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Before Deciding on Medicaid Expansion, State Must Budget for 'Woodwork Effect'

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Of all the provisions of the federal Affordable Care Act, The U.S. Supreme Court struck down the one requiring states to expand their Medicaid programs. That leaves states to decide for themselves whether to go ahead with expanding the program for the poor - largely at federal expense. The choice has just become even more stark with word from the Obama administration that half measures won't do; to be federally funded the expansion must cover everyone the fed deems eligible. The Kasich administration is on the fence as to whether to expand Medicaid in Ohio. Part of the reluctance comes from what's known as the "woodwork" or "welcome mat" effect. ideastream's Nick Castele explains.

Monday, December 17, 2012 at 9:11 am

The Medicaid provision of the Affordable Care Act expands eligibility for benefits beyond states’ criteria. It’s a good deal for states, advocates say, because the federal government picks up 100 percent of the cost for the first three of years, and that declines 90 percent thereafter.

But there’s one problem, say fiscal hawks. When the great bulk of the act takes hold and everyone is required to obtain insurance, hundreds of thousands who are currently eligible for Medicaid under state criteria but not enrolled will “come out of the woodwork,” so to speak, and sign up. Hence, the “woodwork effect,” and some say it will add greatly to the state’s Medicaid bill.

MOODY: “Our current estimate is that as many as 320,000 additional Ohioans are eligible today but not enrolled. So then because of the mandate, they would choose to enroll. The number’s actually bigger than that, but we think a few people will continue to not choose to enroll.”

Greg Moody is director of the Ohio Office of Health Transformation.

MOODY: “The dollar figure associated with that is about $700 million over the two years of the state budget.”

Moody, whose office is in charge of implementing the Affordable Care Act, says that’s a significant cost to the state -- and taking on the expansion adds to it.

MOODY: “So we will keep working until we are 100 percent confident that we can cover the woodwork effect. And only then will we move on to consider other decisions like options to expand or not.”

But others who are in favor of the expansion paint a less onerous picture of the woodwork effect. John Begala heads the Center for Community Solutions, a liberal policy group based in Cleveland. Begala believes the state is overestimating the number of people who will be driven to the Medicaid rolls, and therefore overestimating the cost.

His group estimates that 178,000 people will enroll in Medicaid as a result of the woodwork effect, a bit more than half of the state’s number. He says he doesn’t have any precise estimates on how much less it will cost.

BEGALA: “But ballpark, I think we’re looking at at least half a billion dollars a year difference. Yeah, that’s serious money, and that’s to the state of Ohio.”

Begala says he’s sharing his estimate with state lawmakers and the Kasich administration.

BEGALA: “And we’re very hopeful that this will help convince them of the wisdom of moving forward with the expansion.”

Begala’s woodwork effect number comes close to that put out by the Kaiser Family Foundatio, another left-leaning group that researches health care policies nationally. It estimate about 196,000 people will be added to Ohio’s Medicaid rolls.

For his part, the state’s Greg Moody says he’s giving these outside findings a serious look. He says his agency is working on a final estimate. That will come out in February when Gov. Kasich presents his next two-year budget proposal -- and, maybe, a decision on whether to join the Medicaid expansion.

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