3a Stan Dorn

Medicaid and SCHIP: Dollars and Common Sense: 

Medicaid and SCHIP: Dollars and Common Sense Stan Dorn Senior Policy Analyst Economic and Social Research Institute Families USA National Conference January 27, 2005

On a personal note : 

On a personal note I’m not an economist I don’t even play one on TV My boss is an economist and usually reviews my work He’s out of the office this week

Topics : 

Topics Ups and downs Taxing and spending Winners and losers Expensive and cheap Real and illusory

Part I: ups and downs: 

Part I: ups and downs

The business cycle: 

The business cycle

Ameliorating recession – what’s a policymaker to do?: 

Ameliorating recession – what’s a policymaker to do? Monetary stimulus – lower interest rates Fiscal stimulus Raise spending Cut taxes Automatic fiscal stabilizers Stimulus automatically rises and falls, against the business cycle (“countercyclical”)

Unemployment insurance: 

Unemployment insurance Grows when unemployment rises, falls when unemployment drops Impact, during average recession between WW II and 1999: Mitigated the loss in real GDP by 15 to 17 percent Saved more than 130,000 jobs in the average recession’s peak year Source: L. Chimerine, T. S. Black, and L. Coffey, Unemployment Insurance as an Automatic Stabilizer: Evidence of Effectiveness Over Three Decades, Coffey Communications, LLC, for U.S. Department of Labor (July 1999) Unemployment Insurance Occasional Paper 99-8. http://wdr.doleta.gov/owsdrr/99-8/99-8.pdf

Changes in Medicaid spending, spending on unemployment insurance, and the unemployment rate: 1983-2003: 

Changes in Medicaid spending, spending on unemployment insurance, and the unemployment rate: 1983-2003 Source: U.S. Bureau of Economic Analysis, Dept. of Commerce, August 2005; U.S. Bureau of Labor Statistics (BLS), August 2005. Calculations by ESRI.

Impact of a 1 percentage point change in the unemployment rate (standard Medicaid program, no cap on federal dollars): 

Impact of a 1 percentage point change in the unemployment rate (standard Medicaid program, no cap on federal dollars) Source: Dorn, Smith, and Garrett. ESRI, HPA and the Urban Institute, 9/27/05.

Implications for state decisions about Medicaid waivers: 

Implications for state decisions about Medicaid waivers Caps on federal Medicaid dollars could hurt a state’s ability to recover from future recession More important – such caps could prevent the state from providing health coverage to vulnerable people precisely when ESI declines and Medicaid is most needed

Part II: Taxing and spending: 

Part II: Taxing and spending

What happens when taxes are raised to expand health coverage?: 

What happens when taxes are raised to expand health coverage? Claim: “Raising taxes will hurt the state’s economy!” Response: “Expanding health coverage helps the state’s economy even more!” Urban analysis in MA: universal coverage + $700-900 million tax increase, would increase personal income by $400 million and create 7,300 to 8,600 jobs. Why? Taxes reduce private spending, some of which would have happened outside the state. Almost all health spending happens within the state. Other factors: more federal money in state, higher productivity Source: Holahan, Blumberg, Weil, Clemans-Cope, Buettgens, Blavin, and Zuckerman. Urban Institute, 10/05.

Part III: Winners and losers: 

Part III: Winners and losers

Scenario: use an employer assessment to expand health coverage: 

Scenario: use an employer assessment to expand health coverage Claim: “Forcing employers to pay will hurt business!” Response: “More employers win than lose!” Fewer uninsured means less cost-shifting, lowering premiums for employers that cover their workers Exempt the smallest firms from the employer assessment (e.g., under 10 workers) Let employers subtract from the assessment premium payments and workers covered from other sources –only firms that don’t cover their workers will pay

Example: winners & losers in CT: 

Example: winners & losers in CT Source: AHRQ. MEPS-IC. July 2005. Calculations by ESRI, January 2006. http://www.meps.ahrq.gov/MEPSDATA/ic/2003/Index203.htm

Connecticut workers at firms that offer coverage vs. workers at firms with 10+ workers that do not offer coverage: 2003: 

Connecticut workers at firms that offer coverage vs. workers at firms with 10+ workers that do not offer coverage: 2003 Source: AHRQ. MEPS-IC. July 2005. Calculations by ESRI, January 2006. http://www.meps.ahrq.gov/MEPSDATA/ic/2003/Index203.htm

Part IV: Expensive and cheap: 

Part IV: Expensive and cheap

Metrics forcoverage expansion costs: 

Metrics for coverage expansion costs State budget costs vs. total health spending Premium costs vs. taxes Change in health spending, as a percentage of total health spending

Employer responsibility: 

Employer responsibility If shift costs from employers to public sector, public costs go up more than total health care costs If premiums go down and taxes on employers go up, firms wind up in the middle

Covering all the uninsured nationally would raise health spending by 3 percent, or less than half of one year’s health care inflation: 

Covering all the uninsured nationally would raise health spending by 3 percent, or less than half of one year’s health care inflation Source: Hadley and Holahan, 2005; CMS, 2005 (NHE). Calculations by ESRI, 1/06.

Part V: Real and illusory: 

Part V: Real and illusory

IOM: 

IOM Loss per uninsured - $1,645 - $3,280 Illusion: this much money is saved when someone gains coverage Reality: this is a dollar value of improved morbidity and mortality resulting from insurance