Beginning Jan. 1 of next year, able-bodied adults earning up to 138% of the Federal Poverty Limit (FPL) will be eligible to enroll in Virginia’s expanded Medicaid program. The financial impact on Virginia taxpayers will depend in large measure upon the percentage of eligible recipients that decide to enroll. A lot of people have taken a lot of guesses, but no one will know the financial impact until the expansion goes into effect and people either enroll or don’t.
A new Old Dominion University study, “The State of the Region; Hampton Roads 2018,” has taken a close look at the numbers. “Every estimate is fraught with uncertainty,” write the authors. “The best course of action is to present a range of outcomes.”
The percentage of the eligible population that enrolls is referred to as the “take- up” rate. In 2016, the Urban Institute estimated a take-up rate of 56.8% for a potential Medicaid expansion in Virginia. In 2017, the Virginia Department of Medical Assistance Services estimated that of 370,000 qualifying Virginia adults, 239,000 would enroll in Medicaid and 60,000 would transfer from other health insurance plans — effectively a take-up rate of 64.5%.
The ODU economics professors writing the study took their own crack at estimating the take-up rate for Hampton Roads. Drawing upon the experience of two neighboring states that expanded Medicaid in 2016, Maryland and West Virginia, they estimated a take-up rate of 44% for people under the poverty line and 55% above. Recognizing the uncertainties of any forecast, they estimated 20,000 newly eligible adults on the low side and 27,000 on the high side. Based on those forecasts, they estimated that costs to the Commonwealth for new enrollees in Hampton Roads will run between $16 million and $22 million by 2021.
The authors consider the expansion a net economic gain for Virginia and the region: improving health incomes for lower-income Virginians, reducing the level of bad debts and uncompensated care, and improving the financial health of hospitals.
But, just as continued increases in military spending in Hampton Roads is contingent upon the condition of the federal budget, the authors caution that the modest state share of the expanded Medicaid program — only 10% for new enrollees — is likewise contingent upon the condition of the federal fisc.
Interest expenditures on the national debt are projected to climb from $316 billion in FY 2018 to $992 billion in FY 2028, crowding out other categories of funding. “An economic downturn that places significant pressure on the federal budget could result in a retrenchment of Medicaid eligibility and an increase in the uninsured rate,” the authors warn. “While history may be a guide, it’s not a promise.”
If the federal government reduced its reimbursement rate for new enrollees from 90% to 50%, the financial liability to Virginia would increase five times.
Medicaid expansion is a done deal. There’s no point in re-litigating that case. But Virginia has to live with the fiscal consequences. And one of the things that happened when the General Assembly passed the expansion bill is that the Commonwealth assumed a risk that the federal government will not renege on its 90% promise. We have no way of knowing what will happen over the next decade — we don’t even know for sure how much Medicaid will cost us next year. But we can identify risks and prepare for them. The question is, will we? Or will we stumble forward blindly on the assumption that all will be well?
Update: Response to this post from the Department of Medical Assistance Services can be viewed here.
