Cash flow of rejecting free money

Andrew Sprung at XPostfactoid is doing a great series on the individual states and their performance on  His post on Florida generated an interesting insight and one hell of a comment that I want to expand on.

In Florida, 856,092 private plan enrollees — more than half (53.6%) of the total — had incomes between 100% and 150% of the Federal Poverty Level (FPL). That compares with 47% in all states using that refused to expand Medicaid, and just 22% in expansion states.

Those with incomes in 100-138% FPL range would be Medicaid-eligible if the state had expanded. We don’t know exactly how many there are, but my prior analysis of national enrollment numbers suggests that at least two thirds of the 856k in the 100-150% FPL range are Medicaid-eligible — a bit more than a third of all private plan enrollees in the state (and maybe a good deal more).

In Miami-Dade, the proportion of low-income enrollees is even more eye-popping. Fully two thirds of enrollees — 259,000 out of 392,000 — had incomes in the 100-150% FPL range….

and the very interesting comment:

I am curious about whether an appreciable fraction of the cash influx a state loses by rejecting Medicaid expansion is recovered for the rejecting state in premium subsidies for the 100-138%-ers.

Liberal technocrats have been assuming that the states which refuse to expand are giving up massive amounts of money and thus economic growth by refusing to expand Medicaid will eventually expand.  However, are we accounting for the additional cash flow coming in as premium and cost sharing subsidies for people making between 100% and 138% Federal Poverty Line.  Brad Delong on Kansas from last fall:

 there is one number that I cannot find on either graph or in either version of the policy brief:

$8 billion.

That $8 billion is the amount of federal dollars the U.S. government will commit to match 100% of extra costs for the first three years and 90% for the next seven if Kansas expands the Medicaid program as ObamaCare envisions. And that is money that will not flow to Kansas if Medicaid is not expanded by Kansas.

And a more mathed-up Delong post:

The rejectors have 1/3 of the wealth of the nation–call it $5 trillion/year. They are throwing 0.7% of that away to make a political point….In the short-run of our currently-depressed economy we want to apply the within-monetary-union Keynesian multiplier to these flows: Medicaid-rejcting red states are thus making themselves 2% poorer in the short-run. For medical-care hubs like Dallas, Omaha, Atlanta, and Kansas City, the effects are likely to be larger: 3% less in terms of economic activity relative to the baseline, while the Bostons, the Denvers, and the Albuquerques will be on baseline. In the long-run–should they continue this insane and self-destructive policy–we want to apply Enrico Moretti’s long-run regional economic distribution multipliers–which means that we are talking a fall relative to baseline growth of 6% of regional GDP as far as medical-hub cities are concerned.

Does this analysis hold true for all the moving parts of the ACA as a whole?

The cash outflow to the federal government part is a constant whether or not a state expands Medicaid, it is a constant whether or not a state goes on or sets up their own exchange.  So the cash outflow component is a constant and not worth analyzing.  However cash in-flow is dependent in a post-King world only on whether or not they expanded Medicaid.

Now how do the cash flows balance?

Medicaid Expansion states receive two sets of cash flows from the federal government. The first cash flow is the Medicaid expansion money.  This is divided into two sub-pots of money.  The first pot of money is truly new money to cover newly eligible individuals.  The second pot of money is new federal money that is diplacing previous state spending on voluntary Medicaid programs for non-mandatory to cover populations.  This is new money that convienently displaces some state money to either other budget areas or requires lower state level taxes for the same set of services.   Poorer expansion states will have a higher proportion of their Medicaid expansion cash inflow be for net coverage expansion than richer expansion states.

The second set of cash inflow for Medicaid Expansion states is the premium and cost sharing reduction subsidies.  These are constant with regards to state level policy and apply to people making between 100% and 400% Federal Poverty Line.  Most of the subsidies are flowing to people making between 138.1% FPL and 400% FPL as the law defaults people to Medicaid if they are Medicaid eligible.  There are a few corner cases and odd-ball situations where someone making 110% FPL receives an Exchange subsidy but is not Medicaid eligible, but it is insignificant.

Medicaid Rejection states don’t see any of the Medicaid expansion money. This is the .7% of group GDP that is being thrown away in Brad Delong’s post.  However they are receiving full Exchange subsidies for two groups of people.  The first group is the group of people who make between 138.1% FPL and 400% FPL.  Since Rejection states tend to be poorer than Expansion states, the average personal contribution is probably slightly less as the subsidy eligible population income distribution is skewed slightly poorer and to the left of the chart.  Rejection states will receive slightly more subsidiy per person who makes between 138% and 400% FPL than Expansion states on average given a constant premium level.

The second sub-pool of money from the ACA that Rejection States are accessing is Exchange subsidies for people making between 100% and 138% FPL.  This sum is massive compared to the amount of Exchange subsidy money received by Expansion states for the same population.  The Expansion states received Medicaid dollars to cover this group of people instead.

There are a few questions that need to be asked.  The first is how large of a percentage of the 138% Medicaid Expansion Eligible population in each state is also eligible for Exchange subsidies as they make over 100% FPL?  Given that un-insurance skews massively poorer than general population, and the Rejection states tend to have stricter/less permissive Medicaid Legacy eligibility guidelines, I am betting the Exchange subsidy eligible population is a significant but not majority population group.

Secondly, how rich are the federal subsidies.  I spent some time on looking for policies for single 45 year olds who make 120% FPL in a variety of Rejection states.  It seems like the federal subsidy is between $250 and $350 per month in most cases with another $100 or so of hidden cost sharing assistance subsidy thrown in, so total federal spend is between $350 and $450 per person.  The individual capitation payment for reasonably healthy Medicaid expansion is also roughly in that same region.  Medicaid buys more services as the price per unit is much lower, but the net federal spend per person between 100% and 138% FPL is almost a wash.

If we assume that the net federal spend per person who is Medicaid eligible is roughly the same plus or minus a reasonable amount, the net economic loss to a rejection state is “only” the amount of Medicaid spending that is available to cover people who make under 100% FPL as well as those people over 100% FPL but under 138% who would have signed up for Medicaid but did not sign up nor continue to pay their premiums for an Exchange policy.

That number is significantly smaller than Brad Delong’s .7% GDP, probably closer to 0.5% GDP.

The costs from a state economic development perspective are significant but smaller and if that is the cost of fucking over the poor, Mississippi, Alabama and others have demonstrated throughout their history that they are more than willing to pay that minor price to pay homage to their ideology and assert the dominance of their elite heirarchy.






NB: I need an intern :)

17 replies
  1. 1
    Baud says:

    How’s the daughter feeling?

  2. 2
    Richard Mayhew says:

    @Baud: Much better, she has a cool temporary cast and will be getting a real cast that she can color on later today. I promised her that we would go pick up a multi-color pack of Sharpies. She is excited about that. Amazing what a combination of immobilization, elevation, ibuprophen, and ice cream can do to her mood.

  3. 3
    MattF says:

    OT, but ‘health care relevant’:

    I learned a few days ago about ICD-10– from a post at Language Log. ICD-10 is the master list of medical conditions that the insurers use to sort their customer’s maladies and is infamous among those who care about these things.

    It’s really all quite amazing, a cross between database engineering and ontological absurdity. Some of the odder categories are illustrated here.

  4. 4
    raven says:

    @Richard Mayhew: What did the X-ray’s show, break or sprain?

  5. 5
    Amir Khalid says:

    Richard mentioned yesterday that it was a fracture.

  6. 6
    Davis X. Machina says:

    OT, but ‘health care relevant’:

    Again, related, if not strictly on-topic: Norm Orenstein on how the story of ‘how Obamacare got passed’ that ‘everyone’ knows, is wrong, and why that’s unhelpful going forward: The Story of Obamacare’s Birth, at The Atlantic.

  7. 7
    raven says:

    @Amir Khalid: When I was here it was still up in the air.

  8. 8
    Richard Mayhew says:

    @raven: 2 broken bones, buckle fractures if that means anything to you, so cracked not shattered.

  9. 9
    catclub says:

    My understanding was that those in the 100-138% FPL were NOT supposed to get subsidies. They get them by claiming a higher income, get the maximum subisidy, and then the IRS does not demand a refund of those subsidies when they show up in the 100-138% FPL range, which is supposed to be covered (more cheaply) by Medicaid. Now the IRS has to be the heavy. I am not sure if they have bothered.

  10. 10
    Kay says:

    @Davis X. Machina:

    It is good. My problem with the economic interventions wasn’t that they were too small it’s that they were too scattered. I just fundamentally don’t believe in the management slogan of “it’s not either/ or, it’s plus/ and!”

    Part of that is directly attributable to Pelosi, but I would have liked to see fewer goals and more focus. Everybody can’t win. If you don’t set priorities someone else will. Whatever they had in stimulus I would have liked to see it narrowed and do fewer things completely and well rather than everything under the sun half-assed.

  11. 11
    Richard Mayhew says:

    @catclub: No, people who make 100% to 138% FPL were always subsidy eligible, just the original law as passed and signed and not fucked by the Supreme Court would have seen very few people get subsidies as they would have been Medicaid covered.

    What you are thinking about is what I’ve advocated for people who made 95% FPL and live in a Rejection state — find ways to optimistically but plausibly project an income for the current year of 100.1% FPL in order to qualify for some subsidy. If the income at the end of the year is 100.1% FPL or greater, the IRS won’t care, and if your income is 99.99% FPL or less, the IRS won’t take the money back; if anything they may send a refund check.

  12. 12
    raven says:

    @Richard Mayhew: Sort of, I had a “compression fracture” of my 6th vertebrae. Sucker didn’t move but it was cracked. That was unlike the 18 bone fragments that my leg shattered into when I fell out of an apple tree after 8th grade football practice. Those are just the major ones, I’ve broken lot’s more from head to toe.

  13. 13
    Richard Mayhew says:

    @raven: I know what you mean, I’ve been lucky — nothing bad with my back, but arms, legs, ribs have all had their own breaks

  14. 14
    Gimlet says:

    The Wall Street Journal (7/3, Gershman) reported in its “Law Blog” that lawyers representing House Republicans and the Obama Administration clashed this week over the ACA as both sides filed briefs in Boehner v. Obama, which concerns whether the White House overstepped its authority in paying for and implementing the health law. The Administration said in its brief that if US District Judge Rosemary M. Collyer allows the suit to go forward, the House “could sue the Executive over virtually any dispute over the meaning of federal law.”

    The Hill (7/2, Sullivan) reported that House Republicans say the White House is unlawfully spending money on “cost-sharing reductions” under the ACA, which Congress declined to appropriate money for. The Administration “counters it does not need an appropriation because the funds were made permanent and mandatory by the Affordable Care Act.”

  15. 15
    J R in WV says:

    So last Feb. I had total right shoulder joint replacement. It hurt quite a bit before the work, and for about 3 weeks after surgery it hurt still more. Now it doesn’t, plus I got more mobility than expected (156 vrs 140 max).

    So in late May the surgeon’s scheduler set me up for left shoulder work in early July, Yay!

    Then the next day she calls to ask if I want to reschedule for late June, as she learned that my benefit year reset on July 1, so if they did the work in June, all my deductables would already be paid from when I had the first operation, thus saving me at least some money.

    My insurer told her about this! Or at least the contractor for the state health insurence program told her about it, AND then she was happy to reschedule me into, I dunno, a spare OR slot they were saving, or whatever. Part of this may be the small town factor, but still, how nice!

    So now my left arm is temporarily useless, while my shoulder heals from all the sawing and “pounding and pounding”! I was too into physical hard work which both caused the loss of cartilage (along with osteoarthritus (sp?) and musculature development that caused them some bother while doing the procedure.

    Now I type with one hand also too. Do everything one-handed so far.

    A small happy health-care story !! You may tell it to small children at bedtime, if you wish! ;-)

    My shoulder after 1.4 weeks hurts pretty good from the good Dr’s work, but that will heal. The pain from the cartilage-free joint was getting worse quickly, and, as many of us have learned, that is a special bad kind of pain. Thank you, Health-care industry for being able to do a fix that minimizes the pain! Keep working on how to regenerate cartilage, too!

  16. 16
    Matt McIrvin says:

    @Davis X. Machina: I disagree with Ornstein’s assertion at the very beginning that the core of the program is “almost certainly here to stay.”

    It’s all contingent on a Republican not becoming President in 2017. I have no doubt that if one does (which would probably also mean that Republicans hold both houses of Congress), the whole thing is just going to be repealed, in favor of some ridiculous token “replacement” revolving around tort reform and selling insurance across state lines.

  17. 17
    Armadillo says:

    @Richard Mayhew: Tapping on the outside of the cast can help relieve itch. Also, Claritin, Zyrtec, Benadryl and other allergy meds can relieve itching, even though the underlying cause of the itch is not allergic. Benadryl obviously causes sleepiness in some. Zyrtec is (in my family’s experience) more powerful than Claritin, but “irritability” or somesuch is a labeled side effect, so know what you’re getting into. Can also blow a hairdryer down the cast, get some airflow in there.

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