Testifying about the benefits of health care reform

by Nick Estes
October 4, 2012

Bill Jordan and I testified recently in Las Cruces about the health and economic benefits to the state from fully implementing the Affordable Care Act (ACA). The audience was the Legislative Revenue Stabilization and Tax Policy Committee. Bill explained that $8 to $11 billion of new federal funds for health care will enter the state economy as a result of the ACA if the state chooses to insure all lower income adults through Medicaid. The expense will be completely covered by the federal government from 2014 through 2016, and then phase down to 90 percent in 2020, where it will remain indefinitely. The state’s Human Services Department (HSD) has estimated that the state costs over the first seven years will be between $320 and $500 million.

Bill pointed out a study by economist Kelly O’Donnell, PhD, commissioned by NM Voices, that shows the state will take in twice that amount–between $693 and $953 million–in new state revenues during those first seven years. This revenue will come in thanks to existing state tax laws.

Most of the federal ACA funds–including both Medicaid and the tax subsidies to help middle-income families buy health insurance on the new Exchange–will be paid initially to insurance carriers and therefore will be subject to the state’s Insurance Premium Tax. Portions of the spending will also be subject to the gross receipts tax (which also generates revenues for local governments, which won’t have to spend any money on the ACA).

Bill explained that there is no significant up-front cost to the state. The state costs will ramp up very gradually starting in 2017 and will always be less than the state tax revenue generated by the much larger federal spending, as show below.

I reminded the Committee that, for uninsured New Mexicans, this is literally a matter of life and death. It is estimated that more than 300 New Mexicans die every year because they don’t get the kind of medical treatment they need due to not having health insurance. Having health insurance means people can get the kind of preventive and follow-up care that saves lives (and saves money).

I also pointed out that the Hilltop Institute report commissioned by HSD estimates that the state’s hospitals will save more than $2 billion in “uncompensated care” costs during the 2014-2020 period. These are the costs incurred by our hospitals when treating uninsured patients, mostly in the emergency room. These costs get passed along to all of us as higher local taxes and higher insurance premiums. Getting many more New Mexicans covered by health insurance will help lower these pass-along costs.

Link to the Las Cruces Sun-News coverage of the hearing here.

Link to the Albuquerque Journal’s editorial in favor of expanding Medicaid here.

Nick Estes is a Deputy Policy Director at NM Voices.

Children’s Medicaid enrollment still flat as your hat

by Nick Estes
February 10, 2012

Each month, the Human Services Department posts figures showing the number of people in different categories enrolled in Medicaid (with a four-month lag). They just released the numbers for October 2011, broken down by adults and children and by various categories. The reports are available here. Once again, children’s enrollment was down to 336,436. This is about the same as October 2010 (336,034), even though the number of New Mexico children has grown almost 2 percent over the year.

Here is a graph that shows children’s enrollment in New Mexico Medicaid from late 2006 through the present, and then projected (by HSD) through 2013. From 2007 to 2010, enrollment grew at almost 7 percent per year, partly because of the recession but also because HSD was reaching out to families to enroll their kids.

The graph shows that enrollment has gone absolutely flat since the summer of 2010. The graph also shows that HSD is continuing to project very low enrollment growth into the future—about 1 percent per year.

Medicaid enrollment graph

In November 2009, HSD gave a list to the Legislative Finance Committee of various “cost containment” measures they had undertaken to reduce costs in the Medicaid program.  One of the entries was “limit outreach/aggressive recertification.” Medicaid Director Julie Weinberg was quite candid in telling the Legislature and other public audiences that HSD had essentially ceased any special outreach to enroll children because the budget wouldn’t permit significant new enrollment. The results of that slow-down (together with a little improvement in the economy) are shown above.

At last year’s Legislative session, the Legislature and Governor were truly facing a potential crisis in the Medicaid program because the federal stimulus funds were set to expire (and did) on June 30, 2011. They came up with some $300 million in new state funding to fill that gap, and NM Voices for Children publicly thanked them on stepping up to the plate.

But now that this challenge has been met, there is no excuse to continue the slow-down in kids’ enrollment. There are still an estimated 50,000 New Mexico children who are eligible but not enrolled in Medicaid. Many of them are Native Americans and/or located in rural areas. We urge HSD to begin once again to focus with providers and advocates on how we can step up the enrollment of our children in Medicaid.

Children have a broad and unique range of health care needs, which is well-covered by Medicaid. It provides child preventive services, including immunizations and developmental screenings.  Appropriate health care can help children avoid preventable and serious chronic conditions like obesity, heart disease, and Type II diabetes, and promote adequate nutrition and physical activity. Vision, hearing, and dental care—often considered “extras” in health coverage for adults—are among the services children need in order to develop and achieve their full potential. These are services that lower-income kids can get if they are enrolled in Medicaid. If they are not, these kids will mostly do without, and their education will suffer along with their health. Please, let’s get these kids enrolled!

Nick Estes is NM Voices’ Deputy Policy Director

The economic benefits of health care reform in New Mexico

by Nick Estes
December 13, 2011

Federal health care reform (the Patient Protection and Affordable Care Act of 2009, or ACA) will provide health insurance to an estimated 315,000 previously uninsured New Mexicans. In doing so, it will bring billions of new federal dollars into our state’s economy, creating many new jobs, and generating over $1 billion in new state and local tax revenue by 2020.

Beginning in 2014, Medicaid will expand to cover almost all low-income New Mexicans under age 65. The New Mexico Human Services Department projects that by 2020 New Mexico will have added between 133,000 and 183,000 new Medicaid enrollees. These will primarily be adults who were previously unable to afford health insurance. Also beginning in 2014, the state will have a new health insurance exchange where individuals who earn too much to be eligible for the new Medicaid coverage will be able to purchase private insurance. They will receive sliding-scale federal financial assistance to help pay for their insurance.

The new federal dollars flowing to New Mexico health care providers will generate billions more in economic activity, creating tens of thousands of new jobs and raising about $1billion in new state tax revenue—far more than the state’s share of the cost of implementing ACA. The more aggressive the state is in expanding health care to uninsured New Mexicans, the greater the health and economic benefits to the state.

The table below is a summary of the estimated economic effects of implementing PPACA in the state of New Mexico during the first seven years (2014-2020). As the table shows, the new state tax revenue created by all of this new economic activity will more than pay for the new spending required by the state for Medicaid expansion.

These data are set forth in greater detail in two reports by New Mexico Voices for Children released in August of 2011: The Economic Benefits of Health Care Reform in New Mexico and The Tax Revenue Benefits of Health Care Reform in New Mexico.

Covering so many more people with health insurance will have tremendous benefits, not only in terms of better medical outcomes and quality of life but for our state’s economy. New Mexico has a very high rate of residents without health insurance, and that means our health care providers have a great deal of uncompensated medical costs. Much of this cost is shifted to those who do have private insurance—adding $2,300 to the average New Mexico family’s health insurance premium every year. New Mexico has the highest cost shifting in the country.

Our high cost shifting is an effective economic development disincentive for the Land of Enchantment. Who is going to want to create high-wage jobs here knowing that their health insurance costs will be on an unsustainable upward trajectory? The ACA is the only thing on the horizon that will help with this, by getting most New Mexicans insured so their health care costs aren’t passed along to businesses that provide health insurance.

New Mexico was just awarded a $34 million federal grant to establish the state health insurance exchange. This is a great step forward, and we hope the state will aggressively implement health care reform to really benefit our state’s health and economy.

Nick Estes is NM Voices’ Deputy Policy Director.

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When it Comes to Political Rhetoric, Seeing Can be Believing

Politicos on both sides of the aisle make accusations about the “other side” all the time. What’s almost as bad as the ugly partisanship is the fact that they’re making very simple claims about very complex subjects. So it’s refreshing when some group puts down the basic facts in a simple-to-follow format like the charts referred to below, which have lately been making the rounds on the Internet.

Given the acrimony expressed in the current debate around deficit spending and the federal debt—this seems like a good place to start. Since they’re somewhat connected, we’ll look at the first two charts together: spending and deficits.

Two points have been conspicuously absent from the national debate about spending and deficits: 1. the cause of the deficit, and 2. what we gained from the spending. During the Bush Administration, the bulk of the deficit spending was caused by two things: tax cuts and wars—neither of which was “paid for” by increases in other taxes or cuts to other spending. The income tax cuts overwhelmingly benefited the wealthiest Americans so what we “gained” from them was greater wealth inequality. In terms of the gap between the richest and the poorest, we’re starting to look more like a Third-World country and less like a global superpower whose main strength lies with its vibrant middle class.

Regardless of what you think of the wars, One thing is irrefutable—although the U.S. has often fought wars on credit before, this was the first time in our nation’s history that wars and tax cuts went hand-in-hand.

Note that the biggest jump in the federal deficit began in 2007, and that points to the biggest underlying cause of the current federal debt—the recession. Notice that I wrote ‘recession’ and not ‘economic stimulus.’ That’s because when the economy tanks, so does the revenue the government receives in the way of income taxes. Unless spending is cut to match the decrease in revenue—a very bad idea during a recession—the loss of revenue increases the debt.

Finally, we’ll tackle the oft-made claim that President Obama’s stimulus program “failed.” This is nonsense. The Congressional Budget Office says it preserved or created 1.5 to 3 million jobs. The third chart shows the effect of the stimulus in turning around the job losses due to the Great Recession. It shows the number of jobs lost or gained every month since the beginning of 2008 and up to July 2011.

Under President Bush, the monthly job losses got to be worse and worse. Under President Obama, the loss rate stabilized for a few months and then, in early 2010, private-sector jobs began to grow. This was due to spending on safety net programs like unemployment insurance and Medicaid and the stimulus program—both of which put more money into the economy. The chart shows dramatically how these factors helped stop the slide into another Great Depression.

The chart also shows that while the stimulus helped the economy level off, it turned out to be not enough. Unemployment has leveled off at about 9 percent, but that is much too high. That cold number masks millions of families who are suffering every day because their breadwinners can’t find jobs. So we have to do more. Another stimulus is clearly called for because it will cause the bars representing job gains to raise higher—enough to bring down the rate of unemployment. This will add to the short-term federal budget deficit, but energizing the economy will help us pay down the national debt later, when the economy is doing better. Only then should we take a serious look at slowing spending and paying down the debt. To do so before the economy recovers would be disastrous—as several European counties have already learned.

Nick Estes is NM Voices’ Deputy Policy Director.

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Medicaid, Lawsuits, and Strange Bedfellows

Politics can make for strange bedfellows. In an unusual break with the Obama administration, several prominent Democrats in Congress have filed an amicus (“friend of the court”) brief in the Supreme Court, urging that private citizens be allowed to sue states that are not fulfilling their obligation to provide health care to eligible Medicaid recipients if they accept federal Medicaid funds (which all the states do).

The strange bedfellow in this case—the U.S. Chamber of Commerce, which rarely agrees with congressional Democrats—also filed an amicus brief taking the same position. The Obama Administration is on the other side, arguing that compliance with Medicaid rules should be strictly up to the states, without the threat of citizen lawsuits.

The case was brought by Medicaid beneficiaries after California cut its payment rates to providers. California already had one of the lowest reimbursement rates in the nation and plaintiffs claim more cuts have made it nearly impossible to find providers who will take Medicaid patients. The Dem’s amicus brief reads, in part, “California has been accepting more than $20 billion in federal Medicaid funds per year in exchange for its promise, among other things, to ensure that needy patients had access to health care.” But, it argues, the state is failing to fulfill that promise.

Citizen advocates take the position that the federal government is much too overloaded to effectively supervise whether states are complying with federal Medicaid law so citizen lawsuits are essential in enforcing the rules. New Mexico Voices for Children agrees.

But back to the strange bedfellows. Why would a conservative-leaning, free-market-loving group like the U.S. Chamber, which is generally against tax-payer funded social services such as Medicaid, be on the same side as Democrats in Congress? Likely for the same reason that many “small government” conservatives don’t want to cut defense spending: these government programs create jobs. Good private-sector jobs.

Health care services are delivered by the private sector even when they are paid for by Medicaid. This federal spending supports jobs for doctors and other health care providers as well as their administrative staffs, custodial services, and much more. Like the American Medical Association, which is also siding with the plaintiffs, the U.S. Chamber is just looking out for the best interests of its members—hospital administrators, doctors, and other medical professionals—who rely on reasonable reimbursement rates in order to pay their bills. Congressional Democrats, on the other hand, are looking out for the best interest of those Americans who do not have access to employer-sponsored health insurance and cannot afford to purchase it privately. Still, these seemingly disparate outcomes—health care for the poor and good reimbursement rates for doctors—can be achieved by working toward the same end. It goes to show that those on both sides of the ideological spectrum could probably work much better together if they kept their eyes on the end objective instead of finding fault in how the “other guys” are trying to get there.

Nick Estes is NM Voices Deputy Policy Director
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Don’t Crash the Economy Over the Myth That Spending is Out Of Control

Some members of Congress are driving the United States and the world to the brink of economic disaster on the grounds that they have to stop “out-of control” government spending. This is a dangerous myth and it’s about to steer us over a cliff—completely unnecessarily.

There are two big drivers of our current government spending, and neither of them are permanent: the wars in Iraq and Afghanistan (which have cost about $1.5 trillion so far) and the Great Recession, which has led to spending for people who have lost their jobs or otherwise been thrown into poverty, moderated somewhat by the stimulus program.

These are not permanent “out-of-control” increases in federal spending. The stimulus program blunted the effects of the recession, but that program is already over.  President Obama inherited the two wars and is trying to wind them down responsibly.  When the recession finally lifts, federal spending on the unemployed and lower-income folks who have been hit so hard will decline.

President Obama’s signature program—health care reform—will actually reduce the federal deficit according to the non-partisan Congressional Budget Office.  It will phase out the costly Medicaid Advantage plans and will tax “Cadillac” plans that are unreasonably expensive.

Most government spending is out of Obama’s (and Congress’) immediate control:  Social Security (20 percent), Medicare and Medicaid (21 percent), safety net programs like unemployment insurance (14 percent) and interest on the national debt (6 percent).

The only part of the budget really under the direct, short-term control of Congress and the President, “domestic discretionary spending,” is only 15 percent of the budget and it has not grown at all as a share of the Gross Domestic Product in a decade or more.  This is all the spending for National Parks and Forests (including fighting forest fires), the FBI, interstate highways, the FAA, medical research, aid to education, and other programs that improve the quality of our lives.  Funding for all these worthwhile programs has been repeatedly cut the last few years—there is no way to argue it is “out of control.”

The truth is that federal taxes are the lowest they have been in over 40 years.  In fact, the reason we have a big federal budget deficit right now is that tax collections are so low we can’t pay the costs of the two temporary drivers of the debt: the recession and fighting two wars.

And why are federal tax collections so low? A major reason is the recession itself. When more people are unemployed the government collects less income taxes.

We’re also collecting a lot less money because the Bush tax cuts of 2001 and 2003, which have cost more than $2 trillion, significantly lowered the tax rate for the richest Americans.  Almost all the benefits have gone to the richest 10 percent of Americans, with a huge amount going to the richest 1 percent—people who were already getting richer and richer and didn’t need tax cuts in the first place.  These people (and corporations) are currently sitting on record amounts of cash—not “creating jobs” like we were promised they would when the cuts went into effect. The truth is, significant numbers of jobs will not be created until consumer spending rebounds.

Before the Bush tax cuts, the economy was humming and economists predicted that there would be federal budget surpluses as far as the eye could see.  The tax cuts were enacted and the surplus from the Clinton years disappeared immediately.  Deficits remained each year until the recession hit, when the deficits got dramatically worse because spending had to go up and tax collections unavoidably went down.

Looking ahead—if we restored tax rates to the level they were before George W. Bush—half of our future deficits would be erased immediately and the rest could be brought under reasonable control with the kind of reasonable spending cuts that President Obama has been proposing.

In fact, President Obama only wants to let some of these tax cuts expire (those for the very wealthiest) and eliminate some other egregious loopholes that also benefit only the super-rich.  Yet these reasonable and fair suggestions are so unacceptable to some in Congress that they are willing crash the world economy rather than make a deal.

If this happens, don’t believe it when they tell you it was because government spending was out of control.  It’s extreme partisan ideology that’s out of control.

Nick Estes is Deputy Policy Director for NM Voices.

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An Intelligent (and Humane) Approach to Deficit Reduction

Everyone should take a close look at The People’s Budget, published on the website of the Congressional Progressive Caucus. It is very readable and it offers a reasonable and humane alternative to both the Ryan and the Obama plans for deficit reduction. The People’s Budget would significantly reduce defense spending, and would repeal most of the Bush Tax Cuts and other tax preferences that primarily benefit the rich, so it actually would balance the federal budget by 2021—something neither the Ryan plan nor the Obama plan achieves. And it does this without ripping apart our social safety net. 

Economist Paul Krugman introduced this plan to the public in his New York Times column on April 24 and in a longer blog the same day. Krugman points out that this would mean higher taxes, mostly on wealthier taxpayers who have seen their taxes decline as their share of incomes have increased, but also on the upper middle class, although to a much lesser extent. However, tax rates, including state and local taxes, would still be far less than the rates in European countries.

The People’s Budget is focused on eliminating the deficit by 2021, so it doesn’t address so much the long-term increase in the cost of health care, which we will have to tackle after that date. But it does permit the government to bargain with drug companies for lower costs, adds a public plan to better compete with private health plans, and of course would not repeal all the health care cost containment provisions of the Affordable Care Act.

In short, the People’s Budget is the solid, easy-to-follow alternative to the draconian Ryan plan and the painful, if more sensible, Obama plan.  Please take a look and, if you agree, spread the word!

Nick Estes is a Deputy Policy Director at NM Voices for Children

Health Insurance Exchange Veto Only Puts Off the Inevitable

It’s deeply disappointing that the Governor decided to veto SB 38/370 (Senator Dede Feldman D-Albuquerque), which the Legislature passed to create a New Mexico Health Insurance Exchange. The exchange would have been a web-based marketplace where individuals and small employers could compare different private insurance policies before they purchase. This would promote competition and lower prices. Plus the exchange would pool the risk from individuals and small businesses so that they could get the lower rates presently offered to large employers. Both businesses and individuals stand to get help from the federal government with premiums if we ever get an exchange set up.

Passage of this bill by the Legislature followed eight months of meetings by a joint legislative and executive working group, working with a diverse group of individuals and representatives from the business and insurance industries. Hours of negotiations in the Legislature produced a good compromise bill that had broad support. What a waste to see all these efforts go down the drain.

The Governor said she was worried about the cost of the exchange, but there will be no cost to the state for developing the exchange; the federal government would have paid the full set-up costs until 2015. The exchange thereafter would run on fees charged to the participating insurance companies. By vetoing the bill, the Governor cost the state millions of dollars in federal money that we could have obtained by getting started sooner rather than later.

We must have an exchange up and running by the beginning of 2013 or the federal government will step in and do it for us. This is a complicated undertaking and there was no reason not to get started now and shake out the kinks we are bound to discover as we go forward. Any concerns by the Governor could have been worked out during the two years before it actually goes into operation.

Nick Estes is a Deputy Policy Director for NM Voices for Children.

Legislature Did OK by Medicaid, Given the Resources Available

The New Mexico Legislature is to be commended for sparing Medicaid serious cuts in the coming fiscal year (FY12). They did this despite the governor’s determination not to permit any revenue increases. Medicaid for kids—called New Mexikids—covers more New Mexico children than any other health insurance program. Without it, more than 300,000 children from low-income families would be without health care.

The state’s Medicaid program was facing a $300 million hole in FY12 due to the expiration of extra federal dollars that had come through the federal stimulus bill in 2009. Medicaid is jointly funded by the states and the federal government, and under the stimulus bill (the American Recovery and Reinvestment Act, or ARRA), the federal share went from about 72 percent to about 80 percent for several years. The federal share goes back down to 70 percent for FY12, leaving the $300 million gap. The Legislature found most of the money to fill that gap, even while other state programs suffered cuts for the third consecutive year.  In addition, the Legislature appropriated about $7.5 million to cover a shortfall in the Medicaid budget for the current year.

Still, this total increase for FY12 will leave New Mexico Medicaid about $20 million short of the state funds needed to meet the projected need for the coming year.  This projected need takes into account reductions in the program due to stringent cost cutting mostly already adopted by the state’s Human Services Department, which administers Medicaid.  It provides only a 1 percent increase in total spending over the current year, even though both medical costs and enrollment are growing at a much high rate.  However, the Legislature, in cooperation with the governor’s office, filled most of a very big gap in a very difficult budget year—and that’s good for New Mexico’s children.

Nick Estes is a Deputy Policy Director at NM Voices for Children