A publication of the Kentucky Center for Public Service Journalism

While health care jobs fall short, officials say Medicaid expansion on track to pay for itself

By Al Cross
Special to KyForward
 

The basic financial premise of Kentucky’s expansion of Medicaid under federal health reform is that the addition of so many people and money to the health care system will create enough jobs to generate state tax revenue sufficient to cover the state’s share of the expansion.
 

However, the jobs numbers have been falling short of projections that support the premise, raising questions for the governor’s race and the state budget, which will need money for the expansion in 2017. State officials point to a recent uptick and say the expansion is still on track to pay for itself through 2020.
 

The federal government is paying the entire cost of the expansion for the first three years, but the state will have to pay 5 percent in 2017, 6 percent in 2018, 7 percent in 2019 and 10 percent (the limit set by the law) in 2020.
 

The Urban Studies Institute at the University of Louisville estimated in a February 2015 report for the state by Deloitte Consulting that in 2014, the first year of the expanded Medicaid program, that the expansion had created more than 12,000 jobs, including 5,400 in health care.
 

But the latest adjusted data from the federal Bureau of Labor Statistics show that from December 2013 to December 2014, Kentucky employment in health care and social assistance rose by only 3,100 – from 230,100 to 233,200. The number of health care jobs is the main driver of other types of jobs related to the expansion.
 

(Chart by Dr. Paul Coomes, University of Louisville)

(Chart by Paul Coomes, University of Louisville)


 

This year, monthly BLS figures show that the growth in health care jobs has accelerated, to 234,900 in April and 235,700 in May (a preliminary estimate). Those data and other factors help state Health Secretary Audrey Tayse Haynes argue that the expansion is still on track to pay for itself through 2020, the next-to-last year of Deloitte’s projections.
 

“You can’t deny that overall employment is up,” Haynes said in an interview. She also cited state figures for June, which said Kentucky jobs in health care and education rose by 3,100 in June, for a total gain of 11,900 this year in those combined sectors, broader than the sector defined by BLS.
 

The one-month gain for health care and social assistance was 2,700, and the gain for the first half of the year was 9,500, or 4.1 percent, said Manoj Shanker, an economist for the state Office of Employment and Training.
 

“The job growth has been fueled partly by the introduction of over $2 billion in expanded Medicaid Services beginning in 2014,” Shanker said, calling it “manna from heaven.”
 

However, retired UofL economist Paul Coomes isn’t convinced there is a solid trend. He argues, “It is dangerous to look just a month to month changes. The annual data tell a more comprehensive story.”
 

Coomes points to BLS data showing that Kentucky averaged 230,300 health-care and social-assistance jobs in 2014, down from an average of 231,000 in 2013. “You can see there has been no job growth the last two years,” he said.
 

Haynes argues otherwise. “It doesn’t say any of that at all,” because of the latest state jobs numbers, she said. “You cannot drop over $2 billion in any economy, but in particular Kentucky’s economy, and not see job growth.”
 

Haynes acknowledged that monthly jobs numbers are subject to revision, but said she is confident because the state has now measured jobs for a year and a half of Medicaid expansion. Through 2020, the expansion is estimated to create 40,000 jobs, less than half in health care. Haynes said the estimates should be refreshed each year, perhaps by different researchers.
 

BLS figures provided by Coomes show that a loss of jobs at Kentucky hospitals is largely responsible for the shortfall in expected health care jobs.
 

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(Chart by Paul Coomes, University of Louisville)


 

Haynes said that is a national phenomenon, as hospitals adjust to other features of the Patient Protection and Affordable Care Act. She said services that were once being done only in hospitals are now being done elsewhere, and hospitals now have their Medicare payments reduced if patients are readmitted within 30 days. Kentucky has one of the nation’s highest readmission rates.
 

“Just because there is a specific industry or institution within the overall sector that has had an overall net loss of jobs does not mean that the overall sector has not improved,” Haynes said. She said the state could have also applied a readmission penalty to Medicaid patients, but did not.
 

Kentucky hospitals have said they have been forced to lay off employees because of problems with the managed-care organizations, mostly insurance-company subsidiaries, that oversee care of Medicaid patients.
 

Hospitals complain that they lose money on each Medicare or Medicaid patient because the government programs reimburse them at less than cost. Haynes and her staff counter that the hospitals no longer have to write off millions of dollars in bad debts because relatively few people now lack health insurance.
 

“In addition to getting paid lots more by Medicaid, they’ve also seen their uncompensated care plummet,” said Robin Rhea, an economist in the Cabinet for Health and Family Services, which Haynes runs.
 

Louisville businessman Matt Bevin, the Republican nominee for governor, has said that he would eliminate the Medicaid expansion because the state can’t afford it. Attorney General Jack Conway, the Democratic nominee, said last month that the state will have to find a way to pay for the expansion, and for Bevin to “say you’re going to kick a half a million people off of health insurance based on what we may or may not be able to afford in 2021 is irresponsible.”
 

From Kentucky Health News, an independent news service of the Institute for Rural Journalism and Community Issues, based in the School of Journalism and Telecommunications at the University of Kentucky, with support from the Foundation for a Healthy Kentucky. Al Cross is director of the institute.

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