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Medicaid and SCHIP: Dollars and Common Sense Stan Dorn Senior Policy Analyst Economic and Social Research Institute Families USA National Conference January.

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Presentation on theme: "Medicaid and SCHIP: Dollars and Common Sense Stan Dorn Senior Policy Analyst Economic and Social Research Institute Families USA National Conference January."— Presentation transcript:

1 Medicaid and SCHIP: Dollars and Common Sense Stan Dorn Senior Policy Analyst Economic and Social Research Institute Families USA National Conference January 27, 2005

2 Economic and Social Research Institute2 On a personal note Im not an economist I dont even play one on TV My boss is an economist and usually reviews my work Hes out of the office this week

3 Economic and Social Research Institute3 Topics 1. Ups and downs 2. Taxing and spending 3. Winners and losers 4. Expensive and cheap 5. Real and illusory

4 Part I: ups and downs

5 Economic and Social Research Institute5 The business cycle

6 Economic and Social Research Institute6 Ameliorating recession – whats a policymaker to do? Monetary stimulus – lower interest rates Fiscal stimulus Raise spending Cut taxes Automatic fiscal stabilizers Stimulus automatically rises and falls, against the business cycle (countercyclical)

7 Economic and Social Research Institute7 Unemployment insurance Grows when unemployment rises, falls when unemployment drops Impact, during average recession between WW II and 1999: Mitigated the loss in real GDP by 15 to 17 percent Saved more than 130,000 jobs in the average recessions peak year Source: L. Chimerine, T. S. Black, and L. Coffey, Unemployment Insurance as an Automatic Stabilizer: Evidence of Effectiveness Over Three Decades, Coffey Communications, LLC, for U.S. Department of Labor (July 1999) Unemployment Insurance Occasional Paper

8 Economic and Social Research Institute8 Changes in Medicaid spending, spending on unemployment insurance, and the unemployment rate: Source: U.S. Bureau of Economic Analysis, Dept. of Commerce, August 2005; U.S. Bureau of Labor Statistics (BLS), August Calculations by ESRI.

9 Economic and Social Research Institute9 Impact of a 1 percentage point change in the unemployment rate (standard Medicaid program, no cap on federal dollars) Expected change in the proportion of residents who have each listed form of coverage ESIMedicaidNo coverage Children-1.048%+0.637%+0.427% Adults < %+0.237%+0.670% Source: Dorn, Smith, and Garrett. ESRI, HPA and the Urban Institute, 9/27/05.

10 Economic and Social Research Institute10 Implications for state decisions about Medicaid waivers Caps on federal Medicaid dollars could hurt a states ability to recover from future recession More important – such caps could prevent the state from providing health coverage to vulnerable people precisely when ESI declines and Medicaid is most needed

11 Part II: Taxing and spending

12 Economic and Social Research Institute12 What happens when taxes are raised to expand health coverage? Claim: Raising taxes will hurt the states economy! Response: Expanding health coverage helps the states economy even more! Urban analysis in MA: universal coverage + $ million tax increase, would increase personal income by $400 million and create 7,300 to 8,600 jobs. Why? Taxes reduce private spending, some of which would have happened outside the state. Almost all health spending happens within the state. Other factors: more federal money in state, higher productivity Source: Holahan, Blumberg, Weil, Clemans-Cope, Buettgens, Blavin, and Zuckerman. Urban Institute, 10/05.

13 Part III: Winners and losers

14 Economic and Social Research Institute14 Scenario: use an employer assessment to expand health coverage Claim: Forcing employers to pay will hurt business! Response: More employers win than lose! Fewer uninsured means less cost-shifting, lowering premiums for employers that cover their workers Exempt the smallest firms from the employer assessment (e.g., under 10 workers) Let employers subtract from the assessment premium payments and workers covered from other sources – only firms that dont cover their workers will pay

15 Economic and Social Research Institute15 Example: winners & losers in CT Source: AHRQ. MEPS-IC. July Calculations by ESRI, January

16 Economic and Social Research Institute16 Connecticut workers at firms that offer coverage vs. workers at firms with 10+ workers that do not offer coverage: 2003 Source: AHRQ. MEPS-IC. July Calculations by ESRI, January

17 Part IV: Expensive and cheap

18 Economic and Social Research Institute18 Metrics for coverage expansion costs State budget costs vs. total health spending Premium costs vs. taxes Change in health spending, as a percentage of total health spending

19 Economic and Social Research Institute19 Employer responsibility If shift costs from employers to public sector, public costs go up more than total health care costs If premiums go down and taxes on employers go up, firms wind up in the middle

20 Economic and Social Research Institute20 Covering all the uninsured nationally would raise health spending by 3 percent, or less than half of one years health care inflation Source: Hadley and Holahan, 2005; CMS, 2005 (NHE). Calculations by ESRI, 1/06.

21 Part V: Real and illusory

22 Economic and Social Research Institute22 IOM Loss per uninsured - $1,645 - $3,280 Illusion: this much money is saved when someone gains coverage Reality: this is a dollar value of improved morbidity and mortality resulting from insurance


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