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8:48 am
Mon February 18, 2013

Business Brief: Study shows expanding Medicaid would benefit NC economy

One aspect of the federal Affordable Health Care Act aims to expand state’s Medicaid coverage. Last week, North Carolina Governor Pat McCrory and some members of the General Assembly advanced legislation to decline Medicaid expansion. But a recent study commissioned by the North Carolina Department of Health and Human Services shows expanding Medicaid would have positive impacts on the state’s economy.  WHQR’s Sara Wood recently talked to Scott Nystrom, an associate economist with Regional Economic Health Models, who prepared the study.

SCOTT NYSTROM: One of the funny things about Medicaid expansion is I think it’s a bit of a misnomer on its own, is Medicaid expansion isn’t really a debate to expand Medicaid or not within a state. That’s part of the Affordable Care Act, that’s something the President and the Congress decide. The decision for the state, the legislature and the governor is whether to accept the federal dollars to do it or not. So really what we’re talking about is a lot of federal money coming into North Carolina to pay for the expansion that the state doesn’t really have to offset to a great degree. So that’s what we’re modeling here and that’s why a lot of the things we’re seeing here look rather positive.

SARA WOOD: If the state of North Carolina were to expand Medicaid, what were the largest findings of how that would affect the economy here?

SCOTT NYSTROM: To give kind of you some high-level impressions here, it’s going to take some time, but what it would mean essentially is if the state were to accept the federal dollars, the total jobs impact would be approximately 20,000 to 25,000 jobs, this would be a total, not a creation for every year, so it would be 25,000 extra jobs for employees in the state. Most of those would be in the private sector, if you’re using aggregate majors like  GDP, it would be $1.5 billion a year, and then maybe between $70,000,000 to $100,000,000 dollars in tax revenue for the state as well, which the state could use how it wanted. And the idea being is if the feds are going to be paying 100 percent and the states are going to paying for zero, and it eventually does slide down to 90 percent for feds and 10 percent for states by 2021, is it would make it from budgetary standpoint, a relative easy decision for states to do. Therefore, the cost to the state is relatively low compared to what the feds will be chipping in order for this to happen. The only issue with this is federal legislation could change in the future, and there’s been several governors, who’ve brought up the point that, if the federal government decides to change this deal then the state is on the lamb for a large amount of cash it doesn’t have it might have, it might have to reprioritize from other priorities. But that is something that could change in the future, which why some of the governors have been a little more recalcitrant about agreeing to this expansion.

SARA WOOD: But isn’t the Affordable Care Act set up in a way where states are already paying taxes that would be used to pay for expansion. So if North Carolina declines expansion, will it still be contributing somehow?

SCOTT NYSTROM: That’s is one of the thornier issues of this of course, is that the Congress and the President passed the ACA a few years ago, and of course that means the federal government is going to be collecting these taxes everywhere. And these taxes are a few surcharges on a few different things you’ve probably heard the tanning bed tax. Another one is an excise tax on high-value added so-called Cadillac health insurance plans as well. So that money’s going to be collected in every state whether or not the states do the expansion or not. The state’s decision is whether or not they’re going to accept the money from those higher federal taxes into the state federal program of Medicaid, and therefore increase eligibility, increase enrollments and therefore have some of the economic impact we’re seeing here. If anything if a state doesn’t expand it’s in the unfortunate situation of it’s paying these taxes and its not accepting the dollars, therefore it is actually somewhat subsidizing other states.

SARA WOOD: Is there anything else you found in the study that you think is important for people to know?

SCOTT NYSTROM: I guess the biggest thing I could say about this, is this holds a lot of potential for good for the NC economy depending on exactly what happens. This is a lot of money on the table and it’s a big decision whether the state’s going to accept it or not. But again, I can’t make a recommendation one way or the other given that there is uncertainty in the future, and what Washington might do in the future might change as well. So, we’ll just have to see exactly what the new governor and new legislature does in Raleigh.

SARA WOOD: Well Scott, thank you for your time.

SCOTT NYSTROM: Happy for the opportunity.