Projected savings
An expanded Medicaid program would help fund many current state services. Here are the projected savings over a 10-year period:
$1.86 billion
from mental health services
$504 million
from prisoner medical services
$395 million
from adults currently covered by Medicaid
$444 million
from higher taxes paid by medical providers
$23 million
from a cut in state employee health-care costs
Total state savings: $3.2 billion
Total state costs: $2.3 billion
Net savings for state: $983 million
Source: Center for Healthcare
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Michigan taxpayers could save nearly $1 billion over a 10-year period if the state expands its Medicaid program under federal health care reform, according to a newly released report.
Most of the savings would come from reduced state expenditures for mental health services for low-income residents and medical care for prisoners, which would be shifted to the federal government under the Medicaid expansion, according to the Center for Healthcare & Transformation, a nonpartisan group that studies ways to improve health policy in Michigan.
Since July, state lawmakers and the Gov. Rick Snyder administration have studied whether Michigan should expand Medicaid eligibility and add 450,000 to 619,000 residents to Medicaid rolls over the next decade.
“We think it’s a very good deal for the state,” said Marianne Udow-Phillips, the center’s director and former head of the state Department of Human Services under then-Gov. Jennifer Granholm. “We hope this informs the dialogue, so lawmakers can make a better decision.”
If implemented, the expansion would begin in 2014, and it would be federally funded for the first two years. After that, the state would provide a match that eventually will be 10 percent of the program’s cost, or about $200 million annually.
Combining this cost with expected savings in other areas gives Michigan a net savings of $983 million over a decade, according to the report.
But House Republicans remain undecided on the issue.
They say there are many unanswered questions about how the expansion would operate, including whether the federal government can be counted on to fund the expansion indefinitely. Republican presidential candidate Mitt Romney has pledged to largely dismantle the federal health care reform measures if he is elected next month.
“How is the federal government is going to cover it and for how long?” asked Ari Adler, spokesman for House Speaker Jase Bolger, a Marshall Republican.
“Anytime you get money from the federal government, it’s always risky.”
In addition to state costs, hospital fees and health insurance premiums could increase if the state refused to join in the Medicaid expansion, according to the report. Without it, hundreds of thousands of Michigan residents would continue to be forced to seek expensive care in hospital emergency rooms.
As a result, hospitals would be pressured, for the first time, to pass more of these costs to consumers and insurance companies, Udow-Phillips said.
Under federal health care reform, Michigan hospitals will lose part of the $2.4 billion in federal funding they now receive annually for providing uncompensated care.
But Adler said Michigan Republicans are concerned about the long-term costs of expanding Medicaid rolls.
Currently, 1.9 million Michigan residents receive Medicaid benefits, and the state has an approximately $12 billion annual Medicaid budget. The federal government pays roughly 60 percent of the cost.
“As a CPA, Gov. Snyder is very interested in short-, mid- and long-range projections and he and the team are still closely analyzing the impacts and ramifications of any decision,” said Sara Wurfel, spokeswoman for Snyder.
The federal health care act expands Medicaid eligibility to anyone under the age of 65 with incomes up to 133 percent of the federal poverty level — $29,000 for a family of four or $15,500 for a single adult. Initially, the states were required to participate in the expansion but a U.S. Supreme Court ruling in June allowed them to opt out.
Even though the expansion is mostly federally funded, Adler said state residents still will foot the bill through the federal taxes they pay. Under federal health care reform, Michigan could exit the expansion after deciding to participate, but Adler said it has proven difficult politically to end a program once it’s started.
“Once you have a constituency, it’s very difficult to change that,” Adler said. “Once you have people who have coverage, it’s very hard to get them out of the system.”
Udow-Phillips said the bottom line is that hundreds of thousands of Michigan residents will continue to receive insufficient health care if Medicaid is not expanded. In 2010, there were 1.1 million in Michigan without health coverage, and a Medicaid expansion would reduce that number to 290,000 by 2020, according to the report.
“It would save the state a lot of money,” she said of the expansion, “and more importantly, many people who are uninsured today in the healthcare system would have insurance.”
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