From: Stan Rasmussen
To: Utah Senate, Utah House of Representatives,
Subject: MEDICAID EXPANSION UPDATE #6: Does the Healthy Utah Plan fit Utah's identity?
Date: Thu May 15 19:45:36 MDT 2014
Body:

Dear Representative/Senator,

 

Utah’s state motto is “Industry,” a word Merriam-Webster defines as “systematic labor especially for some useful purpose or the creation of something of value.” Our state motto clearly recognizes the tireless efforts of Utah’s pioneer founders to build a community out of the desert that would “blossom as the rose,” grounded in faith and freedom. This motto is enshrined in the Great Seal of the State of Utah, adopted in 1896 – the year Utah officially became a state. Whether seen in our pioneer heritage, in our state symbols or in more modern accomplishments (e.g., Utah’s economic performance, educational outcomes, etc.), work is a significant part of our cultural identity as Utahns.

 

It stands to reason, then, that this cultural identity ought to be reflected in our public policies. This is especially true for policies that are billed as “Utah solutions” – such as the proposed Healthy Utah Plan. So does the Healthy Utah Plan reflect our identity of industry? Newly published research can help inform the answer.

 

A study published this month by the National Bureau of Economic Research, conducted by academics at the University of Illinois, Georgetown University, and Texas A&M, examined the impacts on employment of expanding a state Medicaid program to low-income, able-bodied childless adults, as the proposed Healthy Utah Plan would do. Of note, the statistical rigor of the analysis and the nature of the Medicaid expansion studied led the researchers to go beyond simply pointing out statistical correlations: “This study provides plausibly causal estimates of the effect of public insurance coverage on the employment” of childless adults (emphasis added). The results are not encouraging for those who believe in Utah’s identity of hard work toward a worthwhile goal.

 

The researchers report that becoming enrolled in means-tested public insurance, such as Medicaid, “leads to sizable and statistically meaningful reductions in employment” of childless adults up to more than two years later. Specifically, they report reductions in the likelihood of employment among the expansion population between 2 and 10 percentage points, depending on the statistical method being used. In other words, if a low-income, childless adult had a 50 percent chance of having a job before being covered by an expanded Medicaid program, that likelihood would drop to 40-48 percent after being enrolled in Medicaid.

 

According to the researchers, the reason means-tested public insurance programs reduce employment is that they reduce the incentive to work more hours, or even to work at all – more gainful employment can decrease their taxpayer-funded subsidies or even lead to them being disqualified from the program altogether. In other words, means-tested programs like the proposed Healthy Utah Plan cut against Utah’s cultural identity of industry by punishing low-income Utahns who seek better pay or more work by removing some or all of their insurance subsidies. The researchers refer to this policy reality as the “Medicaid notch.”

 

Based on the promotional materials for the proposed Healthy Utah Plan, the intent is to get federal approval of work requirements for those in the Medicaid expansion population who are able to work. On the surface, such requirements might seem to resolve any concern about the industry-discouraging incentives of the Healthy Utah Plan’s expansion of Medicaid. However, this is not true, because Medicaid’s disincentive to work is created by the fact that it is means-tested – meaning that benefits decrease or are cut off with increasing levels of income. Independent of work requirements, the means-test acts as a disincentive to work more or get a better job, because it reduces the financial benefit of doing so. As income increases on the margin, health care subsidies decrease or are eliminated, meaning that some or all of the additional income ends up simply going to replace lost health care subsidies, rather than improving the individual’s standard of living.

 

If policymakers had full flexibility to fine-tune the Healthy Utah Plan after it was implemented, the state could make adjustments to the program to mitigate some of these harmful effects – observing which policies in the program discourage work, and revising them. However, because the Healthy Utah Plan waiver will not act as a block grant (i.e., any significant changes after initial approval will require approval from the federal government), Utah will not be able to appropriately respond to such implementation issues. Instead, the most likely outcome is that the Healthy Utah Plan simply becomes a broken extension of an already broken Medicaid system – broken not because it cannot be fixed, but because the federal government refuses to let us fix it.

 

Rather than being a “Utah solution,” the proposed Healthy Utah Plan will likely undermine Utah’s identity of “Industry.” This is largely because the plan must be designed to meet the approval of federal bureaucrats in Washington, D.C., as much as to solve health care problems for low-income Utahns. Rather than putting ourselves in the place of constantly having to seek permission to use Medicaid funding in a way that fits Utah’s cultural identity, policymakers ought to follow the example of their pioneer ancestors: strike out on their own to solve Utah’s own problems, while relying on the abilities, strengths, and goodness in their local communities. And like those ancestors, we can have faith that when people of good will come together in pursuit of the common good, they can achieve remarkable feats that leave the doubters and the cynical dumbfounded.

 

Derek Monson

Director of Policy

dmonson@sutherlandinstitute.org

cell: 512-698-1657

 

Stan Rasmussen

Director of Public Affairs

srasmussen@sutherlandinstitute.org 

cell: 801-718-1841

 

Sutherland Institute

801-355-1272