Failure to Expand Medicaid Could Seriously Damage Companies and Communities

The Supreme Court upheld the constitutionality of Obamacare; but, at the same time, it ruled that under the new health law the Federal government can’t withhold funding to states that decline to participate in the expansion of Medicaid. As a result, the expansion of Medicaid, a Federal-state program that provides health care for over 60 million low-income Americans, is now considered optional. The consequences of this decision are significant.

Obamacare’s Medicaid expansion would have covered nearly half of America’s uninsured citizens, and this will now leave many of the nation’s poorest without health insurance. But the Supreme Court’s action hurts more than the less fortunate among us.If states decide to opt-out of Medicaid expansion – and, so far, it appears that 26 states and the District of Columbia will expand Medicaid; 21 states will not expand Medicaid; and four states are considering expanding Medicaid – everyone’s health insurance costs will almost certainly continue to rise.

Here’s one of the reasons why: doctors and hospitals provide billions of dollars in unpaid medical care to the uninsured each year. The providers then pass much of this cost on to private insurers, who, in turn, pass it on to their customers in the form of higher premiums.

Not expanding Medicaid would also cause many hospitals to suffer. That’s because some hospitals now receive extra payments for providing care to people without insurance. When Obamacare was passed, hospitals agreed to accept cuts in these payments. If almost everybody had insurance, as the law envisioned, hospitals could afford to take those cuts. Without the expansion of Medicaid, however, hospitals will still have to provide care to lots of uninsured patients, but they will have to do it on tighter budgets.The financial stress is already evident.Recently, for example, the Virginia Commonwealth University and University of Virginia health systems indicated that their ability to serve low-income patients could be in jeopardy if Virginia fails to expand its Medicaid program to serve 250,000 uninsured Virginians. It will be worse for a number of hospitals that simply won’t be able to survive – especially in rural areas. And losing hospitals can have a domino effect on other health care providers. Doctors, for instance, rely on hospitals to build a foundation for their practice. If a hospital closes, doctors may leave the community, and this can have a fairly negative economic impact. By one estimate, each doctor in a community leads to $500,000 in additional income while sustaining five jobs. And, in rural areas, health care alone creates 15 to 20 percent of the total jobs.

A failure to expand Medicaid will hurt many small businesses, too. A number of these companies are currently unable – or struggling – to offer health insurance to low-income employees. Medicaid expansion provides small businesses with assistance that benefits the bottom line, because it offers low-income workers an affordable, reliable health coverage option. Good health insurance also means that these employees will be healthier, miss fewer days on the job, and be more productive in the workplace.

Medicaid expansion is also a critical equalizer for small companies.When a state opts in, it helps its many small businesses compete against larger enterprises that can afford to offer health insurance and, thus, attract and retain hard-working hourly wage employees.In addition, small companies in states that expand Medicaid have more flexibility in deciding how to make sure their workers are covered than the small businesses in states that choose not to expand Medicaid. A crucial part of this flexibility has to do with Obamacare’s penalties. Under the law, employers with 50 or more full-time workers have until 2015 to either provide their workers with health insurance or face a penalty. But there are no penalties if employees sign up for expanded Medicaid.

Here’s a good case study – and it involves Jacquelyn Blaney, who runs Independent Living Inc., a health care services company in Louisiana, a state that has, for the moment, decided not to expand Medicaid. Only 40 of Blaney’s 185 employees can afford the company’s insurance plan, which costs each worker about $200 per month. The cost of adding the 145 people to the plan who can’t afford it would be more than $300,000 a year, which, says Blaney, would probably bankrupt her. Blaney’s financial bind is tighter still, because she can’t pass the cost for employee health insurance on to customers, and her fees are set by Louisiana’s Department of Health and Hospitals. Medicaid expansion would, obviously, be a real benefit to Blaney – who will probably end up paying the penalty; and it would also help her employees, many of whom will end up being uninsured.

This destructive scenario will play itself out across the nation.A report from Jackson Hewitt, for example, says that states that do not expand Medicaid will leave their employers exposed to higher penalties under Obamacare. The study also estimates that the cost to business will fall somewhere between $1.03 billion and $1.55 billion in penalties each year in the states that have opted out. In Texas, which has steadfastly vowed not to expand Medicaid, despite the fact that this will leave 1.1 million of the state’s citizens without health coverage, employers will have to pay Federal tax penalties between $266 million and $399 million annually – more than any other state. For their part, Florida’s employers would incur fines of up to $253 million a year.

The macro economic impact stemming from a rejection of Medicaid expansion could also be quite profound for small businesses. In Tennessee, which has opted out at the present time, for example, Medicaid expansion would bring an additional $10.5 billion in Federal dollars to the state between 2014 and 2019. The funds would increase incomes for all types of health care service providers – including hospitals and their employees, doctors and nurses, nursing homes, and medical suppliers. Health care providers and businesses would spend large portions of their revenues and salaries in the state’s local economies. And, as a result, Medicaid expansion would create 18,000 jobs in all parts of Tennessee’s economy between 2014 and 2019.In closing, it’s important to note that Medicaid has been successfully expanded before.And, when New York, Arizona and Maine expanded the program between 2000 and 2005, according to a Harvard study, "rates of uninsured residents dropped, access to care improved, and more people reported being in very good or excellent health. "Most importantly, though, the coverage saved a total of 2,840 lives a year in these states.