While Virginia studies whether to expand Medicaid eligibility under President Obama’s health care law, the state’s hospitals have lobbied hard to accept billions in federal funds as part of the expansion deal.
Under the current system, hospitals receive federal funding through Disproportionate Share Hospital grants they use to cover part of the expense of health care costs for Medicaid-eligible residents. Those grants are expected to see significant cuts under Obama’s law, but to make up the gap the federal government plans to pump billions of dollars of funding to states that expand their Medicaid eligibility rolls.
When the U.S. Supreme Court ruled in 2012 that states couldn’t be forced to expand Medicaid, the question of whether federal funds would be accepted came to the forefront, potentially leaving a vacuum where the DSH grants once stood.
The Virginia Hospital and Healthcare Association has been lobbying hard to expand the program.
“The cuts have already started under Medicare,” said Katharine Webb, senior vice president for the VHHA. “Medicare for most of the hospitals in Virginia is a significant source of revenue. I have got a couple of small hospitals where it’s 80 percent of their revenue. We’ve had some hospitals [have] some downsizing.”
No Economic Benefit for Expansion
VHHA tried to drive home the point in January with an economic report that projected Virginia would receive $3.9 billion in annual economic benefits and 30,000 jobs through Medicaid expansion, but Charles Blahous, a senior research fellow at George Mason University’s Mercatus Center, said the benefits wouldn’t outweigh the expansion in costs.
“In general the economic benefit argument for Medicaid expansion is unpersuasive,” he said. “There are certainly other health and social policy arguments in favor of Medicaid expansion, but most health care policy experts agree that an important policy imperative is to slow the growth of national health spending down to sustainable rates, not to increase it.”
Higher Tax Burden
Some fear the state budget could balloon with the additional health care costs. In 2009, Virginia spent $9.5 billion on Medicare and $5.48 billion on Medicaid. Those costs would rise as Virginia accepts a greater share of Medicaid costs with the federal funds.
An Urban Institute study published in November 2012 projected Virginia would spend $52.68 billion on Medicaid from 2013 to 2022 if it accepted the expansion. Without the expansion, Virginia is projected to spend $50 billion in the same period. The Heritage Foundation has calculated, based on the Urban Institute’s assumptions, that accepting the expansion would require an additional $902 million from taxpayers through 2022.
Gov. Bob McDonnell formed the Medicaid Innovation and Reform Commission to study how and whether Virginia would accept the expansion, but the outcome of the upcoming governor’s election between Republican Ken Cuccinelli and Democrat Terry McAuliffe may effectively decide the issue.
Carten Cordell ([email protected]) writes for Virginia Watchdog.
Heritage Foundation: “Obamacare and the Medicaid Expansion: How Does Your State Fare?”