March 10, 2013

Many states embrace Obamacare

Colin Read, Everybody's Business

— Recently, the first state to sue the federal government over Obamacare accepted its provisions after all. Gov. Rick Scott of Florida is on board as a matter of economic and political pragmatics.

New York and Vermont were early adopters. Their reasons differed, but their responses were identical. They realized what other states took longer to understand. Obamacare was good for their state economies and coffers, even if they don’t endorse steps toward nationalized medicine.

Our economy is certainly most empowered when employees are most healthy. But, there are many other factors that contribute to increased productivity. Our personal ethic affects our willingness to work when we might not prefer, and our off-the-job activities, risky endeavors or inactivity also affect how effective we are when at work. Our willingness, and the willingness of our employer, to invest in our productivity also helps determine whether our economies thrive.

Nonetheless, we each have a shared interest in the health of family members and co-workers. Their healthfulness makes them, and us all, more productive, especially if some of their illnesses can be transmitted to us. We have also, as a society, made a huge investment in each other’s productivity through publicly subsidized education. We must do what we can to be sure our investment pays off in increased productivity and tax revenue.

There remains legitimate debate about what the state can do. Some states believe government can promote a healthy citizenry through state-mandated insurance. Eight states have passed or are considering such universal health care, usually using existing health-insurance networks. Some argue for universal medicine as good public policy, while others argue for it as a basic human right.

Vermont goes the farthest by advocating for a single-payer system, more like Canada’s nationalized medicine. However, while Green Mountain Care will purchase services directly from health-care providers on behalf of its citizens, Vermont will still allow private insurers to compete within their network.

New York takes a different approach. Its view is to extend its Medicaid program, which provides health care for low-income families, to an ever-increasing share of residents. New York prides itself on the depth of its entitlement programs, and Medicaid is the granddaddy of them all.

Obamacare fits perfectly into these goals of Vermont and New York. Each state can pursue the expansion of their state-sponsored provision, and taxpayers elsewhere in the country can fund much of this expansion. Obamacare provides states with 100 percent of the additional costs for an expansion for the first three years and 90 percent of the cost thereafter. Vermont and New York public policy is billed to the United States government.

Other states that envisioned a smaller involvement were reticent to adopt Obamacare. Some sued to prevent the mandates phased in as the law took effect. The Supreme Court allowed states to opt out of such a health-care expansion.

In reality, though, most states are discovering it’s simply good economics to accept federal largesse, even if they don’t accept the premise. 

The healthcare industry is a big employer. In New York, it generates almost 1.1 million jobs and $121 billion in economic activity. Hospital networks are a big part of that. Our regional hospital network is Clinton County’s biggest employer, and Fletcher-Allen is one of the largest employers in the Burlington region.

Each $1 of additional hospital spending generates $2.02 in our state economy. This new spending not only creates jobs but also creates state and local tax revenue. New tax revenue of 12 cents more than covers New York’s 10-cent share of each new health care dollar spent.

Florida and other states are cranking the numbers and realizing Obamacare is an offer they can’t refuse. I expect even Texas will come around. They may not agree, but every state is interested in job creation and tax revenue.

Challenges to healthcare remain, in cost containment, in the alignment of incentives, in finances and in a shift in demographics toward users of more intensive health care as the working age taxpaying population shrinks. Public policy success depends on the resolution of these problems, and not so much on who pays. Ultimately, we all pay.

Colin Read contributors to and has published eight books with MacMillan Palgrave Press. He chairs the Department of Finance and Economics at SUNY Plattsburgh. Follow his tweets at @ColinRead2040.