Will Medicaid expansion add jobs? Yes, no, yes no

03/03/2013 12:17 AM

03/03/2013 12:18 AM

In an about-face, Gov. Rick Scott announced that he would support a massive Medicaid expansion, providing healthcare coverage to an additional million Floridians thanks to billions of federal dollars. Back in 2010, the Republican governor ran on a platform of calling Obamacare a “job-killer.”

Scott’s decision led to criticism from fellow Republicans, including Agriculture Commissioner Adam Putnam.

“The expansion of Medicaid in FL does not create jobs or strengthen our infrastructure,” wrote Putnam on Twitter on Feb. 21. “And it will cost Florida $5B over the next 10 years.”

We wanted to explore Putnam’s claim that the federally funded Medicaid expansion won’t create jobs in Florida. The evidence we found suggests Putnam is wrong, but it’s far from certain. Instead of a Truth-O-Meter rating, we’re providing an overview of the research we found and what experts had to say.

The state’s tab for Medicaid, a government-run health insurance program for the very poor, has been escalating and eats up about one-third of the state budget.

Medicaid is a joint state and federal program. The federal government currently covers about 55 percent of the costs in Florida. The 2010 Affordable Care Act encourages states to expand eligibility and dangled a carrot: The feds would pay 100 percent of the expansion for the first three years, declining to 90 percent in 2020 and beyond.

We found plenty of debate among economists, healthcare experts and politicians. while we couldn’t get an answer from Scott about his view.

A spokeswoman for Putnam sent us recent testimony before Florida legislators by experts about previous Medicaid expansions in Maine and Arizona — Maine’s governor has rejected the current expansion, while Arizona has agreed to it. The testimony we saw didn’t address job creation, but it did make this point: Some predictions about Medicaid expansion ended up not being accurate. For example, uncompensated charity care increased, which undermines the argument that when hospitals get reimbursed for more patients, they will be able to hire more staff. On the other hand, some experts questioned whether the experience in a smaller state like Maine was relevant to Florida.

We reviewed several studies in Florida or other states that predict job growth as a result of Medicaid expansion. We should note that they were written by or for stakeholders or those who support ObamaCare. The job growth predictions include direct jobs in healthcare and indirect jobs (a nurse buys a new car, for example.)

“The reason that Medicaid expansion will create jobs is that this would represent new healthcare services for people not currently enrolled in the system,” said University of Florida economist Alan Hodges, a co-author of one study. He said Putnam’s “assertion that it will not create jobs is simply not true.”

Here’s a summary of some of the studies:

A 2013 study done for Families USA, a liberal group that supported the Affordable Care Act, concluded Medicaid expansion would support approximately 71,300 new jobs in 2016 in Florida.

A 2012 Florida Hospital Association study said if the federal government spends about $24.4 billion between 2012-23, it would lead to new 54,288 jobs over the 11-year period. About 38 percent of the jobs would be in the healthcare sector.

A 2011 study was written by the Florida Center for Fiscal and Economic Policy predicted 65,000 jobs as a result of Medicaid expansion. The author is affiliated with CHAIN, a group that advocates for the poor.

In 2009 —a year before the Affordable Care Act was signed into law —the Kaiser Commission on Medicaid and the Uninsured compiled findings from 29 studies in 23 states analyzing the role Medicaid plays in state and local economies. Kaiser found that “regardless of the economic impact model used, all studies have similar findings — Medicaid spending has a positive impact on state economies” — and that includes generating jobs.

Linda Quick, president of the South Florida Hospital and Healthcare Association, said the employment gains could be gradual and for certain types of facilities. She predicted that emergency rooms may not see immediate declines in patients, because the newly funded Medicaid patients may still end up in ERs if they can’t get in to see a primary doctor.

But Michael Tanner, a senior fellow who researches healthcare topics at the libertarian Cato institute, said the federal money for the increase comes from federal income taxes — including from Floridians.

“The money used to pay these doctors comes out of the private economy. That means those resources aren’t available in the private sector to create jobs....,” he said.

While the federal government picks up 100 percent of the cost of the expansion, it’s probably a net gain for the state, Tanner said. However, states need to be concerned about new enrollees who are currently eligible but haven’t signed up —for those folks, the state has to pay under the old arrangement. And, the federal government will eventually phase down its contribution for the expanded program.

“I hesitate to say it will create no new jobs, but I’m suspicious of studies that say it will create x new jobs on other side,” he said. “There are so many moving parts, and we don’t know how it will play out.”

Finally, we interviewed Chris Lafakis, a senior economist at Moody’s who examines Florida’s economy, and sent him our findings from those who predicted job gains and losses. We should note Moody’s is a financial analysis firm that doesn’t have a position on the healthcare law.

Lafakis said, based on Moody’s previous analysis, if all states opted in to the expansion (and they haven’t), the country would add 270,000 jobs over 10 years — including 10,000 to 30,000 in Florida.

The increase in jobs are a result of two main factors:

The higher coverage rates will encourage those who would otherwise not have insurance to visit doctors, boosting healthcare demand. Higher coverage rates will result in hospitals getting paid for more patients, allowing hospitals to hire and invest.

The federal government is estimated to spend an additional $48 billion in Florida if it opts in.

“That is money that will be pumped into the economy, with the conduit being the poorest people that have the highest spending rates. Florida will also spend more money than it otherwise would to provide Medicaid for its poorer residents,” Lafakis said. “This will free up low-income consumers to use their money on other goods and services [food, gasoline, entertainment].”

In a state the size of Florida, 10,000-30,000 jobs “is pretty small in the grand scheme of things,” Lafakis said. “But still, a Medicaid opt-in would help hospitals financially, boost state and federal spending and channel those funds to citizens with high spending rates.”

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