Must Be Heard recently spoke with Kim Bailey, Senior Health Policy Analyst & Research Director at Families USA, about the impact of the recent Republican budget proposal on healthcare costs, state budgets and the economy. The interview also addresses latest CBO projections regarding Affordable Care Act’s impact on federal budget ($210 billion reduction over ten years) and health system savings.
Context & Question:
Families USA recently published an in-depth report analyzing Chairman Ryan’s recent budget proposal, as presented by Congressional Budget Office. The report titled “Republicans Again Propose Slashing Funding for Medicaid, Medicare, and Other Health Programs” projects the amount of federal support each state would lose for the existing Medicaid program under the proposal. For example, NY State would lose $93.3 billion over the next ten years. The report also estimates the amounts of Medicaid funding each state would lose as the result of repealing the Affordable Care Act and as the repeal “raises taxes on the middle class by $806 billion over the next 10 years,” the report also breaks down the taxpayer losses per state.
The reductions in federal Medicaid funding would have far-reaching implications on the health care system and states’ economies. Families USA’s report discusses weakening health care infrastructure, reduced access to long-term care for seniors and people with disabilities and increased burden for caregivers, negatively impacting the workforce. Cuts to Medicaid program will also lead to a significant increase in health care costs. Families USA quantified the “Hidden Health Tax” in their “Hidden Health Tax: Americans Pay a Premium” report, estimating that “uncompensated care cost across the insured, non-Medicare, non-Medicaid population to arrive at annual costs of $1,017 per insured family and $368 per insured single person in 2008.” Must Be Heard asked Ms. Bailey to elaborate on the mechanics of the Hidden Health Tax and the effect on health care costs, resulting from the proposed Medicaid cuts that will further increase the number uninsured and consequently, the amount uncompensated care.
Kim Bailey:
We have a large population of uninsured people in the US and whether or not you have health insurance does not determine whether you will get sick. We know that uninsured people forgo care for as long as possible but eventually they do need to obtain care. When they do, they often delay care and need care that is more intensive. Uninsured people do as much as they can to pay for as good of care as they can afford and they pay about a third of that out of their own pockets. So uninsured people actually do contribute a large amount and do it at great financial risk to their families. And then what happens is that doctors and hospitals need to recoup some of the cost that they have for dealing with uninsured patients, and a chunk of uncompensated care gets picked up by federal government. But the remaining chunk of uncompensated care gets passed on to those of us who have health insurance in the form of higher premiums because negotiated rates that insurance companies pay are higher. So if the proposal goes through, we would have an even larger uninsured population and the amount that gets passed on to us as uncompensated care would grow.
Context & Question:
In “Jobs At Risk: Federal Medicaid Cuts Would Harm State Economies” Families USA further projects the impact of reduced Medicaid funding flowing into state economies, leading to job losses and reduced business activity in every state. For example, the proposal cuts federal Medicaid funding by 33% in 2021. And if implemented today, the cuts would have placed 190,260 and 187,690 jobs at risk in New York and California, respectively. At the same time, as states now face budget deficits, federal Medicaid cuts would cause states to cut benefits and services. But the costs would inevitably come back to the states, as the newly uninsured would seek care in public facilities. Must Be Heard asked Ms. Bailey to discuss the resulting effects on states’ decision-making (as they must balance their budgets) as well as the impact on business activity and jobs.
Kim Bailey:
Several things would happen if the proposal goes through. The first thing that happens - any time that new federal money flows into the state there is an economic multiplier effect and the effect for the healthcare system is particularly strong, not only on the capital side of facilities and having the equipment that delivers care but also a factor of the economy where there is a number of people who are hired, a lot of specialty people who deliver that care. So if you cut federal funding coming into the state for program like Medicaid you lose that economic effect. And then the other thing that’s going to happen is that states are going to have to make up for that gap in some way. And they are in a position where they are forced to make tough decisions about how they have to deal with state budget. We know that a large share of the budget is going to pay for healthcare services at the current time, under the current Medicaid spending situation when the federal government pays a large share. So it would put states in an even more difficult position and they would have to make very difficult decisions about where their priorities lie and about how they can spend the dollars that they have…. If the states were to cut Medicaid, we would have more uninsured people, we would have more people needing care, more uncompensated care causing a burden on safety net system and public hospitals and we would have a number of people who are working in the healthcare sector that rely heavily on Medicaid spending - they would be losing potential jobs and would have less money in the economy and less of the economic ripple effect.
Question:
Following this logic, would the Medicaid expansion, to be implemented by the Affordable Care Act, provide a positive economic ripple effect?
Kim Bailey:
There is certainly a positive economic effect from investing in healthcare. And then also, beyond just creation of jobs within the healthcare sector and the effect that ripples off from there, any time you invest in population health and insure that people actually have access to care you’re going to have a healthier labor force, people who are better equipped from birth to later in life to actually be productive members of society…. We feel strongly that getting people insured and getting them care that they need will be very positive for the labor market and for our competitiveness locally and internationally as well.
Context & Question:
Congressional Budget Office estimates that the health care reform will reduce federal deficits by $210 billion over the 2012-2021 period.” David Cutler in “The Impact of Health Reform on Health System Spending” projects net national health system savings of $590 billion, including $406 billion from health system modernization. How is CBO’s figure representative of total health system savings? And what is the expected impact of health system reforms and demonstration projects (including payment reforms that will improve care and lower costs) on health system savings and on the scope of savings as reflected by CBO?
Kim Bailey:
When we’re talking about CBO scoring, we’re talking about the federal ledger. And the thing about the way the CBO scores - it is not going to capture things that are going to accrue to those with private insurance outside of federal budget. And they are also not equipped to model the effects and savings that are going to come from some of those system reforms within the ACA. They don’t, for example, score savings for a lot of the public health interventions. So we actually think that there are savings that are substantially larger than what is actually the CBO score…. David Cutler is looking at total health system savings. There are two factors going on within CBO scores. First, the federal ledger versus the healthcare system. The savings within the healthcare system are going to be much larger than within the federal sector. The other thing of course is that the CBO model is very conservative about the savings that they will accrue, so if you’re looking at things like care coordination, for example, we feel strongly that it’s going to result in savings both on the federal ledger and within the broader healthcare sector. CBO doesn’t score anything for items like that…. [One of the reasons is that they] deal within a ten-year window and some of these health system reforms will take slightly longer than that to actually go into place and to start reaping savings. Within Health IT for example, there is an upfront cost but if you look at a longer window that cost reaps a lot of benefits in the long run.