No, It Will Cost Missourians Considerably More Than ‘$20 Per Person’ To Expand Medicaid

posted at 9:16 pm on July 16, 2012 by Patrick Ishmael

The St. Louis Post-Dispatch has published a commentary by Saint Louis University School of Law Professor Robert Gatter in which the good professor claims that Missourians would only have to pay an extra $20 per person, per year to expand their Medicaid program. How does he arrive at that dollar amount? In short, some creative accounting.

Here’s the math. Under the ACA, Washington, D.C., will pay 100 percent of the cost of expanding Medicaid for three years starting in 2014. Then the federal share of that cost in any state that expands its program drops gradually over four years to 90 percent, and it remains there forever. Missouri’s budget director estimates that the state would receive about $2 billion on average each year from the federal government during the first 10 years of expansion. Meanwhile, Missouri would pay, on average, about $80 million per year. That cost would be divided among most of Missouri’s roughly 6 million residents. After excluding Missouri’s children and poor adults, about 4 million residents would share that average annual cost. Eighty million dollars divided by 4 million people equals $20.

Prof. Gatter is, unfortunately, just wrong. The cost of expanding Medicaid would not be $20 per Missourian. It would be much more.

First, Gatter lowballs the state cost of the expansion. As I have written before, the Kaiser Family Foundation estimates that the new program could cost the state almost $800 million in the program’’s first five years — twice what most news outlets have been reporting as the program’s potential cost to the state — and on an annual basis, likely over $100 million in the years that followed. Gatter’s “$20 per person” assumption is based on a rosy baseline that considers only the state budgetary costs in supporters’ ideal budgetary scenario. For a state already facing a battery of budgetary problems, such programmatic ambiguity is dangerous — and especially dangerous if that ambiguity is not admitted.

But the state contribution to the expansion is only a fraction of the cost to Missourians. Again, we are the federal government. Federal money that would go toward a Medicaid expansion is not, despite what the Post-Dispatch has called it, a “”windfall.”” It is our money, being paid back to us from our own pockets. Taking this into account and dividing Gatter’’s annual $2 billion cost to the feds between his four million Missourians, taxpayers can expect to pay closer to $500 total each year to expand Medicaid, not $20. (I say “closer” because there is, as with so much of this stuff, some taxing and spending nuance involved here.)

That said, and in Gatter’’s own words, those costs then “”remain there forever” — unless, of course, the law is repealed.

It is bad policy to let politicians essentially split their programs onto different credit cards and for us to act like one or both cards are free money, rather than a liability. If the cost of one bill rises, taxpayers’ overall bill rises. It i’s not an “investment” for a husband to spend $20 out of one family account and $500 out of another, and then to tell his wife he only spent $20 of the family’s money. It is, at best, a shell game, and one that will eventually bite all involved. The result? For Missourians, it means higher taxes, fewer services, or both, with a “reform” that does not credibly control health care costs.

And a word on Prof. Gatter’s assertion that the Medicaid expansion would produce net savings to the state economy. The professor writes that Missouri experiences “an annual loss to [the] economy of $720 million to $1.5 billion for the 308,000 Missourians [who the proposed] Medicaid expansion would cover.” But does spending $2 billion-plus in taxpayer money each year — state and federal money, much of it likely borrowed — to recoup even $1.5 billion in presumably taxable economic activity really make economic sense? Even liberally construing all of the savings Gatter contemplates in his piece to the maximum, his case for “savings” is far from made, both for individuals and for the government.

Missourians will not get off cheaply with an ACA Medicaid expansion, and in a very real way, much of the cost of the expanded program would just go to another, already maxed-out credit card also in the taxpayers’ name. That is a problem.

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Claire McCaskill voted for Obamacare…

Khun Joe on July 16, 2012 at 9:18 PM

We have to vote out Claire.

tom daschle concerned on July 16, 2012 at 9:19 PM

It is our money, being paid back to us from our own pockets.

After they take a “cut,” for their oversight and benevolence.

cajun carrot on July 16, 2012 at 9:21 PM

Sorry, but I hate that pony-tailed dude in the picture.

DaveDief on July 16, 2012 at 9:23 PM

YES!!

My most favorite picture of the whole, entire mess.

Would really love to know exactly who Mr. Ponytail Labcoat DoucheBag is.

BigWyo on July 16, 2012 at 9:24 PM

How does Mitt attack Obama with this?

CTSherman on July 16, 2012 at 9:24 PM

I know of 3 votes for the GOP in St. L.
My bro-in-law, sis-in-law…and my newly minted 18 year old nephew.
FREEDOM!

annoyinglittletwerp on July 16, 2012 at 9:26 PM

Great, we’re all screwed, again. Freaking STLers….

T-Rav on July 16, 2012 at 9:31 PM

Medicaid expense is not the only increase awaiting Missourians. Welcome to the added expense from Common Core standards…adopted in at least 44 states. These create unfunded mandates for the states adopting them. In Missouri, they are to cost AT LEAST $350 Million. You can access the unpleasant surprise awaiting your state as well in the link below:

http://www.missourieducationwatchdog.com/2012/02/notice-to-dese-shocker-apparently.html

Just think of Obama’s education reform (and pushed by many Republicans) as the educational version of Obamacare.

This is the double whammy nobody talks about. But…it’s for the children! Just like the health care that will provide services for people who can’t get them now.

Right.

manateespirit on July 16, 2012 at 9:40 PM

I have long stated that level of federal taxation squeezes the ability of the states to raise their one taxes and take care of their own needs. How much in federal taxes are collected from a state’s residents only to be recycled back to the states with strings attached? Education funds, infrastructure funds, Medicaid, et al.

In an ideal world we’d have a low, uniform federal tax and higher state taxes as states assumed duties usurped by the Feds. States have incentive to keep taxes low. The central government does not.

Charlemagne on July 16, 2012 at 9:44 PM

Math is hard inconvenient.

Gwillie on July 16, 2012 at 9:47 PM

So, Patrick … have you taken time to educate yourself on nullification yet?

Dante on July 16, 2012 at 9:55 PM

YES!!

My most favorite picture of the whole, entire mess.

Would really love to know exactly who Mr. Ponytail Labcoat DoucheBag is.

BigWyo on July 16, 2012 at 9:24 PM

Anyone that age with a ponytail should be slapped.

Rio Linda Refugee on July 16, 2012 at 9:56 PM

Whoa. Did the qotd thread just crash for anyone else?

KCB on July 16, 2012 at 10:22 PM

…only 50 percent or so of us will be shocked and surprised…the rest are unaware or stupid…time for another poll.

KOOLAID2 on July 16, 2012 at 10:23 PM

Whoa. Did the qotd thread just crash for anyone else?

KCB on July 16, 2012 at 10:22 PM

Got a 404 for about a minute, then okay.

slickwillie2001 on July 16, 2012 at 10:25 PM

Anyone that age with a ponytail should be slapped.

Rio Linda Refugee on July 16, 2012 at 9:56 PM

Or else they better be one hell of a great guitar player.

UltimateBob on July 16, 2012 at 10:44 PM

It is our money, being paid back to us from our own pockets.

Certainly the good professor was not talking about people who actually pay taxes?

Kenosha Kid on July 16, 2012 at 10:48 PM

Gatter’s “$20 per person” assumption is based on a rosy baseline

Liberals always quote ‘the rosy baseline’. “It’s realistic!”

Jerry Brown signed “a realistic budget” last year. By years end it had a $16 BILLION hole in it.

In 1967, the House Ways and Means Committee predicted that the new Medicare program, launched the previous year, would cost about $12 billion in 1990. Actual Medicare spending in 1990 was $110 billion—off by nearly a factor of 10.

GarandFan on July 16, 2012 at 10:55 PM

It’s funny when politicians talk about how “the federal government” is going to pay for some expensive program. Where exactly do they think “the federal government” is going to get the money from? The federal government’s magic money garden?

Reminds me of those people who were lining up in 2009 for “their share” of “Obama’s stash.” Any time an interviewer asked them where the money was coming from, they’d get that dazed look on their face as they struggled to figure out an answer. Probably the same look you’d get from a politician if you asked him/her where “the federal government” is going to get the billions of dollars it will need to pay for the latest great new “free” program.

AZCoyote on July 16, 2012 at 11:29 PM

Nicely done, Patrick. Careful, though. There may easily be an audit in your future.

wolfsDad on July 16, 2012 at 11:39 PM

Missourians will not get off cheaply with an ACA Medicaid expansion, and in a very real way, much of the cost of the expanded program would just go to another, already maxed-out credit card also in the taxpayers’ name. That is a problem.

Just as happened with Romneycare!

Great topic!

DannoJyd on July 16, 2012 at 11:49 PM

Come on “Show me” state, we are counting on you to dump Obama and Claire, BOTH in November.

karenhasfreedom on July 16, 2012 at 11:54 PM

We have to vote out Claire.

tom daschle concerned on July 16, 2012 at 9:19 PM

We will. She’s done in November, and she knows it.

Kevin71 on July 17, 2012 at 12:16 AM

I responded to the Professor’s commentary. It’s long, but I’d appreciate any feedback…

Professor Gatter’s analysis fails to withstand even the most simplistic budgetary, mathematical and economic cross-examination. One can credibly argue that the numbers the Professor uses as the baseline for his argument are best-case scenarios that almost certainly underestimate the program costs and overestimate the government’s ability to maintain those numbers over the course of the 10 years of the expansion. For the sake of argument, however, even assuming his numbers are accurate, his analysis is incomplete in a way that is fatal to his $20 cost conclusion.

His first mistake is stunning in it’s glaring obviousness. He contends the expansion will only cost Missouri $80M annually because “Washington, D.C., will pay 100 percent of the cost”, $2B, for the first 3 years and a percentage that “drops gradually over four years to 90 percent, and it remains there forever.” Setting aside that nothing is forever, especially budgetary rules set by Congress, the Professor ignores the undeniable fact that Washington, D.C. does not have any of it’s own money. Some portion (perhaps even more than 100%) of that $2B gift from D.C. will be initially taxed out of Missouri’s citizens in the form of federal taxes. By Professor Gatter’s own math, $2B divided by 4M non-poor adult residents plus his $20 cost equates a minimum $520 per year cost. However, according to IRS data for 2010, only 2.7M tax returns came from Missouri and over 1M of those were for less that $25k in income. So, it’s likely the cost of over $2B per year is actually borne by significantly less than 4M residents, meaning those who are paying for the program are paying substantially more than even $520 per year in increased taxes. (Remember, the federal government is broke, they don’t have $2B sitting around waiting to be sent to Missouri to pay for this new expansion).

Moving along, the Professor also falls short in his ability to accurately perform a cost-benefit analysis on the cost of expanding coverage to the 308,000 who would gain Medicaid coverage. Again, giving the benefit of the doubt that his estimates on lost productivity cost are correct, he states those 308,000 having Medicaid coverage would lessen the state’s annual loss by $720M to $1.5B. He then concludes, “Taking even the lowest estimate, the annual gain in productivity from expansion would be nine times its average annual cost to the state.” As I clearly demonstrated above, the Professor may wish to see the $2B from D.C. as a gift with no cost to Missouri residents, but that does not make it so. Regardless, even if the cost to Missouri was only $80M, the true costs is, by the Professor’s own numbers, over $2B. So, he’s willing to spend $2B to see productivity gains of at most $1.5B. That’s the type of math that has states and D.C. facing the financial abyss. It also leads me to believe Professor Gatter is either willfully deceitful, or someone whom I would very much like to face off with at the gaming tables.

Also, $2B to cover 308,000 comes to a cost of nearly $6500 per year per covered individual. One can find varying numbers on the average cost of a health insurance policy for an individual, but it is most certainly nowhere near $6500 per year.

And finally, what would any call for government expansion be without a gratuitous swipe at the evils of the free market? The Professor takes his shot with, “Finally, Medicaid expansion is necessary because the free market has failed to keep insurance premiums affordable.” In a myriad of ways, the insurance industry market is anything but “free”. There are a variety of plans and proposals that do attempt to incorporate more market forces into the industry, but they are routinely demonized and opposed by those in favor of more government control. Costs have gone up, without question. So has care accessibility, quality, technology and life expectancy. None of those items are free, and more government intrusion will not make them free, but it will insure each of them become more and more restricted as the reality of economics and math overwhelm any budgetary sleight of hand the politicians attempt.

It is possible some will support the program, even with a full understanding of the cost. To do so would require one to ignore reality and math, but some may choose to do so. But, the politicians, the Post Dispatch and Professor Gatter owe it to the public to be forthright and accurate with their analysis of those costs

The Hammer on July 17, 2012 at 12:38 AM

It always intrigues me that left wingers have never taken a serious course in math, science, economics or American history. It is always some gut course that mimics real disciplines, taught by hard left dimwits or deconstructionists.

pat on July 17, 2012 at 1:21 AM

The Hammer on July 17, 2012 at 12:38 AM
Missouri currently receives $1.32 back for every Federal dollar paid in taxes. Almost all the return is in the form of welfare, unlike such States as Hawaii or New Mexico. It is mildly parasitic. But if this idiot thinks this differential will be tolerated for long, then he must be a progressive.

pat on July 17, 2012 at 1:29 AM

After having been to STL more times than I can recount I can say this: It is spelled M-I-S-S-O-U-R-I and it is pronounced M-I-S-E-R-Y.

A real nice State that needs to be rescued from Leftoland politicians. How such nice people can pick such rotten politicians is beyond me.

ajacksonian on July 17, 2012 at 5:51 AM

Professor Gruberlove: How I Learned to Stop Worrying And Love The ObamaCare Bomb

http://predicthistunpredictpast.blogspot.com/2012/07/professor-gruberlove-how-i-learned-to.html

A Twofer Tuesday M2RB: Depeche Mode and Dr. Strangelove’s Theme Song

Resist We Much on July 17, 2012 at 7:18 AM

Also consider that no Government program, Federal or otherwise, has costs accurately forecast. Even in the best case, the costs will be more than forecast, typically several factors more.

This isn’t like buying a car, where the costs are fixed for the term of the financing. So this slick car salesman professor cannot couch the costs in terms like “C’mon, it’s only a pizza a month. You aren’t really going to walk away from this great car, all over a pizza a month…”

juanito on July 17, 2012 at 10:35 AM