Why Accept Medicaid Dollars: The Facts

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1 Why Accept Medicaid Dollars: The Facts If we accept federal Medicaid dollars, nearly 500,000 North Carolinians will gain access to health insurance. As many as 1,100 medically unnecessary deaths per year will be prevented in our state. As Medicaid eligibility is currently structured in NC, 70% of low-income adults are not covered. If you are poor, below the age of 65, don t have a child, are not pregnant, and are not disabled, you do not qualify for Medicaid. Because the ACA envisioned that low-income people would gain coverage through Medicaid, subsidies are not available to individuals whose incomes fall below 100% of the Federal Poverty Level. Thus, our poorest citizens those who most desperately need health care remain unable to purchase health insurance and unable to pay for their medical expenses. Currently, there are approximately 500,000 low-income NC citizens who could obtain health insurance if we accept the federal Medicaid money. [NCDMA/Kiser Family Foundation, Urban Institute] A recent Harvard/CUNY study estimated that, if North Carolina expanded Medicaid to cover these 500,000 citizens, between 455 and 1,145 deaths would be prevented each year in our state. [http://healthaffairs.org/blog/2014/01/30/opting-out-of-medicaid-expansion-the-healthand-financial-impacts/] A study in the New England Journal of Medicine estimated that there would be 800 fewer preventable deaths per year in North Carolina. Hard-working, low-income families in North Carolina need the security of affordable, quality health coverage without facing huge medical bills. With Medicaid, children and parents would be able to see a doctor if they need to, and instead of seeking routine care in an emergency room, they would be able to receive quality, consistent care at a lower cost. By accepting Medicaid dollars, we can reduce health disparities. Like most states, North Carolina has persistent racial disparities in access to health care and health outcomes. Lack of insurance contributes to poorer health outcomes in communities of color, as measured by mortality rates, infant mortality rates and prevalence of certain preventable diseases such as heart disease, diabetes, stroke and HIV/AIDS. Medicaid expansion holds tremendous potential to reduce long-standing health care disparities by extending coverage to traditionally underserved communities throughout North Carolina.

2 Accepting federal funds for Medicaid is a good deal for North Carolina. Investing in the health of our citizens will save money and inject billions into our economy. The federal government will pay 100% of the cost for new enrollees for the first 3 years and never less than 90% thereafter bringing into NC $13-15 billion for the first 6 years. [CBO} Providing coverage for those currently in the gap would also increase state revenues from drug manufacturers. Through the Medicaid Drug Rebate Program pharmaceutical companies provide a rebate to federal and state Medicaid agencies for outpatient drugs dispensed to Medicaid patients. [NCIOM] With a federal revenue stream to cover the costs of low-income, uninsured patients (who already seek treatment in doctors offices and emergency rooms), we would massively reduce our costs for uncompensated care. In the first 5 years, North Carolina would realize a net savings of $931 million in uncompensated care. [Urban Institute and Robert Wood Johnson Foundation/REMI*]. Weighing the overall costs and benefits, NCDHHS reported that accepting the federal funds to fill in the Medicaid gap would save our state approximately $65 million over ten years. [NCDHHS/REMI*] By not accepting the federal Medicaid dollars, North Carolina is subsidizing with our federal tax dollars the health and economic wellbeing of those states who have accepted the federal money. North Carolina can decline the Medicaid funds at any time. We can accept the money now, and if covering people becomes too expensive, we have the option of returning to our current system. *Regional Economic Models, Inc. (REMI) is the economic forecasting tool used by the Fiscal Research Division of the NC General Assembly. DHHS contracted with REMI to conduct an analysis of the economic impact of the Medicaid expansion on North Carolina. If North Carolina accepts the federal money for Medicaid, 43,000 new jobs will be created by These jobs would stimulate: - Increased consumer spending - New state tax revenues - Growth in NC s gross domestic product The new federal revenue and economic activity would increase the annual state GDP by $1.3-$1.7 billion/year. [REMI*] The new GDP would increase state revenues by approximately $497 million by [REMI*]

3 *Regional Economic Models, Inc. (REMI) is the economic forecasting tool used by the Fiscal Research Division of the NC General Assembly. DHHS contracted with REMI to conduct an analysis of the economic impact of the Medicaid expansion on North Carolina. By refusing Medicaid funds, we are not only losing the opportunity to create 43,000 new jobs, we are also losing thousands of existing jobs in the healthcare industry, which is plunging people into poverty. These job losses are not just the result of rural hospitals and clinics closing. Even our state s largest hospital systems are eliminating jobs to compensate for the decreased federal subsidies that Medicaid reimbursements were intended to substitute. In May, NC Baptist Hospital announced that it would lay off 350 employees as a consequence of decreased federal subsidies that would have been replaced by Medicaid expansion, and, a few months earlier, Cone Health eliminated 300 from its workforce. High Point Regional Health also announced that it would cut 115 from its workforce. Turning away nearly 5 million Medicaid dollars per day does not save this money or direct it toward deficit reduction. This money - which comes from North Carolina taxpayers - will be spent on other states, generating jobs and providing health care for their citizens. North Carolina Institute of Medicine (NCIOM) reported that, on January 1, 2014, our state began forfeiting $4.9 million a day by not accepting federal Medicaid dollars [Community Catalyst: Not only are we losing out on this money, we are currently financing - with our tax dollars - the health and economic wellbeing of citizens in those states that chose to accept Medicaid dollars.

4 North Carolina businesses will avoid penalties and have a healthier workforce if we accept federal Medicaid dollars. Accepting Medicaid dollars would save North Carolina employers between $80 million and $120 million in fees once the employer mandate is fully implemented [Jackson Hewitt] A workforce with health insurance is healthier and more productive. States that have taken federal Medicaid money will have a competitive advantage over NC. Accepting federal Medicaid dollars will protect rural and safety-net hospitals and clinics from being pushed to the brink by the growing costs of caring for the uninsured. Hospitals are vital to keeping our communities healthy, and they are also economic engines. Investing federal Medicaid dollars in our hospitals will keep them strong. Medicaid dollars make it possible for our local hospitals to provide essential services and equipment accessible to everyone, such as state-of-the-art neonatal intensive care units and professional training to doctors and nurses. Without this federal support, many hospitals and clinics in our poorest counties will not survive because government subsidies for treating indigent patients have been discontinued. Medicaid reimbursements would provide the revenues to replace those subsidies. Without federal Medicaid funds, North Carolina hospitals will lose $650 million in charity care costs. [NCIOM] Cone Health System estimated that its cost of treating uninsured patients in 2013 exceeded $63.4 million. Charlotte area hospitals had $928 million in uncollectibles during the first 9 months of That was a 26% increase over the same period during the preceding year. When rural medical facilities shut down, jobs will be lost. To date there have been over 560 hospital jobs lost in NC. [NCJC] When rural medical facilities shut down, all patients both insured and uninsured will be forced to travel long distances for urgent and acute care.

5 Refusing new federal funds for Medicaid will mean higher insurance premiums for everyone. The economic burden of uninsured citizens is borne by those who have insurance. Uninsured people forgo medical care and medications required to manage chronic, life threatening diseases. When they absolutely must seek treatment, they go to the ER and are often admitted as inpatients. They can t pay their bills, so doctors, hospitals and clinics recoup their losses by raising their rates. Then, these rate increases are passed on to families and businesses in the form of higher insurance premiums. Families USA described the impact of this cost shifting on the premiums of families and individuals in each state during 2008: - For single North Carolina citizens paying an annual premium of $4,700, the average cost shift was $ For a North Carolina family paying $12,700 in premiums, the average cost shift per year was $1400 [Families USA, 2009] From 2008 to 2013, the national rate of cost shifting grew approximately 25%. Extrapolating from NC s 2008 figures, one can estimate that cost shifting in 2013 caused a $625 increase in premiums for individuals and a $1750 increase for families in our state. Accepting federal funds will allow North Carolina to build on a Medicaid program that is already one of the most cost-effective systems in the country. North Carolina already has an effective, efficient Medicaid program whose administration costs are remarkably low compared to other states. Kaiser Family Foundation reported that, since 2007, our Medicaid program has experienced the slowest rate of annual growth in the nation. According to North Carolina s Fiscal Research Division our state s per capita spending on Medicaid has declined by over 11% since Over the same period, national per capita spending on Medicaid increased by 6%. In fact, the state's current program recently won a national award from the Healthcare Leadership Council. The award recognized Community Care of North Carolina which is a public-private partnership that coordinates services for about 80% of the state's Medicaid population. Studies have shown that the Community Care model has saved money for North Carolina s Medicaid program. According to the state audit, for example, last year Community Care saved the state about $50 million. [WFAE report, August 2013].

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