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Wells: Az can't afford to not expand Medicaid

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Gov. Jan Brewer made the prudent fiscal and economic choice by calling for Medicaid expansion. Now the Legislature needs to act. The math is clear. If you had the option of investing $1,650 and getting back $16,000, wouldn't you do it?

Based on AHCCCS estimates, that's Arizona's Medicaid expansion deal. For fiscal year 2014 the cost to the state is only $9 million and when fully phased in during fiscal year 2015 it rises to $165 million matched by $1.6 billion in federal healthcare dollars. If state costs go higher, the money coming back will be roughly seven dollars for every extra dollar it costs the state.

The state of Arizona would not be subjecting itself to long-term fiscal obligations should the federal share shrink. Medicaid is exempt from federal sequestration, should it occur. Health and Human Services Secretary Kathleen Sebalius has made clear that states are free to opt in or opt out at any time.

Medicaid expansion means that every Arizonan will qualify for health insurance, either through AHCCCS up to 133 percent of the federal poverty line or through a federally-operated exchange with subsidized premiums available for those with incomes above it. By 2015 approximately 200,000 more Arizonans would have health care coverage than if we fail to expand Medicaid eligibility. A Harvard health study of Arizona found that expanded Medicaid coverage lowered death rates and saved 400 lives a year.

Since the Medicaid enrollment freeze was imposed on adults without minor children in July 2011, 120,000 people have lost health coverage. Since then uncompensated care costs have doubled according to the Arizona Hospital and Healthcare Association. When those costs can't be absorbed, they are passed on to those with private insurance.

By ending the freeze and expanding Medicaid, the Grand Canyon Institute estimates that the added federal inflow of funds will create and maintain 21,000 more jobs, enough to drop our unemployment rate by 0.7 percent and grow our economy by nearly an additional one percent. That added economic benefit will generate about $100 million in state and local revenues, about $30 million of which will go into the General Fund, dropping the net cost of expansion by 20 percent.

The Affordable Care Act's revenue sources go into effect regardless of whether Arizona decides to take advantage of the federal dollars from Medicaid expansion, so not expanding Medicaid eligibility means receding. Given uncertainties with federal dollars in other areas as the March 1 federal budget sequestration deadline looms, Medicaid expansion will help steady our economic future. Yet we're already hearing from state legislative leadership that we can't afford it.

The state budget is expected to remain in austerity mode due to modest economic growth, the loss of the temporary one percent sales tax and the scheduled enactment of hundreds of millions of dollars in tax expenditures and reductions, causing many statutory state obligations like the school building renewal fund at $260 million to remain severely underfunded.

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We continue to have a structural deficit due to an insufficient and historically low revenue structure. However, $9 million for 2014 is easily doable in a $9 billion budget with a rainy day fund and a carryover surplus, and the added $156 million needed for 2015 and onwards, if not from the General Fund, could come from a provider assessment on net hospital revenue as the governor proposed, and is similar to what hospitals have already agreed to do in Phoenix.

The truth is we can't afford not to expand Medicaid. No other policy the Legislature could enact would come remotely close to bringing a long-term return of nine dollars for every dollar of state investment.

Wells authored the Grand Canyon Insitute’s study “Arizona’s Medicaid Options under the Affordable Care Act: Fiscal and Economic Consequences.”


Dave Wells holds a doctorate in Political Economy and Public Policy and is the Research Director for the Grand Canyon Institute, a centrist fiscal policy think tank.

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1 comment on this story

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Feb 20, 2013, 5:11 pm
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Great article Dave!  I’ve been in touch with both Matt Laos and Mayor Rothschild on this issue and I sure hope the Medicaid expansion initiative passes this legislative session.  Keep up the good work!

Dr John
www.tucsoncitizen.com/healing-tucson

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