Reports Supporting Medicaid Expansion Flawed

March 27, 2014

Under ObamaCare, states must decide whether or not to expand their Medicaid programs to individuals earning up to 138 percent of the federal poverty level (FPL). Tax preparation company Jackson Hewitt recently released two studies, which ObamaCare supporters say are proof that states should expand their programs. The Hewitt reports claim that businesses will suffer tax consequences of somewhere between $2 billion and $3 billion annually if states do not expand Medicaid. But the reports are flawed and uses false assumptions, says Jonathan Ingram, director of research for the Foundation for Government Accountability.

Ingram details six flaws in the Jackson Hewitt reports:

  • The reports do not estimate the number of full-time employees between 100 percent and 138 percent of the FPL correctly. Rather than look at state population data, the authors make an assumption about states' low-income population distribution, leading to wildly divergent numbers. For example, the studies estimate that more than twice as many people are in the 100 percent to 138 percent FPL group in Utah than there are in reality. These miscalculations lead to incorrect calculations of employer costs.
  • The studies include individuals who are already eligible for Medicaid without the state expansion (and who therefore could not trigger employer penalties) in their calculations.
  • Seasonal workers and part-year workers do not trigger penalties either. The Jackson Hewitt calculations, however, include these workers, who constitute one-third of full-time employees within the 100 percent to 138 percent FPL group. Again, this overestimates the potential employer cost.
  • Only 14 percent of full-time employees at large employers are not offered affordable health insurance, yet Jackson Hewitt assumes that 93 percent of employees are not offered affordable health insurance, triggering penalties.
  • The reports assume that employers will subject themselves to these penalties, rather than find ways to work around them. This is unlikely. Employers will restructure their workforce and reduce their workers to part-time work in order to avoid penalties.
  • The Jackson Hewitt studies assume that the employer mandate will be enforced as it was enacted in 2010, but given the frequency of delays, this is doubtful.

The Jackson Hewitt studies are being used by Medicaid expansion advocates, yet the studies are very flawed and wildly overestimate the tax penalties on businesses. Lawmakers should not rely on these reports as they contemplate whether or not to expand their Medicaid programs.

Source: Jonathan Ingram, "The Exaggerated Epidemic," Foundation for Government Accountability, March 13, 2014.

 

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