Earlier this year, Pennsylvania took a good first step towards significant budget savings when the state adopted Medicaid expansion under Gov. Tom Wolf’s leadership.
That policy is now in effect, and it is expected to benefit as many as 605,000 people and generate $626 million in savings.
As budget talks continue in Harrisburg, lawmakers would be wise to follow this policy with a complementary one: A raise in the state minimum wage, which could generate hundreds of millions of dollars in additional savings by shifting more of the costs of Medicaid onto the federal government while increasing the incomes and health of working adults.
Before the Affordable Care Act, most abled-bodied, non-elderly, non-pregnant adults with any work income could not qualify for ‘traditional’ Medicaid.
The program not only did not cover most low-income working people over the age of 18 (with the exception of some young adults), but it was also expensive: Pennsylvania’s share of program costs was nearly half (46 percent, or $10.8 billion in 2014), while the federal government covered the rest.
Now that Pennsylvania has joined the majority of states in expanding Medicaid under the ACA, abled-bodied working adults earning up to 138 percent of the federal poverty line qualify for this program.
The federal government will cover the entire cost of ‘expansion’ Medicaid for newly eligible adults until 2016, and the lion’s share (90 percent) of costs from 2020 on.
The potential savings from Pennsylvania’s participation in expansion Medicaid is expected to be significant.
After only a partial-year implementation of the program, the National Association of State Budget Officers forecasts that the state will see a strong increase of 18.9 percent in Medicaid enrollment in 2015, compared with just 1.6 percent in 2014, while spending in the program will drop from 5.5 percent of the state’s funds in 2014 to 4.7 percent in 2015.
At the same time, NASBO expects that the federal government’s spending on Pennsylvania’s Medicaid program will increase from 5.2 percent to 18.2 percent during the same period.
More healthcare-related savings to the state could be accrued from an increase in the minimum wage.
According to estimates by the Center for American Progress and the Institute for Research on Labor and Employment, a higher wage floor of $10.10, in combination with expanded Medicaid coverage for low-income working adults could generate as much as $231.5 million in additional savings to the state budget.
This is because as the income of low-wage workers rise, more of them will be shifted from traditional to expansion Medicaid, transferring at the same time more of the state’s healthcare expenditure onto the federal government – all while sustaining working families’ access to healthcare.
Savings from shifting some of the costs of healthcare onto the federal government could be used to fund important state priorities, such as K-12, special education and higher education programs; long-term healthcare and programs for Pennsylvanians with disabilities; and other state programs whose funding have been flat or negative for the past several years.
Yannet Lathrop is a researcher and policy analyst for The National Employment Law Project, a Washington D.C.-based advocacy group.
Read the original piece at PennLive.