Cooper’s plan to expand Medicaid relies on bad math, JLF report finds

Gov. Roy Cooper’s price tag for Medicaid expansion could be off by as much as $171.3 million, a report by the John Locke Foundation says.

Medicaid expansion has dominated Cooper’s fights with the Republican legislature. Cooper’s pitch comes in the form of a moral imperative: Cover uninsured people who are suffering without medical care, and do it with zero cost to the state. 

Cooper’s math is bad, the researchers say. 

The John Locke Foundation report predicts a funding gap of $119.3 million to $171.3 million in the first year. Cooper is underestimating how many people would enroll and how much they’ll cost the state, the report says.

JLF researchers did the study to evaluate Cooper’s claims about the state’s costs associated with Medicaid expansion.

North Carolina has been wrestling over Medicaid expansion for more than a decade, but Cooper has made it a priority. He sank last year’s budget and vetoed teacher raises to push health care coverage. The budget stalemate has dragged on for more than a year. 

Medicaid expansion would cover anyone making less than 138% of the federal poverty level. North Carolina is one of 12 states that has failed to expand Medicaid and restricts the program to low-income families, pregnant women, the aged, the blind, and the disabled. 

North Carolina is only on the hook for 10% of Medicaid expansion’s cost. The federal government promises to pick up 90% of the tab, and Cooper plans to put the remaining costs on hospitals and prepaid health plans. 

But expansion would cost more than they originally agreed to pay, says Jordan Roberts, John Locke Foundation health policy analyst and author of the report. 

“The amount of money that Cooper thinks he’s going to raise from that revenue falls short,” said Roberts. “In the scheme that Cooper has cooked up, the hospitals will pay X amount, but it could be a lot more than that. The General Assembly would have to make up the difference.” 

In his budget, Cooper predicted expansion would add 626,000 people to Medicaid’s rolls. But he didn’t use that number when calculating costs. Instead, he dropped his estimate to 500,000 enrollees, and got a $4.3 billion price tag for 2021 for the expansion population. 

That has consequences. About 28% of the population would be on Medicaid after expansion, says the report. Roughly one in five residents are now covered by Medicaid. 

The report breaks down how Cooper underestimated the cost of covering enrollees. 

If 600,000 people signed up, Cooper’s budget would assume they would each cost $7,187 — more than $1,000 short of the Centers for Medicare and Medicaid Services’ estimate of $8,604 per expansion enrollee, says the report. 

The report shows Cooper’s failure to accurately account for the “woodwork” effect. Medicaid expansion encourages people who were already eligible to sign up for coverage, or to come out of the woodwork. These enrollees don’t qualify for the 90% federal match, so they’re more expensive for the state. 

Cooper ignored the true cost of this group, says Roberts. When combined with Cooper’s other low estimates, the state could rack up a funding deficit of as much as $171.3 million in the first year of expansion.

“It’s very unlikely that it will be free to the state,” Roberts said. “We’re responsible for the entire 10%, no matter what it will be. Especially given all the budgetary impacts from COVID, that extra $171 million could cause more shortfalls on top of what the state may already face from the pandemic.”