Medicaid Expansion Could Net West Virginia Millions -- Lessons From Kentucky
Earlier this month, Kentucky announced it would be joining West Virginia and 19 other states in expanding Medicaid as part of the Affordable Care Act. Kentucky, however, had stronger evidence to support its decision than West Virginia. While West Virginia estimated expansion would cost the state around $375 million over the first 10 years, Kentucky looked not only at the costs but also the savings and increased tax revenue from Medicaid expansion and found it would save the state $802 million over eight years (Figure 1). If we apply these same findings to West Virginia, we could also save money, netting around $320 million through 2021.
Figure 1: Cumulative Net Impact of Medicaid Expansion in Kentucky Through FY2021
Source: "Analysis of the Affordable Care Act: Medicaid Expansion in Kentucky" Kentucky Cabinet for Health and Family Services
If you recall, I blogged about how the CCRC Actuary report used to estimate the impact of Medicaid expansion in West Virginia was incomplete. The report concluded that expanding Medicaid would cover an additional 91,500 state residents while bringing in $5.2 billion in federal revenue and costing the state around $375 million over 10 years. The report, however, didn't consider the expected economic impacts from job creation and increased tax revenue that most other states have included in their analysis nor did it look at the cost savings to the general revenue fund from anticipated reductions in expenditures to budget items such as behavioral health, local health departments, community health centers, and corrections.
As you can see from Table 1, West Virginia and Kentucky have very similar demographics. Both states have high poverty rates, poor health outcomes, and about the same the share of folks without health insurance. Using Kentucky's findings to estimate the impact of expansion in West Virginia then can give us at least a rough idea of the full effect of expansion. As a very rough ‘back of the envelope' calculation, I used Kentucky's estimated total net impact ($802.4 million) divided by the total number of people who would be newly eligible for Medicaid (308,397) to find the total net impact per patient ($2,602). Assuming a $2,602 net impact per patient in West Virginia with 123,806 newly eligible under the expansion, the total net impact in West Virginia would be around $322.5 million over eight years. Using the same calculation with Kentucky's job creation estimate shows West Virginia would create around 6,700 new jobs (Table 2). As you may recall, this is just above the number of jobs that Families USA found would be created by Medicaid expansion in West Virginia.
While these are rough estimates, it is likely they reflect a closer approximation of the net economic impact of Medicaid expansion on the state's budget and economy than the CCRC report which fails to consider savings the state budget and the increase in tax revenue collections. With this in mind, West Virginia should consider putting together a similar analysis as Kentucky. That way, legislators and the public would have a more complete picture of the impact of Medicaid expansion on the state budget and understand that it will most likely not require tax increases or finding additional revenue.