Study finds Md. economy will benefit from health care act despite $19 billion in new spending

By Dana Amihere

Stethoscope and dollarsHealth care system reforms under the Affordable Care Act will cost the state billions to implement but are also projected to generate income from FY 2014 to FY 2020 as a result of the newly insured, a new study reports.

Researchers at the University of Maryland, Baltimore County’s Hilltop Institute estimate that the unemployment rate will decrease nearly 1% by 2020 as a result of almost 135,000 jobs created across all sectors by the new legislation.

While the federal government’s infusion of funds into the state via subsidies or increased match for Medicaid payments directly impacts the health care system, this has a “rippling effect in the economy” that extends beyond the health care sector, said interim Hilltop Institute executive director Michael Nolin.

The state’s new health insurance exchange, expansion of Medicaid and children’s health insurance program, increased Medicaid reimbursement rates and agencies’ increase in administrative costs alone total nearly $19 billion, the study says. Simulated models were used to determine additional money pumped into the state economy as a result of system reforms:

  • $3.2 billion in Medicaid payments matched to 100% Medicare levels for health care service professionals including physicians, dentists and nurse practitioners
  • $4.9 billion spent on hospital services, including a reduction of $3.1 billion in uncompensated care costs for patients currently without insurance
  • $1 billion spent on pharmaceutical drugs and services
  • $5.7 billion in cost-sharing and subsidies to low-income Americans (up to 400% of the federal poverty level) purchasing insurance in the private market

Breathing time for cost controls

Nolin says he interprets the 6-year period between FY 2014 and FY 2020 –– the ACA’s effect date and when all provisions have been put in place –– as a means of “buying breathing time to get control of medical inflation” during which cost-containment measures can be put in place before federal funds drop off.

At a Greater Baltimore Committee forum last, health care administrators questioned whether the increased Medicaid spending would actually occur, even if the ACA survives.

“I can almost guarantee that Medicare and Medicaid will be targets for federal deficit reductions,” said Ronald Peterson, president of the Johns Hopkins Health System.