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Department of Health: Big Spending Means Big Savings?

By Calvin Thompson on December 17, 2012

Thomas Forslund, director of the Wyoming Department of Health, said Wyoming can save money by expanding Medicaid by more than what the law requires.

If ‘spending money is a good plan for saving money’ sounds strange to you, you are in good company.

Under Obamacare, the state of Wyoming is required to expand Medicaid for certain groups, such as underprivileged children. The feds have committed to cover 50 percent of these costs, and the Wyoming Department of Health estimated number of new enrollment with the mandatory program will total 10,600 people.

There is also an option to expand Medicaid to cover any adult who is ineligible for Medicare, under the age of 65, and with an income up to 138 percent of the Federal Poverty Level (FPL).  Currently Medicaid in Wyoming covers only those at or under 100 percent of FPL, that is, individuals with an annual income of $11,484 or less, or about $23,000 or less for a family of four. Wyoming’s Department of Health estimates that 17,600 additional people might enroll in this optional program if it is implemented; the program served 77,207 people in 2011.    Director Forslund recommends expanding the program, claiming it will cost the state government less to implement than the smaller, required plan.

Nothing can change the fact that 17,600 additional enrollees will cost a lot of money. So how does the state government plan to achieve this disappearing act? By passing the cost on to a federal government that is already heavily in debt.

Under the current healthcare system, about 50 percent of Wyoming’s Medicaid costs are financed by the state’s general fund. If Wyoming participates only in the mandatory expansion, the federal government will continue to fund a little under half of Medicaid’s total bill of $195.4 million. If the optional 17,600 adults are also covered, the federal government has committed to pay between 90 to 100 percent of the cost from 2014 to 2020, and absorb many existing programs into the new system. The Department of Health estimates this would save the State General Fund $47.4 million by 2020, through offsets and program absorption.

So by passing the expense on to the federal government, the estimates suggest the state would have to pay less under the optional expansion. There are plenty of problems with this sort of thinking, as Regina Meena, Policy and Legislative affairs with Wyoming Liberty Group explained.

“Saving is a wonderful concept. You start to believe that you can afford a high cost item,” she said. “It gives you hope that the more you save means the less you are going to pay. In reality, we never make a decision on how much is saved. We make a decision on how much it’s going to cost. Sometimes the cost is still so high you can’t afford to save that much. This is exactly the place Wyoming is in. We will never realize the savings as we have to bear the costs of the Medicaid expansion.  And those costs have historically remained uncontrollable.”

But for the sake of argument, let us give Forslund and the Department of Health the benefit of the doubt, and assume that the optional expansion would save the state government some money. They would still spend unnecessary cash, even if they hand the bill to the federal government. That federal money comes from somewhere; it comes from taxpayers, both in Wyoming and elsewhere. Covering 17,600 new people won’t be saving the taxpayers any money.

Source: Wyoming Department of Health

Required and Optional Populations

Costs to the Federal Government 2014-2020

Costs to the State General Fund 2014-2020

Required Coverage

$95.5 million

$99.9 million

Optional Coverage

$737.8 million

$51.2  million

Total

$864.4 million

$151.1 million

It’s foolhardy to assume that the federal government will keep coughing up huge amounts of cash into the distant future. Washington has fiscal problems.  Although the state would be allowed to revoke the expansion should expenses become too burdensome, revoking handouts is never as easy as voting them in.

Forslund recommends that the state create a statute where optional Medicaid coverage would automatically be dropped if the federal government contributes less than 90 percent of the funding, but he has not provided any recommendation for an alternative for people who might be left out in the cold.

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