Essay Sample on Current and Future Impacts of Medicaid Expansion

Introduction

A considerable number of controversies have developed from the discussion about the expansion of Medicaid, particularly the Affordable Care Act. About 20 states have opted out of the program, leaving over 3 million uninsured Americans who may have been covered by the expansion. The policy agenda of the topic of expanding Medicaid is likely to remain high especially with the recent election threatening the program in Kentucky as well as the current debate that goes around the future effects of expanding Medicaid. Economic terms often oppose the expansion of Medicaid as states are unable to afford the coverage cost. In 2014 through 2016, the cost of expanding Medicaid as fully paid by the Federal government at 100%; however, the share dropped drastically to 94 % in 2018. This drop is still expected to continue in the coming years.

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President Obama signed the Affordable Care Act on 23rd March 2010 with the aim of increasing the coverage of health insurance among the population of America. The key component of expanding Medicaid was to cover up for 17 million more citizens with low income (Courtemanche et al. 2017). After several legal challenges, many parts of the act were upheld by the Supreme Court in 2012 with a ruling that rather restricted states from expanding their coverage on Medicaid. Only half of the states have decided to expand Medicaid since the ruling as made.

The decision on whether to expand Medicaid or not has substantially affected the access to health care coverage with a significant increase in the number of individuals being covered in states that chose to expand their Medicaid such as Rhodes Island. Since the Affordable Care Act started being implemented, the number of individuals in Rhodes Island who enrolled for Medicaid expansion and the Children's Health Insurance Program increased by 37 %. The number of uninsured individuals effectively reduced by an estimate of 9.3% in Rhodes Island by mid-2014 after the act was signed into law. However, the rates of uninsured individuals still vary in a wide range from different states.

Health Coverage and Economic Growth

The popular press has had lively debates on the potential economic effects of expanding health care coverage. Besides, just a few pieces of research have directly examined the consequences of expanding Medicaid on economic growth and employment. To date, the academic literature has relied on the assumption that health insurance coverage should have a positive impact on the economy due to the better health improvements that result from greater access to health insurance. However, this does not account for the possible negative impacts on the cost of healthcare coverage.

A healthy population may have positive benefits on the economy such as increased production rates due to the reduced number of individuals who are likely to miss going to work as a result of sicknesses or death. Some studies show that the outcomes of improved health are one among the few robust factors of predicting economic growth. Also, these studies suggest that healthcare improvements since the 1970s have increased the national wealth of America by approximately 3.2 trillion Dollars yearly. It is also clear from the studies that a healthier population can be created through the help of health insurance coverage. Quality health insurance decreases the onset of illnesses that can be avoided while increasing access to care for treatable diseases. Besides, it decreases the likelihood of minor illnesses becoming relatively severe. However, healthcare coverage is costly, and these costs must be balanced against the economic benefits that result from improved health.

What is unclear from the studies that exist is the overall health care spending effects on economic growth. While some research findings suggest that it can stimulate the economy by increasing wages and employment in the healthcare sector, escalating the cost of healthcare can also pose serious challenges in economic growth. For instance, since 2004, the premiums of health insurance have increased by 69%; according to some studies, the increase in premiums often cut into wages and increase the chances of becoming unemployed or underemployed. For some state governments, raising the cost of healthcare may result in increased taxes and borrowings which may cut into other important services and programs like investing in economic growth such as education and infrastructure. It is therefore essential to also consider that healthcare expenditure may not necessarily relate to better health results; The U.S spends more on health on each person despite having a low life expectancy than other developed nations.

Economic Effects of Health Coverage and Health Spending

While studies that exist offer a good reason for believing that Medicaid expansion helps in economic growth by ensuring a healthier workforce that is more productive, it is also clear that enlarging medical coverage raises the government expenditure to the extent that the net economic effect may become negative. These research findings take into account such factors as expanded coverage and increased expenditure by directly looking at the relationship between coverage and spending on health care and their effects on the economy (Mazurenko et al. 2018).

Health insurance coverage and healthcare spending effects on economic growth can be analyzed in terms the country's GDP and total employment from the data depicted by the census of America as well as the Medicare centers and Medicaid services. This analysis compares the private and public coverage rates by analyzing the coverage age group while focusing particularly on the population of the working-age ranging between 18 to 65 years. It also examines the healthcare expenditure by per capita as well as state GDP percentage. This is broken down into private and government expenditure on Medicare and Medicaid, including military health care. Some controlled variables have been included in the analysis with the aim of ensuring that the findings are depicted from observable factors.

Economic Growth and Health Insurance Coverage

According to the analysis, the working-age adults who have enrolled in health insurance programs sponsored by the government such as Medicare and Medicaid, as well as military health plans, raise the economy of the country. An estimated point increase of one percent in public coverage of the population of the working-age raises the annual growth of the real GDP by 0.08 % and also increases employment rates by the same margin. However, the analysis shows that no significant connection exists between private coverage for the population of the working age and economic growth.

To understand the importance of these findings, Medicaid is considered because it is a public health insurance program that is mostly controlled by the states due to the joint funding and administration by the federal or state governments. In 2013, only 13 percent of the working-age population got a Medicaid cover in Rhodes Island. However, there was a surge in the first year of enrolment for Medicaid expansion with a 37% point increase in the total number of enrollees by November 2014. Although the data does not show the share of the new working-age adults who have enrolled for the program, it is estimated that the increased enrollment for the Medicaid program included an increase in public coverage of the population of the working-age by 5%, thus bringing the ratio to 18 percent. Therefore, the analysis suggests that the state per capita GDP growth, as well as employment growth rates, may increase by 0.4 %.

Economic Growth and Health Care Spending

The analysis suggests that an increase in individual and business expenditure on healthcare per person reduces the economic growth of the state as the growth rate of jobs is not affected. An increase in private healthcare expenditure by 1% is associated with a decrease in the GDP growth rate of a state by 0.05% due to the crowding-out effect of healthcare spending. In this case, businesses spend money on health care services which they never spend on wage increase, hiring a new employee, or investing in new product development. Also, the more people pay for health care insurance, the less they save or spend on other products and services; they may not even carry out investments like higher education as they are more likely to go into debts or run bankrupt.

Increased government spending contrasts with private spending on health care as the former does not seem to have any impact on economic growth regarding GDP. However, an increase in public expenditure per person especially on Medicaid is associated with a decrease in the growth of employment opportunities. This may result from the typical inverse relationship between Medicaid spendings and job growth investment spendings like education and infrastructure. For instance, each additional dollar spent by the states on Medicaid results in a cut of about 6 to 7 cent in the appropriations of higher education.

According to the analysis, an increase in Medicaid spending per enrollee by 1% reduces the employment growth rate of the state by 0.008% annually. The 2011 data suggest that Rhodes Island spent 9,247 dollars on Medicaid per enrollee; this was the country's second highest rate. If the state could have reduced its spending on Medicaid to the approximated national average of about 5,790 dollars per person, the rate would be reduced by 37% thus increasing the employment growth rate by as much as 0.29% (Sommers & Gruber, 2017). This significantly represents a potential effect on the employment growth rate of Rhodes Island due to the annual average of approximately 0.4% depicted from the past decades.

The Multiplier Effect

Starting from 2020, states that opt to expand their Medicaid cover including the steady states receive about 90% funding on the program from the Federal government. However, this money does not sit idle; it largely supports the provision of care through a large labor expense share. Those who are employed in organizations supported by the program spend the funds on their daily expenses such as eating at restaurants, buying groceries or going to movie shows. Consequently, many businesses that supply such services, especially those that will be in-state entrepreneurs, spend the money on supplies and wages, thus ensuring a continuation of the cycle.

Such a process in economics is called the multiplier effect. A dollar placed in an economy creates an economic activity of more than a dollar. Again, the degree of that multiplier is a subject for discussion, but can reasonably be estimated to be between 1.5 and 2.0. Therefore, the 90 cents provided by the Federal government for each dollar spent on Medicaid translates to about 1.35 dollars to 1.80 dollars in the state economic activity; assuming that there is adequate economic slack to absorb the spending. Consequently, the extra economic activity gets taxed by the state. If the aggregate tax rate of the state is 10%, then the extra economic activity generated by the subsidies of the Federal government generates tax revenue of between 13 and 18 cents. This brings the break-even tax rate to approximately 7.5% which is below the general tax rate of many states (Cunningham et al. 2016).

Some broader economic factors need consideration. For instance, if expanding Medicaid induces the enrollment of previously uninsured eligible Medicaid beneficiaries at a lower match rate, the state should fund the enrollment with a less economic bounce; thus offsetting some extent of support by the Federal government for programs which the state can otherwise fund. Generally, with reasonable assumptions, the effect of expanding Medicaid on the state budget accounts for the break-even of states; it may a...