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Government, Politics & Issues

State legislators debate the costs - and benefits - of expanding Medicaid

This article first appeared in the St. Louis Beacon, Jan. 13, 2010 - As Congress seeks to reach consensus on a bill to provide health insurance for everyone, state lawmakers are turning their attention to the price tag. The good news is that the federal government is expected to pick up as much of 95 percent of the cost of whatever legislation is enacted and that states would have up to three years after the law takes effect before they start picking up their part of the tab.

Even so, some Missouri lawmakers already are raising eyebrows as they hear very broad estimates of what the state might have to spend to expand Medicaid.

On Tuesday, some lawmakers and policymakers at a seminar in Jefferson City were told that expanding Medicaid in Missouri could cost anywhere from $250 million to $800 million a year, according to state Sen. Eric Schmitt, R-Glendale, vice chair of the Senate Health Committee. He said these ballpark numbers came from a staff member from the National Conference of State Legislatures.

Schmitt said the cost estimates meant that "the governor will either have to raise taxes or cut spending for education" to pay for Medicaid expansion. He says the plan would impose a big burden on Missouri and other states already trying to cope with recession, budget cuts and high unemployment.

Cost Estimates Vary

The numbers mentioned by Schmitt are substantially higher than a recent projection from the Missouri Department of Social Services. It had estimated that the Senate version of the federal legislation would extend Medicaid coverage to an additional 255,000 Missourians and would cost the state between $90 million and $100 million a year.

Most state officials stress that no firm figures on cost would be available until Congress agrees on a bill. Meanwhile, the National Conference is calling on the federal government to cover the full cost of expanding Medicaid. The group sent a letter Tuesday to U.S. Senate leaders of both parties, saying, "A lesser commitment from the federal government will shift billions of costs to states and will have serious short and long-term consequences for state budgets and state services."

Others say the final Medicaid costs to states must be weighed against the fact that the federal government is expected to pay a large share of the cost. For example, under Social Services' earlier estimate of an annual state payment of roughly $90 million, the federal government would add more than $1.7 billion. The point that agency officials are making is that it's not as if Missouri would get nothing from its investment.

Proponents of health reforms also note that that the reform legislation would give states up to three years to begin paying their share. The House legislation would underwrite all of the Medicaid cost for the first two years of the program, while the Senate's bill would cover costs for three.

"This is an extraordinary piece of legislation," said Sidney Watson, a St. Louis University law professor and an expert on health law and health-care access for the poor. She cited the example of a friend, a 58-year-old Missourian who earns $45,000 a year and is the father of a son who needs ongoing prescription drugs. The man's job has dropped health insurance, she said, and he was turned down last week for health coverage because of his son's health needs. Health reforms would address such issues, she said.

"People have had to go into the individual market where there are no state rules regulating health insurance," Watson said. Companies "charge what they want to cover whatever they want to cover. There now will be a lot of help for moderate income Missourians."

Senate, House versions treat the poor differently

One big concern, however, is that the Senate bill doesn't help poor people as much as the House's. A Missouri family of four with income that is 134 percent of the poverty level of roughly $29,000 would have to pay premiums of $1,182 a year under the Senate's proposal. The House bill would require that same family to pay only $443. The cost of premiums is about equal in both bills for families and individuals in the moderate income range.

The Senate's decision to require people with modest incomes to pay relatively large premiums is an issue that Congress must address, said Judith Solomon, a fellow at the Center on Budget and Policy Priorities in Washington.

Otherwise, she said, the matter could result in a voter backlash that could add to a potential effort by opponents to repeal of health reform.

Still, she praised what Congress has achieved, noting previous major health-care bills didn't even make it out of committee.

The Senate wants to limit Medicaid to people earning no more than 133 percent of the poverty rate, while the House would expand the program to cover those earning 150 percent of poverty. Either increase would benefit Missourians: A poor parent with one child can earn no more than 20 percent of poverty to qualify for Medicaid in Missouri.  Missouri's guidelines require that the parent with a child earn no more than $234 a month, and a family of four earn no more than $342 a month.

The law would mean that health insurance would still be out of reach of tens of thousands of moderate-income Missourians who wouldn't qualify for even the expanded Medicaid program. Some of them would get coverage through insurance exchanges; others would have access to coverage through Medicare; and the rest would rely on traditional private insurance.

Special Provisions Need to be Addressed

Even if Congress enacts a law, one issue that irks Schmitt is the decision by Congress to exempt Nebraska from paying the added Medicaid costs required of other states. Democrats granted the exemption to gain the vote of Nebraska Sen. Ben Nelson, a Democrat. But Nelson said on his website yesterday that he was working with Senate leaders and others to treat all states the same. He said he had opposed the Senate bill because he had always "fought against unfunded federal mandates."

Another controversial exemption was granted to Louisiana. Watson, the SLU law professor, said preferential treatment for Louisiana seemed legitimate because the number of poor people there was distorted by flooding during Hurricane Katrina. That's an issue because federal Medicaid matching payments are based in part on a number of variables, including level of poverty.

Debate over these exemptions shows how much is likely to change before a bill is enacted. Whatever the outcome, proponents stress that this nation has never came this close to enacting a health reform that would extend coverage to so many people. Because lawmakers have a chance to make history, proponents say they are likely to be more willing than usual to compromise.

"I'm guardedly optimistic that something is going to pass," says Ruth Ehresman of the Missouri Budget Project. "I think it will be an important first step that will do an enormous amount of good."

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