Dropping Out of Medicaid? Wyoming Has Taken a Look at the Consequences – Say Ahhh! A Children’s Health Policy Blog

An idea has been floating about suggesting that states
that don’t want to comply with the new Medicaid provisions will simply “opt
out” of the program. While much of the recent chatter has centered on Texas,
Governor Freudenthal of Wyoming asked his Department of Health to examine the
back in March. The report the Department
of Health released in September provides some insight on the economic impact of
such a move.

Let’s start with the basics of their report –

  • As the largest source of federal support to the states,
    Medicaid is a major driver in the economy, funding both state and local
    government agencies. Opting out would decrease their revenue base and take
    needed dollars out of the state economy. At the same time, the resulting loss
    of coverage will increase costs to counties as more uninsured individuals are
    forced to seek indigent care.
  • Medicaid funds also enable states to fill the gap in
    coverage when children and families lose coverage as a result of the economy.
    Beyond that, it allows the state to respond to emergencies as well as an aging
    population. While some of the folks losing coverage under an opt-out scenario may
    find other options under health reform, for this low-income population,
    coverage will likely be unaffordable (only those with incomes above 100% of the
    FPL are eligible for exchange subsidies) and may not offer them the benefits
    they need.
  • On the other side of the equation, providers, such as
    doctors, hospitals, and nursing homes, could see a reduction in payments of up
    to $250 million a year. The impact would be felt greatly in long-term care
    services, as Medicaid is the primary source of revenue, accounting for 63% of
    total nursing home expenditures.

The consequences of such an action reveal that it’s more
of a dropping out than an opting out–a fiscally irresponsible action that would
make a political statement but create significant hardship for the citizens and
providers that rely on the money that Medicaid brings into the state.  A multitude of state agencies are also
touched by Medicaid dollars and it’s important for a state to consider the
trickle down effect such a decision would have. There are some pretty obvious
ones, for example a significant portion of mental health and substance abuse
services are paid for with Medicaid funds, as are pregnancy and family planning
related services. However, there are others like the Office of Health Care Licensing,
an important watchdog agency that protects the health and safety of all Wyoming
residents by conducting on-site inspections and complaint investigations of
health care facilities that may not immediately come to mind.

As the report concludes, “because Medicaid has been in
place as a significant payer source within the health care industry for so
long, much of the industry touches the program in one way or another.” Dropping
out of Medicaid would not only impact those receiving coverage through the program,
but providers and state agencies would also feel the pinch of a lack of federal
financial support.  When
policymakers take the time to think about it, it’s a foolish choice and one
that will only serve to destabilize their state economies and their health care

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