3rd report cites Pa. Medicaid savings under expanded federal coverage

| Wednesday, April 24, 2013, 7:09 p.m.

Pennsylvania could expect budget savings and more tax revenue if it takes billions of dollars in federal funding to expand a health insurance program for the poor.

The state budget could realize an average positive impact of $425 million a year from 2014 through 2021 by expanding Medicaid to cover more people, as called for by the federal health care reform law, according to an analysis by the Independent Fiscal Office.

“The report provides information and analysis that policymakers can use to inform the decision on whether or not to expand Pennsylvania's Medicaid program,” said Matthew Knittel, director of the state agency.

The positive impact would come from two places: the federal government would pick up more of the cost of insuring people the state currently covers, and from higher tax revenue from insurers who will add more customers.

Gov. Tom Corbett has rejected the idea of expanding Medicaid, saying that costs could be too high. A chorus of Democratic lawmakers and health care advocates have called on Corbett, a Republican, to reconsider.

A similar study was released last week by the Pennsylvania Economy League showing the state could save $4.4 billion over 10 years if the program is expanded. Another study, commissioned by the state Hospital and Healthcare Association, found at least $3.2 billion in annual economic growth under expansion.

“I'm not surprised by a new independent study showing the federally funded Medicaid expansion would be good for Pennsylvania,” said state Rep. Dan Frankel, D-Squirrel Hill. “At this point, we're approaching ‘beyond a reasonable doubt.'”

But the state Department of Public Welfare warned that the reports fail to account for the possibility that increases in tax revenue may not happen.

“I'm very concerned that not everyone has the facts, and this includes the fact that over a billion dollars for our Medicaid program is in doubt,” acting Public Welfare Secretary Beverly Mackereth said.

The U.S. Department of Health and Human Services is considering eliminating or reducing the amount of gross-receipts taxes charged to health insurers that the state can spend on Medicaid, she said.

HHS spokeswoman Emma Sandoe declined to comment on the tax issue but said the Medicaid expansion “is completely paid for by the federal government in the first three years, and the federal government will cover at least 90 percent of these costs in the years thereafter.”

Corbett spokeswoman Christine Cronkright said the governor will review the Independent Fiscal Office's report, “but receiving clarity on the GRT (gross-receipts tax) moving forward will significantly impact any analysis of costs and savings around Medicaid expansion.”

Under the IFO's analysis, new tax revenue from the gross-receipts tax would increase from $78 million in 2015 to $120 million in 2021.

Budget savings would jump to $465 million in 2015, as more people are covered under Medicaid and as the federal government covers 100 percent of the cost of those new recipients, the IFO report shows. But savings slowly decline as the federal contribution decreases, dropping to $73 million in 2021.

Knittel said that even by removing the positive effect of higher gross-receipts tax collections, the state would still realize significant yearly savings under an expanded Medicaid program.

For instance, in 2021, the state is estimated to see $299 million in positive budget impact. Taking out $120 million in additional gross-receipts tax would leave “significant savings,” Knittel said.

Up to 771,000 additional state residents could be covered by Medicaid by 2021, the IFO said.

“After adding up to one million new Medicaid recipients in Pennsylvania, the federal government will pull back after three years, leaving our taxpayers on the hook to the tune of billions of dollars,” said Jennifer Stefano, Pennsylvania director of Americans for Prosperity, a limited-government advocacy group. “We must not head down this path.”

Alex Nixon is a staff writer for Trib Total Media. He can be reached at 412-320-7928 or anixon@tribweb.com.

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