New IHL Report Shows That Medicaid Expansion Will Create Jobs; Costs Significantly Less than Previous Estimates

October 24th, 2012

A new report released by the Institutions of Higher Learning (IHL) shows that adopting Medicaid Expansion will create 9,154 jobs across the state in 2020. The study also reports that Medicaid Expansion will cost significantly less than previous estimates.

IHL Analysis
For the first three years of Medicaid expansion, the federal government covers 100% of the medical claims costs. In the following years, the federal match declines steadily until expansion is fully implemented with a 90% federal match. In its analysis, IHL accounted for the economic impacts associated with the influx of federal dollars accompanying Medicaid Expansion. When the new economic activity is accounted for, the cumulative net cost of expansion to the state in 2020 is $109.4 million. The chart below illustrates the size of the federal investment compared to Mississippi’s net cost by year.

The IHL study estimates that in 2020 the net cost to the state for Medicaid Expansion will be $65 million. Additionally, over $1 billion in federal resources will come into the state that will create 9,154 jobs and connect 312,000 Mississippians to health insurance.

Why are the estimates so different?
The primary cost estimate that has typically been cited – $1.6 billion through 2020 – was conducted by Milliman Inc. For a couple of reasons, the Milliman estimate is different than the IHL estimate. First, the Milliman report looked at a much broader set of costs associated with the effects of the Patient Protection and Affordable Care Act on the Medicaid Budget than the IHL study. The IHL study, considered only the costs of Medicaid Expansion. The decision to only focus the analysis on Medicaid expansion makes sense. Over the summer, the Supreme Court affirmed nearly all aspects of the Patient Protection and Affordable Care Act. One exception was a provision that required states to expand eligibility for a state’s Medicaid program to cover working families or face significant penalties. Under the Supreme Court ruling, states will not face penalties for not participating in Medicaid Expansion. With states now having a choice to expand Medicaid without incurring costly penalties for not expanding, the legislature will convene in January and make a decision on whether or not to expand Medicaid. The IHL study provides information to directly inform that policy decision.

Second, the Milliman report did not account for the full economic impacts of any aspect of the law. The IHL study examined both the fiscal and economic impacts of expansion implementation. IHL’s impact analysis includes estimates of new revenue generated from the economic activity stimulated by the new federal dollars coming into the state for Medicaid Expansion. When new revenues are used in the analysis, IHL finds that the cumulative net cost of Medicaid Expansion through 2020 is $109.4 million.

In a state where poor health is a deterrent to economic development, connecting more people to insurance will help create a healthier and more productive workforce. Mississippi has been affected severely by recession induced job loss, and the jobs associated with expanding Medicaid represent another important benefit. Clearly, the policy represents an economic and public health opportunity not to be missed and remains a good deal for the state of Mississippi.