COLUMN: Expansion will create jobs, add tax revenue
COLUMBIA — It’s legitimate to argue that Medicaid shouldn’t be treated as a jobs generator, as Gov. Nikki Haley’s Medicaid director does.
But at least as long as our tax dollars help pay for expanded Medicaid coverage in other states, whether we accept our share of that funding or not, it’s not legitimate to ignore the jobs that an expansion would create – or the extra tax revenues those jobs would generate to offset the cost.
Money doesn’t just disappear when it’s spent on “government” or government programs. It might not be spent as efficiently as we’d like, but it’s spent, and that spending reverberates through the economy.
Pumping an extra $1.8 billion in federal Medicaid funds into our state every year will create more jobs, for doctors and nurses and pharmacists and all the support people who work in doctor’s offices and hospitals and rehab centers, and that will produce spin-off jobs when those people with new jobs buy groceries and clothing and houses and other goods and services.
And our state will collect more money in income and sales taxes when those additional people are employed and purchasing more taxable goods.
As a study for the S.C. Hospital Association explains: “The benefits from an increase in federal funding can be likened to the benefits resulting from recruiting any other new spending activity to the state, such as increases in tourism spending or manufactured exports.”
So we can reject out of hand state Health and Human Services Director Tony Keck’s out-of-hand rejection of the hospitals’ study, which said the Medicaid expansion would generate tens of thousands of new jobs and pay for itself over the first seven years.
The report, prepared by a USC economist, projects that accepting the federal money to cover everyone who makes up to 138 percent of the federal poverty would produce 44,000 new jobs by 2020; this would result in $9 million more in increased tax collections than it would cost the state over the first seven years, as the federal government’s share of the cost drops from 100 percent to 90 percent, where it will remain unless the Congress changes the law. That’s not much of a surplus a $7 billion state budget, but it’s better than having to pay more.
The study says the extra $1.8 billion in annual federal funding would increase our state’s gross domestic product by 1 percent and increase our health-care employment by about 15 percent, from 188,000 jobs to 217,000. The other jobs – and this is where economic projections get really squishy – would be concentrated in the retail, food services, private household operations and real estate sectors. All told, the new jobs would result in an additional $105 million in annual state tax collections, or a little more than half of the extra $200 million the state would have to spend on the program once we start picking up our full 10 percent.
Does the Hospital Association have a “shocking” amount of “pure self-interest” on the question of whether South Carolina expands its Medicaid program, as Keck charges? Perhaps not “shocking,” but certainly there’s self-interest at play.
Might its figures be overly optimistic? Certainly. Just as the projections on how much the expansion will cost might have been overly pessimistic in a report produced for Mr. Keck, who has been unabashed in his opposition to an expansion.
And figuring out just how solid all those numbers are should be an important part of the debate as lawmakers grapple with whether to expand Medicaid, as the federal health law mandated but the U.S. Supreme Court has allowed each state to decide.
Indeed, unless the Legislature decides that it has an obligation to provide medical care to the poor regardless of the cost – which it’s not going to do and probably shouldn’t do – there are lots of practical questions that need to be asked:
If legislators reject Haley’s rejection of the expansion and opt in, how would we afford the extra cost, projected at $28 million in 2014 and rising to $200 million by 2020?
If they fall in behind the governor, what would happen to people who can’t afford to purchase health insurance but by law must have it, because that law intended for them to be covered by Medicaid?
And this one is huge: What would happen to the cost for the rest of us at those hospitals that by law must provide care to anyone who walks into their emergency rooms, but whose federal offsets for some of that care are set to dry up, because the law intended for everyone to have some type of insurance?
What’s the chance that the Congress will pull a bait-and-switch, reducing the promised 9-to-1 federal match once states agree to expand the program, potentially locking themselves into that expanded coverage regardless of how the reimbursement rate changes?
But two questions that do not need to be asked – that cannot even legitimately be asked – are whether the expansion would create more jobs in our state, and whether that would result in more tax revenues to offset part of the cost of the expansion.
Even if the hospitals’ projection is inflated, the indisputable fact is that injecting an extra $1.8 billion a year into our state will create a significant number of new jobs, and that will generate additional tax revenues.
And that means that our state would not have to raise taxes or cut services by that full $200 million a year in order to provide $2 billion worth of medical care, much of which we’re going to end up paying for anyway, with or without the federal government picking up the other 90 percent of the cost.
Cindi Ross Scoppe is an associate editor with The State newspaper in Columbia.