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The cost of expanding Medicaid

By Gabriel A. Fraire / December 18, 2015

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There is no doubt that Gov. McCrory and the Republican Legislature want to reduce government spending and save money. But consistently doing it on the backs of poor people is a scandal and they ought to be ashamed.

The governor and his cohort’s efforts to undermine healthcare for the poor is disgusting. Recently the State Legislature approved a bill that will privatize the North Carolina Medicaid system. Privatization always equates to money for the provider and reduced services for the clients.
Medicaid is the government health insurance program for the poor, elderly and disabled. The federal government and the state share the costs, with the federal government picking up about two-thirds of the expenses. But the Republican led legislature thinks their share of costs is out of control.

Close to one fifth of the state’s population or about 1.9 million residents are currently covered by Medicaid and Children’s Health Insurance Program (CHIP). However, North Carolina’s Medicaid program currently does not cover parents whose incomes are greater than 50 percent of the federal poverty level (about $10,000 for a family of three). The plan also does not cover adults without children who are not elderly or disabled. The state’s Medicaid eligibility levels rank near the bottom of the all states. Almost one-fifth (18.1 percent) of North Carolinians below 65 are uninsured, which exceeds the national average.

Under the federal Affordable Care Act (Obamacare), the federal government would pay 100 percent of medical costs to newly eligible Medicaid enrollees in 2014 through 2016 and 95 percent (with the state of NC picking up 5 percent) in 2017. By 2020, the federal government’s share would be 90 percent (with the state picking up 10 percent).

Expansion advocates want to add another 500,000 people to the rolls but McCrory and a Republican-majority legislature say no, opting instead to privatize the plan despite the fact that the bill’s original sponsor, House senior budget writer Nelson Dollar, opposed the plan after it was compromised in the Senate, and he argued that Medicaid costs weren’t out of control and that private healthcare entities “have failed repeatedly” in the state.

The state’s new plan is to contract with three managed care companies that will operate statewide serving Medicaid recipients. The general expectation is that these companies will be for-profit insurers form outside of North Carolina. These managed care companies will assume the financial risk for treating Medicaid patients, while the state pays more than the set sum only if more people become eligible for the program. There will also be up to 10 locally-run “provider-led entities” – networks of doctors and hospitals that will offer regional plans, in six newly designed regions. The same type of plans Dollar said, “have failed repeatedly.”

With the new plan the state will stop paying for each Medicaid patient’s medical procedure and doctor visit. Instead, the providers will receive up-front, per-patient payments and handle any cost overruns.

This will aim the burden of expense on insurance companies who in turn will either leave the state or dump the burden of expense on the hospitals which in turn will end up like Vidant Hospital in Belhaven, N.C., and have to close. Dr. Charles Boyette, a primary care physician for close to 50 years in Belhaven said after the closing, “We’re going back to the dark ages of health care.”

And all of this to allegedly save money. However, detractors of the new plan claim not expanding Medicaid actually costs the state money.

According to a study done by Cone Health Foundation with KB Reynolds Foundation, North Carolina lost $2.7 billion in federal funding in 2014 and is losing $3.3 billion in 2015, compared to the amounts it would have earned had it expanded Medicaid in 2014. This non-expansion of Medicaid also resulted in, more than 23,000 fewer jobs being created statewide in 2014 and 29,000 fewer in 2015. The state’s total economy is about $1.7 billion smaller in 2014 than if Medicaid had expanded, causing the state to lose almost $100 million in potential state tax revenue.

The study also notes since North Carolina continues to decline any expansion to Medicaid, the state will lose an estimated $21 billion in federal funding between 2016 and 2020.

As a result, 43,000 fewer jobs will be created by 2020 statewide. About half of the jobs affected would be in the health care sector. But the other half of the jobs that could be lost are spread across many sectors and the economic benefits that would have rippled out through the community now will not. The study further shows that expanding Medicaid could trigger a substantial reduction in unemployment in North Carolina. If Medicaid is not expanded, about $860 million in potential state revenue will be lost as well as $161 million in county tax revenue from 2016 to 2020, for a combined loss in excess of $1 billion.

How does not expanding Medicaid save money?

Rep. Nelson Dollar, a Cary Republican, said arguments that Medicaid costs were out of control are wrong, “We need reform in North Carolina that is based on caring for our citizens, not for a group of stockholders.”

Unfortunately, the health care of the poor and disabled in North Carolina is not as important as public posturing about saving money, at least not to the governor and the ruling legislature.


Gabriel A. Fraire has been a writer more than 45 years. He is the current copy editor of the Peacemaker. He can be reached through his Web site: gabrielfraire.com




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Since 1967, the Carolina Peacemaker has served as North Carolina’s leading news weekly with a national reputation. Founded by Dr. John Kilimanjaro, the newspaper is published by Carolina Newspaper, Inc.

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