New estimate of Medicaid expansion costs raises questions of how to pay

A new estimate that says Nebraska would have to come up with about $112 million in state tax dollars to expand Medicaid over the next five years has supporters of the idea trying to figure out how to pay for it.

Throughout the year, supporters of expanding Medicaid to provide more of the working poor with health insurance coverage have said they would keep the cost to the state down. Sen. John McCollister of Omaha, one of those supporters, said Monday "Throughout the summer and fall I went through Nebraska and I promised Nebraskans that any fiscal impact from Medicaid expansion would be nominal."

Now, a new estimate from the Legislature’s own fiscal office puts the state’s cost of the proposed expansion at nearly $112 million over the next five years. That’s still less than the more than $150 million cost estimated in a study done for the administration of Gov. Pete Ricketts, who opposes expanding Medicaid. But Calder Lynch, head of the Medicaid Division of the Ricketts’ Department of Health and Human Services, says, it is still a significant number. "It’s worth noting that in both estimates, there’s a cost to the state totaling over $100 million through state fiscal year 2021. Which is very significant and something that has to be taken into consideration," Lynch said.

Sen. Heath Mello, a leading co-sponsor of the Medicaid expansion bill, says there are several reasons for the new cost estimate. One is that the number of people who it is estimated will sign up for Medicaid if it’s expanded has increased, from 77,000 to 97,000 thousand. The Ricketts administration’s consultant estimates that number will be even higher – 127,000.

Mello also says the state was initially planning on keeping the premiums – two percent of their income – that participants in the program would pay. But it turns out the federal government, which would provide 90 percent of the funding to expand Medicaid, would take back 90 percent of the premiums paid.

Advocates say Medicaid expansion’s still a good deal, which would provide health insurance to people who currently don’t have it, and bring in more than $2.8 billion in federal funds to Nebraska over the next five years. Opponents have said the state’s share would take money away from roads, education, and other state needs. But Mello says supporters will make changes to their proposal to avoid that. "We are going to bring a bill out of committee that will not have a general fund impact," he promised.

Mello was not specific about how this would be done. He said he, McCollister, and Sen. Kathy Campbell, another leading cosponsor, have been discussing various ideas, including a "funding stream to cover the general funds necessary for this concept.

Asked about such a "funding stream," Lynch was skeptical. "That’s not reducing the cost. That’s just raising the taxes to pay for it, which I don’t think this administration would support," he said.

Asked if the new funding stream could come from a proposed increase in the state’s cigarette tax, McCollister demurred. "Were still looking and we haven’t arrived at a conclusion yet. And that’s all I’ll say today," he declared.

Sen. Mike Gloor, sponsor of the proposed hike in Nebraska’s cigarette tax from 64 cents to $2.14 a pack, says no one has asked him about using the proceeds for Medicaid. Gloor, chairman of the Revenue Committee, says the cigarette tax proposal was introduced to provide funds for property tax relief, and that remains the priority. His committee is scheduled to discuss the increase later this week.