The debate over expanding Medicaid in Indiana so far has hinged on how much it will cost. But two recent studies suggest Hoosier employers should be focused on how much a Medicaid expansion will save them: perhaps as much as $400 million per year.
The actual number is likely to be lower, but the potential savings are real. That’s because a Medicaid expansion would spare some employers from having to pay penalties for not providing health insurance to their workers and it might lead to less cost-shifting by hospitals, which raises prices for employers to cover the hospitals’ losses on uninsured patients.
In a March 13 study, Jackson Hewitt Tax Service estimated more than 18,000 Hoosiers have incomes between 100 percent and 138 percent of the federal poverty limit and also would qualify for federal subsidies to buy private health insurance through an online exchange the federal government will create.
If Indiana’s legislators decide to expand Medicaid coverage, as called for by the 2010 Patient Protection & Affordable Care Act, these Hoosiers would receive health insurance coverage via Medicaid.
But if Indiana does not expand Medicaid, those 18,000 Hoosiers could instead buy private health insurance in an exchange using the federal subsidy.
If they use the exchanges, the employers of these Hoosiers would be on the hook for a federal penalty, which is called a “shared responsibility” payment. Those penalties will range from $2,000 to $3,000.
In Indiana, those penalties could total $36.5 million to $54.8 million per year, according to Jackson Hewitt’s calculations.
“Paradoxically, state government efforts to constrain Medicaid costs growth in and after 2017 may lead to higher net taxes for employers in such jurisdictions beginning in 2014,” the Jackson Hewitt report states.
In addition to that, the Medicaid expansion would give hospitals more paying customers. The Urban Institute, in a 2011 study, said Indiana hospitals would see nearly $345 million per year less in unpaid care if Medicaid were expanded.
That extra revenue might flow back to health insurers and employers—but only if insurers and employers have negotiating leverage over hospitals.
“The likelihood of hospitals passing on this gain to insurers is difficult to predict,” wrote Fernando Wilson, a professor of public health at the University of Nebraska Medical Center, in an e-mail. Wilson and other researchers at Nebraksa cited the Urban Institute study in a February analysis of an expansion of Medicaid in Indiana. That report was conducted for the Indiana Hospital Association.
“It ultimately depends on the relative bargaining positions that specific hospitals and insurers have with each other," Wilson added in his e-mail, "which in turn depends on the characteristics of each hospital and insurer's market.”
In Indiana, WellPoint Inc.’s Anthem subsidiary has a commanding market share, controlling more than half the commercial marketplace. But with hospitals merging and acquiring physicians, their bargaining leverage has increased significantly.
Still, if hospitals passed on those savings in full, they would average about $236 for individual insurance policies and $677 for each family coverage policy, according to the University of Nebraska study.