Point of View

Too many wins for North Carolina to reject a Medicaid expansion

February 18, 2013 

Given our state and national debt, it is certainly prudent to be concerned about government spending and to cast a skeptical eye on new spending proposals, giving them a rigorous review. The decision of the North Carolina legislature to reject expansion of the state Medicaid program under the Affordable Care Act, however, seems misguided.

It is important to make sure that money is not being wasted, fraud is eliminated and the Medicaid program is running at peak efficiency, as Gov. Pat McCrory has persuasively argued, but it is hard to overlook the immense financial advantages and public health improvements that expanded Medicaid would entail.

McCrory should resist the legislators’ decision and ask them to reconsider expansion.

Under the Affordable Care Act, the expansion would cover an additional 600,000 North Carolinians who have no insurance under the Medicaid program, according to the N.C. Institute of Medicine. The state currently pays 35 percent of the cost of Medicaid for its existing patients while the federal government pays the other 65 percent. Under the Affordable Care Act, the federal government will pay 100 percent of the costs of the expansion for the first three years, 94 percent, 93 percent and 92 percent for the next three years and 90 percent of the costs thereafter.

Moreover, this care will bring tangible financial benefits to the state: an influx of $1.3 billion to $1.7 billion a year, producing 18,000 to 25,000 new jobs and $497 million in additional tax revenue by 2021, according to the N.C. Institute of Medicine. This would dramatically affect the state’s economy.

One might wonder whether all of this is worth the cost of paying the 10 percent portion in succeeding years. After all, that is still a considerable amount of money. Three factors suggest that this concern is unwarranted.

First, the amount of tax revenue generated by the additional funds coming into North Carolina and spent on health care will more than make up this 10 percent share.

Second, if the legislature decides not to expand the program, the cost of caring for these 600,000 North Carolinians will not go away but will be borne, as it is now, by other state programs and by those who have insurance, because hospitals cost-shift money to pay for those who cannot pay for themselves. This effectively increases the price paid by those who have insurance. Expanding the Medicaid program will therefore help to hold down costs for those who do have insurance.

Third, and perhaps most important, almost all of the major medical centers in the state have agreed to cover this 10 percent themselves.

The expansion will essentially be costless to the state and will in fact bring increased revenues into our coffers. Conservative projections by the Institute of Medicine suggest that adopting the expansion will actually produce a net savings to the state budget of $65 million by 2021 and add a total of $14.8 billion in federal dollars to the state GDP. Expansion is, in short, an economic windfall for our economy and state budget.

Regardless of what the state decides, North Carolina taxpayers still will be paying the same amount for the federal portion of the expansion as everyone else in the country, because FICA taxes paid by each worker will be used to support the expansion nationwide. To reject expansion in our state means that our tax dollars will be going to support the health care of people in other states and not in North Carolina.

To put it in other terms, we will see a net outflow of funds from North Carolina to other states of almost $15 billion over the next eight years.

There are many reasons to have doubts about the Affordable Care Act, but it is not going to go away. Some states may turn down expansion in an effort to derail the program, but this will only hurt the residents of those states. A majority of states have already approved or will certainly approve the expansion of the Medicaid program, and the U.S. Supreme Court has ruled that the act as a whole is constitutional.

Obamacare has become a hot-button political issue on which parties have drawn sharp lines, and it is inevitable in the current environment that many partisans will feel they should oppose it. The expansion of Medicaid, however, is so immensely advantageous to North Carolina that the governor should support it and legislators should reconsider their decision. We need to set aside partisan passions and do what is so obviously beneficial for the state as a whole.

Michael Allen Gillespie is professor of political science and professor of philosophy at Duke University.

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