January 5, 2013
The most important issue facing the next Missouri General Assembly is whether to expand health care coverage for uninsured Missourians who have incomes below 138 percent of the Federal Poverty Level (FPL equals an income of $23,050 for a family of four.)
The costs and benefits of expansion have been analyzed in three separate studies: one by the Missouri Office of Budget and Planning, one by the Kaiser Foundation and one by the University of Missouri Medical School in cooperation with Dobson, DaVanzo & Associates. The MU study is the most conservative, so I will rely upon it. The projected economic benefits and the number of Missourians covered by the expansion are substantially higher in the other two studies.
The Federal Affordable Care Act (ACA, also known as Obamacare) allows states to expand their medical coverage to 138 percent of FPL. The federal government will pay 100 percent of the cost through 2016. That percentage will phase down to 90 percent in 2020. About 161,000 additional Missourians would receive medical coverage under the expansion. Absent expansion, those Missourians will continue to live without health insurance. When they experience health problems, they show up at hospitals and are treated — but the cost of that care is not completely compensated. We all pay the cost of their treatment. It is redistributed through increases in our health care premiums or absorbed by the hospitals as uncompensated care.
There is a provision in law whereby hospitals receive money to offset the cost of uncompensated care (called DSH, or Disproportionate Share Hospital allotments). The DSH provision will be substantially reduced. It has been replaced by the option for states to expand coverage. That means that Missouri hospitals will lose DSH payments and, if there is no expansion of Medicaid coverage, they will also absorb the cost of treating people with no insurance — a huge financial burden.
Statewide, the cost of decreased DSH payments will be roughly $500 million. Losses to hospitals resulting from other changes in law will be about $2.6 billion. On the other hand, if Missouri expands coverage, the state will receive an additional $8.2 billion from the federal government in the years between 2014 and 2020. The state will be required to pay about $333 million, all occurring after 2017. The economic expansion would include an additional 24,000 new jobs with a payroll of nearly $7 billion and a total impact on Missouri’s economy of more than $16 billion. Tax revenues to the state would increase by more than $850 million. The tax revenue from the increased jobs and economic activity will generate more than double the cost of expansion.
Viewing the loss of DSH payments at a local level, Christian Hospital in St. Louis County will lose about $30 million dollars. The combined losses to Boone Hospital and the University of Missouri in Columbia will be about $28 million. Proportional losses will occur to hospitals in Springfield, Kansas City, St. Joseph, Cape Girardeau and Joplin. The pattern is the same for all larger hospitals. They will be seriously harmed, but will survive.
Having grown up in a rural community with a small hospital, I wondered what was likely to happen in rural Missouri. I studied the probable result of expansion of Medicaid verses non-expansion in West Plains as an example.
Ozarks Medical Center (OMC) is a 114-bed hospital, serving 11 counties and about 160,000 people. The closest large hospital is in Springfield, 100 miles away. OMC will lose about $2,225,000 as a result of the reduction of the DSH provision. OMC will still be required to treat all who appear at its door. In the event that those patients do not have insurance, OMC will not be fully compensated for that care. The hospital estimates that cost next year to be about $6 million to 8 million.
On the other hand, if the state were to expand Medicaid coverage, more than 9,000 additional people would have medical insurance in the West Plains service area. In addition to the benefits of medical insurance for those patients, the entire South Central Region will experience an economic benefit. The federal contribution in the region is estimated to be $463 million. More than a thousand jobs would be created. The total economic benefit to the region would be almost $800 million. Much of this expansion would occur in Howell County. More patients mean more pharmacists, more nurses, more physical therapists, and so on.
OMC is larger and stronger than some other rural hospitals. As one looks east toward the Bootheel, the situation becomes more troubling. The hospitals are smaller and their patient populations are poorer. If Missouri does not expand coverage, Missouri could lose more than a dozen rural hospitals — perhaps as many as 25 — a tragedy for rural Missouri. There is only one rational conclusion: Missouri will gain far more than it loses from the expansion of health care coverage.
Opponents of expansion say, “We cannot afford it,” but these claims are simply an expression of opposition to the concept of “Obamacare” without analysis of the actual economic costs and benefits. Whether one supports or opposes the underlying philosophy of Obamacare, it is the law of the land. Missouri should not undermine the solvency of its own hospitals and decimate the economic lifeblood of many rural communities just for the sake of demonstrating political purity. The Legislature has an obligation to examine what is economically best for the state of Missouri. We should work together to find a solution we can all live with.
Rep. Chris Kelly is the newly elected state representative in the 45th legislative district and member of the House Budget Committee.