Rejecting federal health care dollars would mean huge tax transfer to Washington

CommonwealthFund_OptingOutMedicaid_fullOklahomans will pay $1.2 billion per year in federal taxes and get nothing in return if the state refuses federal funds to extend health coverage to low-income adults, according to a new study by the Commonwealth Fund.

The Affordable Care Act extends Medicaid coverage to all individuals up to 138 percent of the federal poverty level. Currently in Oklahoma, working-age adults are eligible for Medicaid only if they are parents of dependent children and have incomes below 37 percent of the poverty level.  Oklahoma’s current limit leaves out hundreds of thousands of working poor Oklahomans, including large numbers of retail, restaurant, and construction workers.

We can insure these workers at little cost to the state. The federal government will pay 100 percent of the cost for the newly-eligible population from 2014-2016, phasing down to 90 percent after 2020. But so far, Governor Mary Fallin has refused to accept the federal funds to extend coverage.

The report by the Commonwealth Fund, based on data from a 2012 study by Urban Institute researchers for the Kaiser Family Foundation, finds that Oklahoma will forgo an estimated $1.252 billion in 2022 if we continue to refuse federal help. Taking into account federal taxes paid by Oklahoma residents, the net cost to Oklahoma taxpayers in 2022 will be $1.254 billion.

The report also points out why accepting the federal health care funds would provide a large boost to the economy. They compare it with the federal spending on projects such as highways and defense that state leaders avidly support:

Highway funds pay local road contractors and generate jobs and benefits for local residents, and defense procurement funds pay local businesses and generate local jobs. Similarly, new Medicaid expansion funds will pay local health care providers and generate jobs and health insurance benefits for residents.

For Oklahoma, the $1.25 billion in federal funds associated with Medicaid expansion in 2022 is 50 per cent greater than projected federal highway spending ($815 million) and more than one-third of federal defense contracts in the state ($3.083 billion). 

Finally, the Commonwealth Fund report addresses the portion of the total cost of Medicaid expansion that states will cover following 2016.  The Kaiser Family Foundation projected that Oklahoma would spend $156 million more in 2022 to cover individuals newly eligible for Medicaid (although this would be offset by a decrease of $24 million in state spending for uncompensated care).  By comparison, state spending on incentives to attract private business in 2022 will be seventeen times greater, or $2.7 billion, based on data from the New York Times Government Incentives Database.

Kaiser_federal&stateThese new findings are only the latest to show significant benefits to Oklahoma from expanding Medicaid – and significant costs from failing to do so.  As we discussed in this blog post, the Kaiser Family Foundation found that from 2013-2022, federal health care spending in Oklahoma would be boosted by $12 for every $1 in additional state spending. Medicaid payments to Oklahoma hospitals alone would increase by $3.6 billion from 2013-2022, an 18.5 percent increase. Medicaid expansion would reduce the number of uninsured Oklahomans by 126,000. 

Meanwhile, the report by Leavitt Partners commissioned by the Oklahoma Health Care Authority and Governor Fallin estimated the total economic impact of accepting federal funds to expand health coverage at between $13.6 – $17.3 billion from 2013-2023. The Leavitt report determined that once program savings and increased tax revenues are considered, the net impact of expanding coverage would be a net savings to the state of $447 to $487 million over ten years. The budget savings would be especially significant in the short-term while the federal government is responsible for absorbing 100 percent of the cost.

The Medicaid expansion is a clear win-win for state economies and uninsured citizens. That’s why several Republican Governors, like Jan Brewer of Arizona and John Kasich of Ohio, have successfully pushed their states to accept federal funds through the Affordable Care Act. Oklahoma’s leaders should take heed of the clear economic benefits and do the right thing for our people.

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Former Executive Director David Blatt joined OK Policy in 2008 and served as its Executive Director from 2010 to 2019. He previously served as Director of Public Policy for Community Action Project of Tulsa County and as a budget analyst for the Oklahoma State Senate. He has a Ph.D. in political science from Cornell University and a B.A. from the University of Alberta. David has been selected as Political Scientist of the Year by the Oklahoma Political Science Association, Local Social Justice Champion by the Dan Allen Center for Social Justice, and Public Citizen of the Year by the National Association of Social Workers.

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