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Ken Hare In Depth: Medicaid expansion would attract billions to state

Alabama has one of the more bare-bones Medicaid programs in the nation, so it would seem natural for the state to take advantage of the billions in federal funds that will become available in a year to dramatically expand Medicaid.

But based on his statements to date,  it would appear that Gov. Robert Bentley -- a medical doctor -- is not inclined to take advantage of those billions of dollars to fund medical services for hundreds of thousands of  Alabamians and at the same time provide a boost to the state's economy.

However, a closer look indicates that the governor might be leaving some wiggle room for the possibility of an expansion down the road.

And Alabama's state health officer, Dr. Donald  E. Williamson, said in an interview on Thursday that he hopes if reforms to make the Medicaid program more efficient are successful, the changes and new efficiencies would allow the state's political leaders to reconsider the expansion issue. Williamson is leading a panel appointed by the governor to study possible reforms for the existing Medicaid program.

Some background: If Alabama opted to expand Medicaid under the federal Affordable Health Care Act starting in 2014, the federal government would assume almost the full cost of the expansion through 2016. The state would have to start assuming a larger share of the cost after that, but the state's share would top out at 10 percent starting in 2020.

The federal government would cover 100 percent of actual health care expenditures from 2014 through 2016, although Alabama would be responsible for a share of administrative costs amounting to about $39 million a year.

The bottom line:  The total cost to the state through 2020 would be $771 million. Meanwhile, during that seven-year span, the federal government would pump an additional $11.7 billion into Alabama health care. Over the next 10 years, according to a recent report by the Kaiser Commission on Medicaid and the Uninsured, Alabama would spend about $1 billion for the expanded Medicaid coverage while getting about $14 billion in additional federal support.

Philosophically, there are reasonable arguments pro and con about President Obama's sweeping expansion of government-funded health care. But from a purely economic analysis of just this one important aspect of that health care plan -- the expansion of the Medicaid program to cover more uninsured individuals -- it is hard to argue with the numbers.

Still, Gov. Robert Bentley has said  that he did not favor a Medicaid expansion "at this time.

"More recently, following the release of a University of Alabama Birmingham study that emphasized the positive of the expansion on the state's economy, a spokesman for Bentley released a statement that read:

"Governor Bentley will not expand Medicaid under its current structure. Our priority right now is fixing the system we have, not expanding a broken system. Governor Bentley recently created the Alabama Medicaid Advisory Commission. The Commission will identify ways to increase efficiency and help ensure the program is sustainable for the long term. Reforms will also benefit patient care. These will be positive reforms that will strengthen Alabama Medicaid and the care it delivers to patients across the state."

Note the phrases "at this time" and "under the current structure."

The Medicaid advisory panel headed by Williamson is expected to recommend sweeping changes to how Medicaid works in Alabama -- changes likely designed to shift it from a fee-for-services approach to more of a managed-care approach.

"Once we get Medicaid transformed," said Williamson, "it would give the governor the opportunity to reconsider the issue of expansion."

But there is a tight window for that to happen. To receive the full benefit of the larger federal match ratio, states are supposed to have an expansion program developed by January 2014.

Again, if the state were to embrace expansion, the potential effects on the economy appear impressive.

According to the Kaiser study, the state would get $14 for every $1 invested in the first decade, and $10 for every $1 invested after that.

Over the past couple of decades, Alabama's political leaders have shown a willingness to invest hundreds of millions of dollars in incentive money to attract automotive and aeronautics industries to the state. Like a Medicaid expansion, those new industries bring jobs and money to spur the state's economy.

One has to wonder if politics could be left out of the equation -- in other words, if the state's Republican decision-makers could look past the fact that this is part of a program dubbed "Obamacare" -- would state officials turn their backs on an offer to invest $10  in Alabama's economy for every $1 the state puts up?

However, as attractive as those numbers appear, there are some practical governance problems with the state expanding Medicaid. The most basic is where would state government -- already beset by funding problems -- come up with its share of the cost. Alabama is already struggling to pay its matching share of Medicaid costs even without an expansion, and other state spending is stretched thin as well.

Two professors at the University of Alabama Birmingham believe they have the answer. In a just-released study of the economic impact of Medicaid expansion, economists David Becker and Michael Morrisey estimate that the impact of all that federal spending on Alabama's economy would generate a lot of additional state tax revenue -- so much  new revenue that it would more than cover the cost of the state's share of the program.

In their study, Becker and Morrisey estimate that the proposed Medicaid expansion in Alabama would generate $20 billion in new economic activity, which in turn would generate $1.7 billion in new tax revenue for the state from 2014 to 2020.

Subtract the $771 million in state costs for the expansion from the $1.7 billion in new tax revenues, and the state would come out ahead by almost a billion dollars, according to the professors.

In an interview with al.com, Becker said of the study: "What is the question at hand? It is not whether one likes the Affordable Health Care Act. It is not whether health care spending is out of control and this will make it worse. What this should be about is what is best for Alabama."

Of course, those practical governance problems still would rear their ugly heads. Because Alabama earmarks so much of its tax revenue -- far more than any other state -- the bulk of that new tax revenue could flow to other parts of the state budget, including education, making it difficult to use it to pay for the Medicaid expansion.  But that's a problem the governor and the legislative leadership could address if they had the political will to do so.

I have purposefully focused on the economic numbers and impact of a Medicaid expansion on the economy and the state's budgeting. But it would be grossly misleading not to point out the impact on real Alabamians by an expansion.

The Kaiser study estimates the expansion would make 313,000 more Alabamians -- most of whom currently have no medical coverage -- eligible for Medicaid and the health benefits that would come with that coverage.

In the end, that 313,000 may be the number that matters most.

Ken Hare was a longtime Alabama newspaper editorial writer and editorial page editor who now writes a regular column for WSFA's web site. Email him at khare@wsfa.com.

Copyright 2012 WSFA 12 News.  All rights reserved.

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