July 15, 2012

Study finds Md. economy will benefit from health care act despite $19 billion in new spending

Print More

By Dana Amihere
dana@marylandreporter.com

Stethoscope and dollarsHealth care system reforms under the Affordable Care Act will cost the state billions to implement but are also projected to generate income from FY 2014 to FY 2020 as a result of the newly insured, a new study reports.

Researchers at the University of Maryland, Baltimore County’s Hilltop Institute estimate that the unemployment rate will decrease nearly 1% by 2020 as a result of almost 27,000 jobs created across all sectors by the new legislation.

While the federal government’s infusion of funds into the state via subsidies or increased match for Medicaid payments directly impacts the health care system, this has a “rippling effect in the economy” that extends beyond the health care sector, said interim Hilltop Institute executive director Michael Nolin.

The state’s new health insurance exchange, expansion of Medicaid and children’s health insurance program, increased Medicaid reimbursement rates and agencies’ increase in administrative costs alone total nearly $19 billion, the study says. Simulated models were used to determine additional money pumped into the state economy as a result of system reforms:

  • $3.2 billion in Medicaid payments matched to 100% Medicare levels for health care service professionals including physicians, dentists and nurse practitioners
  • $4.9 billion spent on hospital services, including a reduction of $3.1 billion in uncompensated care costs for patients currently without insurance
  • $1 billion spent on pharmaceutical drugs and services
  • $5.7 billion in cost-sharing and subsidies to low-income Americans (up to 400% of the federal poverty level) purchasing insurance in the private market

Breathing time for cost controls

Nolin says he interprets the 6-year period between FY 2014 and FY 2020 –– the ACA’s effect date and when all provisions have been put in place –– as a means of “buying breathing time to get control of medical inflation” during which cost-containment measures can be put in place before federal funds drop off.

At a Greater Baltimore Committee forum last, health care administrators questioned whether the increased Medicaid spending would actually occur, even if the ACA survives.

“I can almost guarantee that Medicare and Medicaid will be targets for federal deficit reductions,” said Ronald Peterson, president of the Johns Hopkins Health System.

  • Pm

    The problem with most predictions are that they are usually wrong.  This prediction needs to have the range spelled out and the level of confidence needs to be cited.    

  • abby_adams

    More Super 8 Ball predictions. Too bad taxpayers still have no finite idea concerning what will be covered in ACA (still writing the laws) or how much it will finally cost. It seems to me, non-economist that I am, that these studies boil down to one simple fact, we’re moving money around from one pocket, federal taxes, to the other pocket to bolster expanded state promised benefits with a prediction that 8 years in the future unemployment will drop by 1%?  

  • Hungrypirana

    The Hilltop Institute holds itself out as non-partisan, yet its collaborations with Maryland’s Medicaid program suggests it has a bias towards the aims and rationales for Obamacare. Perhaps I am mistaken, although experience teaches to be circumspect re: possible bias.

    These studies, however, can convey just how appalling taxpayers’ returns on Obamacare will be. That is the case with this study.

    Table VII, Section A shows that by 2020, Maryland’s “Total Uninsured” will decrease by 333,605 after 7 years of Obamacare. To achieve this result, Hilltop says spending will increase by $17,800,000,000. However, this sum excludes Federal and the state of Maryland’s incremental administrative expenses, which I estimate (pro-rata for Federal) to be $3,200,000,000. SO: $21,000,000,000 of new welfare spending just for Maryland’s Obamacare. Our children and their children will inherit a debt of $65,000 per each newly-insured person.

    This is not sustainable. It’s also dishonest to transfer these costs outside our generation.

  • Guest

    The bias embedded in this report starts with the headline, which suggests that the new act will be a net benefit for Maryland. Numbers provided show otherwise, i.e. that it will still be a net drain on the state of over $5 billion, and that will only be true if the numbers estimated actually materialize. That is highly unlikely. As Hopkins President Peterson said, Medicare and Medicaid spending is likely to decrease, not increase. But a larger point is almost entirely missed here. It is hard to imagine how a net drain of $5 billion, let alone $19 billion, will “help” the Maryland economy. We are not talking about creating new enterprises here, we are talking about bigger government, bigger deficits and higher taxes. Finally, the actual costs of this monstrosity are going to be multiples of what they have disingenuously budgeted for, as I explained in a series on Obamacare written two years ago (http://www.examiner.com/article/summary-source-for-healthcare-articles). This entire law is an assault on our economy, our liberty and our collective health. If you don’t understand the issues and can’t write about it with authority, you shouldn’t report on it at all.

  • KenS

    From page 1 of the Hilltop study:

    “The simulation model does not address the state’s baseline
    budget, including possible
    short-term challenges related to growth in Medicaid enrollment
    and other factors [emphasis added].
    Because these factors are independent of health care reform
    and are not an implication of
    the ACA itself, they are not included in the simulation model.”

    Translation: This study does not take into account the
    environment in which “Affordable Care Act” will operate; in short, it’s pie in
    the sky.

    This would have been a very different article if the Maryland Reporter had developed its last two sentences:

    At a Greater Baltimore Committee forum last, health care
    administrators questioned whether the increased Medicaid spending
    would actually occur, even if the ACA survives.
    “I can almost guarantee that Medicare and Medicaid will
    be targets for federal deficit reductions,” said Ronald Peterson, president of
    the Johns Hopkins Health System.
    Why does this health care reform business seem so complicated?  It’s because the private health insurance industry has propagandized us to accept the premise of private health insurance and has supported the campaigns of politicians to pass legislation like this; and our health care insurance premiums are paying for all that.  It doesn’t need to be so.  A public health care system, like Medicare for All and the Maryland Health Security Act, would provide universal health care for less than we are paying now.    

  • JGwen

    Beware the State that has a second offering of HOUSE BILL 1015 the Maryland Health Security Act of 2012 Establishing the Maryland Health System; requiring the Health System to Provide Health Care Services to All Residents of the State under a Single System [Single Payer] that is not dependent on employment and which this year added HB1090 Health PALLIATIVE CARE Services. With HHS support for abortive services and an IPAB system that will closely consider costs vs benefits of furthering the care of premature and impaired birthings, medical services for the severely disabled and the more costly medical services for seniors … Maryland could well become a U.S. likeness of the British system and NICE or the Canadian System. 

  • Cwtrau

    And from WHERE do these people think those federal dollars are coming??  Santa Claus?