emergency rooms. But any improvement to the public health, even if marginal, is better than nothing. And it seems foolhardy to reject billions of federal dollars that cost the state nothing.
House budget writers are at loggerheads with their counterparts in the Senate Finance Committee, who propose a budget without Medicaid expansion. But if the House numbers stand up to scrutiny and Virginia can actually save money from the expansion, I don’t know how the Senate can resist. Medicaid expansion looks like a done deal.