Several critics – including Louisiana’s leading think tank, the Pelican Institute – are challenging Gov. John Bel Edwards’ claim that since expanding Medicaid coverage in 2016, the state “leveraged a $1.85 billion federal investment into $3.57 billion in economic activity and created 19,000 jobs.”
Over the past six months, Louisiana went from having a projected fiscal 2019 budget shortfall of $994 million in the general fund, which the governor claimed in April, to having a $300 million fiscal 2018 budget surplus. Touting the need to raise taxes to cover the shortfall, Edwards eventually pushed a seven-year tax increase through the legislature, extending what was supposed to be an expiring one-cent sales tax by 0.45 cents.
Edwards’ proposed budget estimated that of the estimated $994 million shortfall, $657 million came from health care services. In April, while releasing the “Medicaid Expansion and the Louisiana Economy” report, Edwards claimed the state saved $317 million and grew the economy by enrolling more than 470,000 new people in Medicaid, the federal government's taxpayer-subsidized health care plan for the poor. The state's report was commissioned by the Louisiana Department of Health (LDH) and prepared by Dr. Jim Richardson and the Public Administration Institute at Louisiana State University.
In 2014, those enrolled in Medicaid accounted for slightly less than 20 percent of the state's population. By 2017, more than 30 percent of Louisiana’s population was enrolled in Medicaid, the Chicago-based Truth in Accounting (TIA) organization reports.
For every dollar the state spent on Medicaid expansion, the federal government paid 97.50 cents.
“Yet, when asked to explain how is it possible for the state to profit when you have to pay 2.5 percent of the Medicaid cost for 500,000 residents, there is never a response,” Steve Gardes, Lafayette-based CPA, told Watchdog.org.
The governor’s office did not respond to several requests for comment for this story.
Richardson, the LSU professor who prepared the report, did respond to Watchdog.org, reiterating the report's initial claim.
“The direct economic impact of Louisiana’s decision to expand Medicaid, based on the type of health care treatment being provided, created and supported almost 19,200 jobs, state tax receipts of just over $103 million, and local tax receipts of $74.6 million," Richardson said via email. "In State Fiscal Year 2017, the federal government paid for 97.5 percent of the Medicaid expansion program.”
Infusion of federal money, Richardson argues, created an economic stimulus to the state’s economy, “sustaining and creating employment impacts, personal earnings, and state and local tax receipts.”
The Pelican Institute refutes Richardson’s claims, however. Its senior fellow, Chris Jacobs, argues the report is factually inaccurate because it only assessed Medicaid-specific dollars, “ignoring the fact that people were dropping Obamacare Exchange coverage to enroll in the Medicaid expansion – and losing federal subsidy dollars in the process.”
Over the past two years, Jacobs points out, subsidized enrollment on Louisiana’s health insurance exchange fell by nearly half – from 170,806 in March 2016 to 93,865 earlier this year. In other words, many individuals who qualified under the federal exchange switched to Medicaid.
The report refers to “net new federal dollars” Jacobs argues, which “inaccurately ignores the substantial funding in federal exchange subsidies that at least some expansion enrollees gave up by enrolling in Medicaid.”
According to the Congressional Budget Office (CBO), in 2012, low-income individuals received about $9,000 per year in exchange subsidies, and Medicaid coverage costs were $6,000.
“For those individuals who would have qualified for discounted exchange policies, their Medicaid coverage may have actually cost Louisiana additional federal dollars – and jobs – because Medicaid could cost less than federal insurance subsidies,” Jacobs said.
Additionally, Louisiana’s Legislative Fiscal Office noted in 2015 that about 20 percent of those enrolling in Medicaid expansion would give up their private health care coverage to enroll in Medicaid.
“If Medicaid enrollees dropped employer-sponsored coverage to enroll in expansion, the supposedly ‘new’ federal subsidy dollars would instead supplant existing coverage subsidies provided by the employer,” Jacobs notes. “The report does not acknowledge this trade-off.”
The CBO also reported that Obamacare would reduce the workforce by about 2.5 million jobs. CBO analysts argued that individuals who might not qualify for Medicaid because they earn too much would then have to pay costly premiums and deductibles for exchange coverage, presenting a disincentive to work. Medicaid expansion, they argued, “effectively creates a tax on additional earnings” that “reduces the incentive to work.”
Despite costs associated with Medicaid expansion, the Pelican Institute maintains that health care is not a jobs program and asking for more federal money is not the solution to an ailing economy.
According to a Pew Charitable Trusts analysis, Louisiana’s budget relies the most on federal dollars. Before Medicaid expansion, 42.2 percent of the state’s budget came from federal dollars.
“If Medicaid is a job creator, why is Louisiana still down jobs year over year?" Jacobs asked. "If Medicaid expansion has created so many jobs, why has Louisiana lost a net of 200 jobs in the past year?”
According to the most recent Bureau of Labor Statistics data, Louisiana’s workforce shrank over the past year.
“With a shrinking workforce, the second-lowest economic growth rate in the country, and the largest decrease in incomes nationwide in 2016, if Louisiana receives any more ‘prosperity’ from Medicaid expansion, the current malaise in the state could turn into a full-fledged economic crisis,” Jacobs said.
Richardson maintains that Louisiana’s findings “are consistent with findings in Michigan, Arkansas, Colorado, Kentucky, Maine, Pennsylvania, and, most recently, Montana, all states that have accept Medicaid expansion, either directly as Louisiana did or via various waivers.”
But Jacobs says that's incorrect.
“He’s factually wrong,” Jacobs said.
Pointing to a study of Montana’s Medicaid expansion, Jacobs notes that when calculating the net dollars associated with expansion, Montana officials subtracted money that would have been spent by employers, individuals, the state, and the federal government. The Montana analysis points out that only roughly half of all dollars associated with expansion represent “new” funds into the system.
“Richardson’s analysis only examined the net difference in Medicaid dollars, and concluded that all of those dollars represent 'new' money in the system," Jacobs said. "That’s just not defensible.”
Bill Bergman, Truth in Accounting’s director of Research, told Watchdog.org: “Looking across the 50 states, we see a tendency for states with higher shares of Medicaid enrollment in total population to have higher taxpayer burdens, and slower economic growth.
“Coincidentally, or not, Louisiana ranks near the bottom third of states on TIA’s Taxpayer Burden measure, and has had sub-par performance in GDP per capita in recent years,” Bergman added.