Independent agency sees savings in Medicaid expansion

A new analysis by the state’s Independent Fiscal Office says the proposed expansion of Medicaid under the federal Affordable Care Act (known popularly as Obamacare) will dramatically boost the Pennsylvania economy and help the state’s budget rather than hurt it­ – contrary to the fears of Gov. Corbett, who has so far balked at the expansion, in spite of a federal commitment to pick up the bulk of the costs.

Two Democratic leaders of the state Senate, Jay Costa of Allegheny County and Vincent Hughes of Philadelphia, cited the study and touted the Medicaid expansion Tuesday as a potential source of funds for the ailing Philadelphia School District, among other pressing financial needs statewide.

“The IFO’s report is yet another in the long line of studies and reports that have detailed the benefits of expanding Medicaid,” said Hughes, the minority chairman of the Senate Appropriations Committee, citing earlier studies by the Rand Corp. and the Pennsylvania Economy League. “We can leverage these dollars to solve problems.”

The proposed Medicaid expansion would extend coverage to another 750,000 people statewide, including roughly 100,000 in Philadelphia, according to Dr. Donald Schwarz, the city health commissioner and deputy mayor for health and opportunity.

The IFO, created to provide independent fiscal analysis to the legislature, comparable to the role of the  Congressional Budget Office in Washington, projected that Pennsylvania’s budget would benefit in two major ways: reducing state expenditures by having shifting the medical costs of General Assistance recipients to the federal government, and expanding tax revenues as the result of roughly $3 billion in new federal funds going into the Pennsylvania economy.

The net impact would improve the state budget situation by $181 million in the fiscal year starting July 1, as the Medicaid expansion would begin in January 2014, the study found. The Pennsylvania budget impact would jump to $620 million in fiscal 2015 and then taper off gradually, to $543 million in 2016, $427 million in 2018, and so on, down to $299 million in 2021, the final year covered by the study.

“The dollars identified by the IFO can be used for a variety of purposes including the investment in public schools, such as the cash-strapped Philadelphia School District,” Hughes said Tuesday at a news conference in Philadelphia’s City Hall.  In addition, Hughes said, the full expansion would create 35,000 additional Pennsylvania jobs.

 A spokeswoman for Gov. Corbett, Christine Cronkright, said the governor has not made a decision on what to do about the proposed Medicaid expansion.  She said he was concerned about whether the federal government would allow continuation of the gross-receipts tax now imposed on managed care organizations in Pennsylvania.

Corbett’s acting welfare secretary, Beverly Mackereth, sent a letter Tuesday to the four legislative appropriations chairman, warning that a federally-mandated change in the gross-receipts tax could cost the state up to $1.5 billion over seven years.

To date, Mackereth said,  the U. S. Department of Health and Human Services has said only that it will address the tax issue through “national guidance.”

Click here for's politics page.