A tip of the hat to state Rep. Joe Farrer, who forwarded us another copy of the report that the Rand Corporation made 18 months ago analyzing the economic impact of the Affordable Care Act—aka Obamacare—on Arkansas. Rand’s findings were reported extensively at the time and gave Republican moderates in the Arkansas legislature the impetus to implement the one part of Obamacare that states could choose not to undertake—the expansion of Medicaid to cover low-income adults who previously were not eligible for the government insurance.
Examined with fresh eyes since the initial implementation of all the major features of the law, the research of the Rand economists may tell us whether Arkansas is on track to realize all those economic savings and stimulus that it once forecast for the year 2016 and beyond. We now have four months of subsidized health insurance for the middle class and seven months of Medicaid expansion for men and women whose incomes put them below 138 percent of the federal poverty line to compare with Rand’s longer-range forecast.
Things could change by the end of 2016, more than two and a half years away, but the verdict now is that, whatever you may think of Obamacare, it is an economic bonanza for Arkansans and also for the state government, which will in 2017 begin to share some of the cost of treating low-income adults who are getting medical insurance for the first time.
This is important knowledge because the biggest debate in this month’s primaries and in the general election in November is whether the state government will soon be heavily burdened by the cost of picking up a share of Medicaid that is borne at the outset by the federal government.
No, clearly, it will not. Rand predicted that by 2016 the additional money funneled into the Arkansas economy by widened health coverage will amount to $430 million and that the state’s gross domestic product will rise by $550 million that year as a result of the law. In 2017, the state government will pick up 5 percent of the cost of the adult Medicaid expansion, but the influx of all that new federal money into the Arkansas economy and into the state budget will far exceed the state’s new matching requirement. And it will continue to exceed it when the state’s Medicaid expansion rate tops out at 10 percent in 2021.
There are reasons a politician or any citizen might condemn Obamacare—principally that government has no business buying medical insurance for poor people and subsidizing those with more modest means—but the state budget is not one of them. When Gov. Mike Huckabee, in 1997, expanded Medicaid to cover far more people and at a much higher state matching rate and with a big impact on the state budget, no objections were heard. Huckabee was a Republican and Democrats and Republicans joined him.
If anything, the Rand Report greatly understated the economic advantages to the state from Obamacare. It did not calculate that the state would see some $130 million a year in state budget savings because, on Jan. 1 this year, Obamacare shifted all the state’s current costs of treating the “medically needy” population—those who spend nearly all of their income on medical bills to qualify for Medicaid—and coverage of poor pregnant women to the federal government. Also, state medical institutions like UAMS and local hospitals like our own will get paid for care that they have in the past been required to provide free for the poor and uninsured. The UAMS state budget next year draws lots fewer state taxes for that reason.
The Rand Report deducts from the Arkansas savings tens of millions of dollars for reductions in Medicare spending in Arkansas by the federal government, but that is a miscalculation. The cuts in federal Medicare spending are reductions in payments to insurance companies that offer Medicare Advantage policies. None of the cuts will be felt by Arkansas Medicare recipients, so there is no economic downside for Arkansas.
But the crux of the Rand Report was its forecast of enrollment in Arkansas under both the Medicaid expansion and in the subsidized insurance exchanges—the two big and controversial features of Obamacare. It guessed that that there would be a surge in enrollment in the exchanges and in Medicaid at the beginning of 2015 and the beginning of 2016, so that some 400,000 people would be insured for the first time by the end of 2016.
Four months into 2014, more than 200,000 have enrolled. About 150,00 of those are new adult Medicaid enrollees, and that number probably will approach 200,000 by the end of this year. To state officials’ surprise, about 25,000 more children have been enrolled in Mike Huckabee’s ArKids First program, bringing the total to 431,000—by far the biggest Medicaid program of all.
More than 40,000 enrolled in the subsidized insurance exchange, and that figure will climb sharply this winter in spite of the legislature’s ban on all government outreach efforts to educate people about the availability of health insurance and to help them through the complicated enrollment process. That is where the Rand Report could be off—if, indeed, the legislature’s efforts to stop Arkansans from getting insurance actually succeeds.
Thursday, Rep. Farrer and Sen. Bryan King held a press conference to denounce their colleagues for extending insurance to some 150,000 of the state’s poor because they said it was costing more per enrollee than an actuary had estimated a year ago. They held up signs claiming the excess would be $100 million and that the state would be forced to pay it back to the feds.
Sen. David Sanders, the Little Rock Republican who worked on the Medicaid plan, called it a “cheap political stunt” by Farrer and King and that they were just wrong. The state is unlikely to be required to pay Washington for the private option’s exceeding the costs of straight Medicaid coverage. Obamacare’s Medicaid expansion is an economic and fiscal bonanza for Arkansas, as the Rand report portended, and a life-changing development for tens of thousands of Arkansans.
This rosy scenario does not mean that the state will not face a budget crisis in 2017 and beyond. The legislature has almost demanded that Obamacare cause a fiscal crisis. Since the Rand Report and other studies showed a great fiscal stimulus and a great improvement in the state budget from Obamacare, legislators that the Obamacare savings allows them to cut taxes for corporations and people with wealth. So they ate up $100 million a year of those savings. So when 2017 or 2021 arrives and the state must pick up a bigger share, all that extra money generated by the changes will be gone and they can say, “Look what a crisis Obamacare has caused.” Remember the reason.