New studies: Medicaid opt-out costly for NC

Two new studies say turning down federal Medicaid expansion could cost North Carolina hundreds of lives and tens of millions of dollars in tax penalties a year.

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RALEIGH, N.C. — Two studies out this month say turning down the federal Medicaid expansion could cost North Carolina the lives of hundreds of low-income uninsured people per year and leave businesses on the hook for tens of millions of dollars annually in tax penalties, beginning in 2015.
An analysis released by tax preparation firm Jackson Hewitt urges policymakers debating Medicaid expansion to include "the very real costs of the shared responsibility tax penalties to employers" in calculating the net costs of expansion to the state.  

The study, authored by Jackson Hewitt executives Brian Haile and George Brandes, explains that the Affordable Care Act was drafted with the assumption that states would expand Medicaid coverage to people earning up to 138 percent of the federal poverty level. Uninsured workers earning more than that could claim tax credits to offset their premiums, but their employers would face a "shared responsibility" tax penalty of about $2,000 a year for each worker above the 138 percent threshold who claimed the credit. 

In the 25 states that have opted out of Medicaid expansion, low-income workers between 100 and 138 percent of the poverty level who would have been eligible for free coverage will now have to buy their own insurance. Each of those workers can also claim the tax credit to offset his or her premium, triggering an additional $2,000 penalty for his or her employer. 

Those employers would not have owed a tax penalty if the workers had enrolled in Medicaid.

"States that expand Medicaid may effectively lower the penalties for employers that do not provide health coverage," the study concludes.

The analysis uses U.S. Census data to estimate that about 40,000 uninsured workers in North Carolina fall into the 100 to 138 percent gap. It estimates the potential annual cost to employers of those workers at $80 million to $120 million in additional tax penalties, starting in 2015.  

Higher mortality rates

Another new analysis by health policy experts from Harvard University and City University of New York finds that opting out of Medicaid expansion will cost between 455 and 1,145 lives a year in North Carolina. 

The study's authors looked primarily at preventive screenings and chronic disease management in states across the country. Medicaid expansion would extend those services to currently uninsured low-income workers making between 100 and 138 percent of the poverty level a year. 

The difference in North Carolina, the authors say, is somewhere between 455 and 1,145 preventable deaths per year that might have been avoided by expanding coverage.

Gov. Pat McCrory has repeatedly said he opposes Medicaid expansion because he believes the state's Medicaid system is "broken." He says it shouldn't be expanded until reforms have been implemented.

Medicaid reform is on the governor's list of 2014 legislative priorities, but he conceded last week that it will be a tough sell in the upcoming short session. Legislative leaders have already said they don't plan to stay in session any longer than they have to. 

Spokesman Ryan Tronovitch declined to comment on the new studies Friday. He said McCrory remains opposed to expansion. 

Department of Health and Human Services spokeswoman Julie Henry also declined to comment on the studies.

Under the terms of the expansion, the federal government would cover the cost of the newly eligible enrollees until 2017. After that, states would begin to cover a slightly higher percentage of the cost of the new enrollees each year, but the federal government would cover 90 percent until at least 2022. 

Advocates for expansion say the savings the state would realize by reducing its costs for uninsured care would largely or completely erase the additional cost. They also say the federal funding that would flow into the state to pay for the new enrollees would create more jobs for providers.

But opponents of expansion say it's too hard to predict how much the program will cost in the future, especially if congressional Republicans succeed in defunding the Affordable Care Act. They say it's a looming threat to North Carolina's fiscal stability.

Backers, critics react

Proponents of expansion said the two new studies support their arguments. 

"These studies simply highlight the moral and economic impact the legislature and governor's failure to expand Medicaid is having on our state," said Adam Searing with the left-leaning North Carolina Justice Center. "Not only do we know that low-income workers will be sicker and die earlier because they can't get health coverage under the Affordable Care Act because of North Carolina's decision, but now it is becoming clear how much employers will pay in tax penalties next year as well. 

"It's too bad our state chamber of commerce isn't speaking out. In states considering expansion, like Missouri, their state chamber of commerce has made clear business support for Medicaid expansion, in part because of these huge penalties," Searing added. "Gov. McCrory clearly has the opportunity to address the health and employer issues here, if only he will take it."

Critics, meantime, questioned the validity of the studies.

Chris Conover, an outspoken skeptic of the Affordable Care Act, is a Duke University research scholar with ties to the right-leaning American Enterprise Institute and Mercatus Center. 

Conover said the Harvard/CUNY study compares death rates for the uninsured to that of individuals with private insurance, which he says is superior to Medicaid. He also said it doesn't differentiate between deaths caused by health problems and deaths from other causes, such as auto accidents. 

Conover also pointed out a much larger mortality study by Richard Kronick, published in 2009, which concluded, "There is little evidence to suggest that extending insurance coverage to all adults would have a large effect on the number of deaths in the United States."

John Hood, director of the right-leaning John Locke Foundation, said the Jackson Hewitt study assumes that every low-income worker who would have been eligible for Medicaid under expansion will go out and sign up for private coverage on the exchange, claiming the credit and triggering the penalty for his or her employer. 

"In reality, the participation rate in exchange plans among this target population appears to be very, very low," Hood said. "The long-term cost to North Carolina taxpayers of Medicaid expansion will far exceed" the tax cost to state businesses.

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