Tuesday, November 5, 2013

Nonsensical Budgeting

If you’re like me, you’ve probably found the relentless conservative Republican opposition to Medicaid expansion more than a little mystifying. After all, if here in Montana we agreed to Medicaid expansion under the terms of the Affordable Care Act, we would receive Federal funding that would create thousands of new jobs and hundreds of millions of dollars in new income. It would reduce hospital charges and private health insurance costs. And most important of all, it would provide good health insurance to 70,000 low income Montanans who now go uncovered. What’s not to like? How could legislators of sound mind and with the state’s best interests at heart turn down this opportunity? Anybody out there got an answer?

Well, yes! Senator Fred Thomas does.

But unfortunately, it makes no sense. Zero. Zilch. Nada.

I am not making this up. Writing in a recent Missoulian guest column, Thomas argues that the Legislature was “right to reject Obamacare Medicaid expansion” because of the “hole it would blow in our balanced budget.”  Here’s the way Thomas has it figured: when we were putting together the budget for the current (2014-15) biennium, we thought we’d have about $319 million more in revenue than we had in the biennium before. But Medicaid expansion was expected to cost the state $179 million in the 2018-19 biennium and $282 million in 2020-21.  So we would have used up “up to 88% of … current revenue growth” to fund Medicaid and thus could not have increased funding for schools, or the University system or other services without blowing that hole in our budget.  What Thomas has calculated here is that Medicaid costs six years in the future amount to 88% of our projected revenue growth right now.

What this calculation means is anybody's guess.

The numbers Thomas is using look okay. The go-to source for the economic effects of Medicaid expansion in Montana is a report by Gregg Davis at UM’s Bureau of Business and Economic Research.*  Davis provides both low and high estimates for the cost to the state of Medicaid expansion and Thomas is apparently using the high one.  You can argue the number if you want, but that’s really not the point.

If we want to know how much of our increased current revenue we are going to encumber through Medicaid expansion, we need to know how much our current Medicaid expenditures are going  to grow. But that number, which would mean something, is – surprise! –  a whole lot less than the one that Thomas randomly pulls out of the hat. In fact, Davis estimates that the state’s 2014-15 cost of Medicaid expansion would have fallen somewhere between $35 and $40 million. That means that expansion would have used up somewhere between 11 and 13 percent of the additional $319 million that Thomas says we can expect to take in. 

But wait! There’s more!

If the state had taken the plunge and spent $40 million this biennium to expand Medicaid, according to Davis the corresponding Federal contribution would have been $1.054 billion (yup, that’s billion with a b). That would have meant a whole lot of new jobs and new income for Montana, and of course a whole lot of new state and local tax revenue as well. How much? Davis puts it at $75 million. That’s above and beyond the $319 million Thomas is already counting on. We could have spent $40 million and collected $75 million more in new tax revenue than we thought we would.

So far from blowing a hole in the budget, far from gobbling up all the new revenue, Medicaid expansion, if we'd had the common sense to accept it, would have increased an already substantial budget surplus.

If all this sounds depressingly familiar, don’t be surprised. It’s business as usual. Whenever there’s a program that’s going to provide an essential and valuable service to the public, and anti-government conservatives don't like it, they monkey with the numbers and predict financial doom. If they’re lucky, they can even  make it sound like standing in the way of progress is the right thing to do. I mean, after all, think about how that shut down thing worked out.

An Estimate of the Economic Ramifications Attributable to the Potential Medicaid Expansion on the Montana Economy. Not exactly mellifluous, but heck, Gregg’s an economist. That’s the way we roll. 

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