The Case for Medicaid Expansion

I have a piece (caseformedicaidexpansion-1-23-17) in the latest issue of the North Carolina Medicaid Journal arguing for Medicaid expansion. I wrote it last fall and thought it was going to be out during the Fall. I updated it briefly earlier this month, by invoking a Meatloaf song. The piece is based on the ACA payment formula and the Urban Institute’s modelling of expansion uptake and costs that they completed late last Summer.

The looming Cassidy-Collins Senate replacement bill actually includes even more advantageous Medicaid expansion terms for States like North Carolina than the ACA had (appears to have 95% FMAP for long run instead of 90%).

If expanding insurance coverage is an important policy goal, there won’t be a more advantageous way for States to achieve that goal than a Medicaid expansion with favorable terms like those included in the ACA, or in the Republican health reform bill that seems to be picking up steam in the U.S. Senate. Much like the ACA, expect the Senate to set the terms for what can actually become law re health reform in Republican controlled Washington.

Fact checking Medicaid expansion

Will Doran, a News and Observer/Politifact reporter has given a Mostly True rating to Governor Cooper’s claim that North Carolina is already paying for Medicaid expansion.

I have long been a supporter of Medicaid expansion as anyone who has read much of what I have written will know. I have a piece coming out in the next issue of the North Carolina Medical Journal that tries to make the case for the expansion (I was written last Fall, with a light update). I consider the case for expansion to be fairly straightforward, but there are many complicated moving parts to get both the coverage and financial numbers straight, and certainly to estimate what I would call derivative effects like jobs.

Just to help identify some of the complexities, I include a copy of my correspondence with Will when he asked my advice on this Fact Check. He wrote me On Jan 11, and I answered later that night while riding in a cab in Washington DC, so its not the most beautiful prose but you get the point (I italicized and bolded my answers here for clarity & I removed Will’s email and phone number):


Some answers below.

From: Doran, Will
Sent: Wednesday, January 11, 2017 7:51 PM
To: Don Taylor
Subject: Media inquiry on Medicaid in North Carolina

Hi Professor Taylor, I’m a reporter for PolitiFact North Carolina and the News & Observer in Raleigh. I’m working on a fact-check about Medicaid and was hoping you could answer what’s probably a stupid question that I have.

North Carolina residents and business pay 2.4 percent of the taxes the U.S. government collects. Is it safe to also say that the state’s taxpayers cover about 2.4 percent of the federal government’s Medicaid expenses? Or is the math much more complicated in reality?

Math is more complex than this. It is possible this is a reasonable estimate, but I am not sure without some work and digging.

Here is a toe dip into the complexity. Social Security payroll taxes are a key source of federal taxes paid in, but they don’t go to Medicaid expansion, and another large tax are Medicare payroll taxes that don’t pay for Medicaid expansion. Medicaid (federal share) is generally funded from general tax revenue (income taxes) and there are a variety of taxes levied by the ACA that could be thought of as paying for the expansion. This post address expansion and taxes, but doesn’t really answer your question.

This link lists the ACA taxes

I also have one question that’s more policy-related, if I may take up a bit more of your time. Gov. Roy Cooper has said Medicaid expansion could create tens of thousands of jobs in North Carolina. But I know other states have not necessarily had that kind of result.

Kentucky, for example, has actually lost health care jobs since accepting the Medicaid expansion – despite a study that said the state would gain jobs. Is there any reason to believe that either scenario (the job gains or the job losses) is more likely to happen in North Carolina if we accept the expansion?

I am not sure. Surely someone must have done a summary of job impacts across states? Why did you pick Kentucky? There is a new model out focused on Michigan that predicts big job impacts….but I have read some criticisms of the study say the effect projected is implausibly large. The methodology of any given study in question is important. This is not really my area, but I will say from policy standpoint that I think job gains are what I would call derivative effects and not the primary intended effect. However, leveraging Billions of dollars into the state that wouldn’t otherwise be spent in the state will either increase jobs and/or wages paid to existing employees and/or expand revenue to health care providers that can be used for other purposes (like have a better bottom line). So, you could have derivative economic benefits even if you didn’t create more jobs. I don’t know this area better in part because I don’t think of jobs as the main point of Medicaid expansion. The key issue is how important is it to expand health insurance coverage? If it is impt, there will never be a more financially advantageous way for the state to do it.

I am sorry the answers are not simpler.


I appreciate any help you can give me about either of these questions. And if a phone call works better for you, my number is xxxxxxx.

Thank you.

Will Doran

PS here’s a news article on the Kentucky situation if you’re not already familiar:


Revisiting Cassidy 2015 as a potential deal

Margot Sanger-Katz from the NY Times flags an interesting pre King vs. Burwell Republican plan that could actually pass the Senate with more than sixty votes.  It was designed to deal with a conservative win in King vs. Burwell.

Let’s look at it with the 53 page PDF here:

Section 101 is the three options a state has if the Supreme Court ruled in favor  in King in King v Burwell and thus knocking out advanced premium tax credits for people who lived in states.

Option 1 would be to stay under PPACA and establish a state based exchange. Option 2 would be a complete withdrawal from PPACA with no subsidies. Option 3 would be to establish a HSA-like equivalent of coverage with most of the regulator requirements, taxes and mandates of PPACA thrown out. This is actually interesting if the funding makes sense. The default assumption is a complete opt-out. States would have to to opt into either Option 1 or Option 3.

Section 102 talks about the state alternative with HSA. It wipes out mandates and federal regulation. Essential health benefits, minimal actuarial value coverage and other regulatory requirements of PPACA that define a qualified health plan also are junked in this section. 102-4-A authorizes an initial HSA grant and the rest of 102-4 describes the mechanics of that grant. 102-C establishes a public health block grant that is 2% of the eligible funds for the HSA.

Section 103 determines the size of the HSA subsidy. This is where the money matters. The HSA amount is age and geography adjusted which is very similar in function as the ACA benchmark Silver is determined by zip code and age of the recipient. Bingo — 103-1-B is meaty.
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ACA Element inventory

The ACA is a complicated law.  It has a lot of moving and interacting parts in it.  It also has parts that can be severed from the rest of the law without significant operational impact.  I want to conduct an inventory of the major elements that we will need to be familiar with during the second round of healthcare and health finance reform debate.  A basic understanding of what the different parts of the law do and how they play nicely with the other parts of the law will put you in good shape over the next couple of months.

I will break things down to the broadest stand alone structure and make comments as needed.

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Did Gov Cooper Raise Taxes Yesterday?

Governor Cooper announced yesterday that he would expand Medicaid via an Executive order, setting up a legal dispute with the North Carolina General Assembly which in 2013 passed a law saying the State would not expand. Leaders in the General Assembly announced they would ask Congress and “Federal Officials”–presumably in the Center for Medicare and Medicaid Services (CMS) to deny the request. I don’t know how this will play out, but it represents the new Governor making clear his policy preference in this area.

Speaker of the N.C. House Tim Moore, and Majority Leader John Bell (from my hometown of Goldsboro) took another tack in criticizing the move, and said the Governor was raising taxes by his proposed action.

“Gov. Cooper proposed raising taxes on North Carolinians today, just over 72 hours into office.”

This is not true for the federal cost of Medicaid expansion (95% this year, dropping to 90% in 2020). No tax provisions were changed yesterday, nor will they change if North Carolina expands Medicaid (or does not expand Medicaid for that matter).

The Affordable Care Act (Obamacare) did raise a variety of taxes to pay for Medicaid expansion (full list of taxes, and credits related to ACA from IRS). On January 1, 2013, North Carolinians with salary or self employment incomes over $200,000 for individuals, $250,000 for couples had a tax increase of 0.9% levied on the amounts above these  thresholds. In addition, a tax on investment income (Dividends and capital gains) above $200,000/$250,000/year for individuals or couples of 3.8% also went into effect on January 1, 2013. Taxpayers in all states with salary and investment income above these thresholds have been paying increased taxes for 4 years, but so far North Carolina has not taken advantage of these monies to expand Medicaid in our state.

How about the State share of expansion costs?* Governor Cooper proposed that Hospitals and Health Systems in North Carolina pay for the States portion of Medicaid expansion. You could call that a tax if you want, but its worth noting that the hospitals have never been so ready to pay up. The hospitals will gladly pay the State’s expansion costs since they will benefit greatly from the increased revenue that will flow to them as a result of North Carolinians who would become covered by Medicaid expansion. Hospitals take care of our fellow North Carolinians who are uninsured when they get sick now. Expansion would mean there far fewer such persons in our State.

*I have a commentary piece in the next issue of the North Carolina Medical Journal that gives lots more detailed arguments, but I can’t put that out prior to publication. Hopefully it will be out in the next couple of weeks.

Gov Cooper Plans to Expand Medicaid

North Carolina’s Governor Roy Cooper announced today that he will expand Medicaid via an “amendment to the State’s Medicaid program” by this Friday, setting up more conflict between him and the North Carolina General Assembly. Several quick thoughts in what I am sure is just the first step (and not the last one) in this process.

  • While running Medicaid is the essence of an Executive Branch State government function (along with education and corrections), the fact that the N.C. General Assembly passed a law in 2013 explicitly not expanding Medicaid sets up another round of conflict between the Governor and the General Assembly over the separation of powers. I have no idea of how that plays out legally.
  • Gov Cooper said he was encouraged by “people in Washington” to take this action which presumably means the Obama Administration, who could in theory act quickly on the request. Perhaps it could be undone soon by the Trump Administration, I don’t know.
  • The emerging details of the Republican “Repeal and Something…” on the ACA in Washington may have provided some of the impetus for the urgency of this action. It looks increasingly doubtful that a clean repeal will be achieved, and with vague notions from Republican leaders in Washington saying they won’t remove coverage from people or states in any replace plan, this move could redefine the baseline against which a future block grant or increased flexibility in expansion monies could be provided.
  • In policy terms, expansion would make North Carolina’s pending 1115 waiver a better policy. Here are some thoughts I have (along with my friend Aaron McKeithan) about the waiver (with me putting on my ‘benefit of the doubt’ hat; maybe Republicans could do the same and we might stumble into a deal?). Here is a past white paper I pitched  that makes the point that expansion helps to pave the way for fundamental reform of the Medicaid program and overall health care system in North Carolina. We need a reform that expands insurance coverage while moving away from fee for service in a manner that increases the value we get for the Medicaid dollar spent in our state. Again, the 1115 and expansion go together, they aren’t in opposition in policy terms.
  • Gov Cooper calls on the hospitals in the State to pay for expansion since they will benefit greatly in financial terms from expansion. There are a variety of details that can achieve such a self financing, and paying for the expansion is the easiest call ever for the hospitals of the State. For a large health system (like Duke or UNC), the magnitudes might be on the order of “we will give you $50 Million a year in return from $500 Million a year” in increased revenue.

I have a paper coming out in the North Carolina Medical Journal soon that makes the case for Medicaid expansion. The Urban Institute has the best projections/numbers on expansion. I will link up my piece and say more about the financing details when the piece comes out, but it is fairly straightforward to develop an expansion plan in which the total cost to North Carolina is self financed by the hospitals and health systems in the State..

Comment on N.C. Medicaid Waiver

Aaron McKethan and I submitted the comment linked below on North Carolina’s pending 1115 Medicaid waiver to CMS. Short version is there are some good ideas to work with, some potential problems, the most expensive part of Medicaid (dual eligibles) are excluded from the waiver and lots of reform work is needed there, and the waiver discussion gives our state a chance to reconsider Medicaid expansion–which would really allow our state to jump start state level health reform. If we committed to transparency and evaluation of the results, we could even become a national leader in this area.

pdf (Taylor_McKethan_NC_Medicaid_Waiver_Comments_7202016)