Maine’s bankrupt health policy

This year, 1,300 Mainers will be saddled with catastrophic health costs.  Here’s how it could have been avoided – while c
reating thousands of jobs and boosting state GDP.

Medicaid-bankruptcy 7-3-2014Yesterday, the White House Council of Economic Advisors (CEA) released a report examining the differences between states that have accepted federal healthcare funds to expand Medicaid and the minority of states – including Maine – which still have not expanded.  Fittingly, the report is titled Missed Opportunities: The Consequences of State Decisions Not to Expand Medicaid.

The missed opportunities are manifold.  First, rejecting billions of dollars in federal funds has predictable consequences for state economies.  The states seizing the opportunity are adding jobs – 79,000 in 2014 alone – and enjoying the attendant impact on state GDP.  The CEA estimates expansion states will experience $62 billion in new economic activity by 2017.

Meanwhile, non-expansion states are languishing with higher rates of uncompensated care for the uninsured tearing gaping holes in hospital budgets.  In Maine, where tens of thousands of people who would be covered remain uninsured, two-thirds of hospitals are struggling with budget shortfalls and layoffs. In contrast, covering 4.3 million uninsured working poor has shored up hospital budgets in expansion states.

The CEA’s detailed state-level analysis echoes a familiar, but frustrating, statistic: had Maine’s Legislature mustered two or three extra votes to override the Governor’s veto, the boosted demand for services would add up to 3,000 new jobs and $530 million to state GDP over 2014-2017.

But the economic consequences of ideological decisions don’t just impact the state economy – they make themselves felt at the individual level.  The 2010 health reform was critical, for many reasons: healthcare costs were dragging the nation’s economic competitiveness down.  Americans were paying too much for care that was too often uncoordinated and redundant.  Most important, skyrocketing health costs barred too many Americans from needed care, and saddled many others with onerous medical debt.  For too many, a health crisis mushroomed into a financial crisis: bankruptcy.

Low- and moderate-income Americans no longer have much cushion against the vicissitudes of the modern economy – job loss, underemployment, and unexpected health crises.  Consumer bankruptcy has risen over the past century in the United States with rates spiking dramatically between 1980 and 2005.  In 2005, one in fifty-five American households declared bankruptcy.  In 2012 alone, more than 3,000 Maine households declared bankruptcy.  Contrary to the old stereotype of the heedless, profligate borrower, most Americans declaring bankruptcy are older (the median age has risen to 45 in recent years), married, high-school educated – and heavily burdened with medical debt.

Medical debt has become the leading cause of bankruptcy in America, driving three-fifths of all filings.

This is one of the areas where the CEA analysis shows the biggest differences for consumers: in states that have expanded Medicaid, 193,000 low-income workers are protected from what otherwise would have been catastrophic medical costs – healthcare bills that eat up more than a third of one’s annual income.  In contrast, based on economic projections, 1,300 uninsured Mainers will face catastrophic costs this year – the kind that pushes Americans to file bankruptcy for lack of other options.  The tragedy here is that these individuals’ costs would be covered, had the governor followed the Legislature and accepted the federal healthcare funds here in Maine. CEA projections indicate that another 4,000 Mainers who would have been covered under Medicaid expansion instead will have to borrow or skip payments in order to pay necessary medical bills.

America has endured a decades-long healthcare cost crisis. For the sake of the economy, our leaders need to meet it head-on.  The Affordable Care Act was a major step toward that objective. Running away from reality, or refusing reform, might score partisan points with the base, but we need leaders who focus on the next generation, not the next election.  Executive intransigence has meant Maine misses out on thousands of good jobs and a badly-needed jolt to our state GDP. But this recent analysis shows that this policy failure has also directly undermined the economic security of thousands of Mainers and their families.  Maine’s hard-working people earn less than our New England counterparts.  Burdening thousands of them with medical debt that could have been avoided – and risking pushing them into medical bankruptcy – is not principled politics.  It’s intemperate, it’s heedless, and it’s cruel.