Kentucky Medicaid expansion has not produced jobs Beshear claims - WDRB 41 Louisville News

Kentucky Medicaid expansion has not produced jobs Beshear claims

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The emergency room at University Hospital, Nov. 18, 2015 The emergency room at University Hospital, Nov. 18, 2015

LOUISVILLE, Ky. (WDRB) – In defending his decision to expand Medicaid in Kentucky, Gov. Steve Beshear has repeatedly cited what he calls an “undisputed fact” -- that the program has already added 12,000 jobs to the state’s economy.

“These numbers are not Gov. Beshear’s political talking points,” Beshear told reporters at a Nov. 13 press conference. “They’re not my hopes and my dreams. It’s real data… It happened. ”

But the numbers were projections – not actual data – and the job growth Beshear has touted hasn’t materialized.

Beshear has been referring to an estimate – included in a state-funded study -- that all of the new Medicaid money flowing to hospitals and doctors would generate 12,037 new jobs in 2014, the first year of expanded Medicaid eligibility.

But the figure does not represent actual employment statistics, which show that healthcare jobs in fact declined in the state last year.

For example, more than 3,000 jobs were supposed to be added at hospitals alone in 2014 as hundreds of thousands of newly insured people got services under Medicaid, according to the study’s estimate.

But instead, hospital employment in Kentucky declined by 2,660 jobs, to 72,760, in 2014, according to government data.

The 12,000-jobs estimate comes from a February study by Deloitte Consulting LLP -- the same company that received a $125 million contract to build Kentucky’s health insurance exchange, Kynect.

Beshear’s administration paid Deloitte $140,000 to produce the study without advertising the work separately to other consulting firms, according to officials with the Cabinet for Health and Family Services.

Ultimately, the Medicaid expansion will create nearly 40,000 jobs by 2021, the study estimates.

But those figures are not actual employment data. Instead, they were generated by an economic model that academics and consultants use to predict how a new development like Medicaid expansion might affect a local economy.

“They are guesses, and they are guesses based on old data, and sometimes the guesses are only as good as the data they are based on,” said Ken Troske, a professor of economics and director of the Center for Business and Economic Research at the University of Kentucky.

Whether the Medicaid expansion has added jobs in Kentucky is not simply an academic question.

The more jobs the policy generates, the more easily Kentucky can afford the increasing cost to continue covering people who earn up to 138 percent of the poverty level through Medicaid, as the expansion allows.

Republican Gov.-elect Matt Bevin has said the state can’t afford it while Beshear – buttressed by the Deloitte analysis --- claims that it can.

Deloitte concluded that the Medicaid expansion pays for itself through 2020 – generating a “positive fiscal impact” to the state of $819 million, to boot.

But that calculation assumes that Medicaid expansion will bring the predicted 40,000 new jobs through 2021 – and that those employees will in turn generate more than $1 billion in new state and local tax revenue.

Deloitte did not generate the job and tax revenue projections in its study. Instead, the estimates came from the Urban Studies Institute at the University of Louisville.

About half of the 12,000 jobs that were supposed to be added in 2014 from the expansion – 5,436 – were in the core industries of “health care and social assistance,” according to the Deloitte study. That includes hospitals, doctor’s offices and medical clinics, among other health-related employment.

But researchers at U of L acknowledge that Kentucky actually lost 1,287 “health care and social assistance” jobs from 2013 to 2014, according to statistics from the U.S. Bureau of Economic Analysis.

“Our model predicted more employment (not limited to health care but certainly concentrated in health care) than materialized,” Janet Kelly, director of U of L’s Urban Studies Institute, wrote in an email to WDRB News.

The remainder of the 12,000-job estimate is comprised of 6,601 jobs in “other sectors.” These jobs would follow, the model predicted, mostly from the secondary effects of the new healthcare spending.

To be sure, Kentucky did add about 28,000 jobs in 2014, but healthcare was not a growth area.

And, as WDRB reported on Sunday, the Medicaid expansion has delivered hundreds of millions in new revenue and helped hospital companies’ bottom lines. It has also halved the percentage of Kentuckians without health insurance.

In  the study, Deloitte cites government data showing Kentucky had 5,300 more “healthcare and social assistance jobs” in November 2014 than a year earlier as confirmation that the model’s employment prediction was right on track.

But that monthly data from the Bureau of Labor Statistics is often revised after the fact, and now the government reports that the gain was only 3,500.

Audrey Tayse Haynes, Beshear’s outgoing secretary of the Cabinet for Health and Family Services, said in an interview Tuesday that she still thinks the projection of 40,000 jobs from the Medicaid expansion by 2021 will materialize.

“We continue to stand by the data and the projections; we have no reason not to at this point,” she said. “…We all still feel really good about where this is headed. As you know, you can talk to just about any healthcare person, and they are more likely than not hiring.”

In a written statement, Beshear did not directly address the discrepancy between the model’s prediction and the actual government data on jobs. Instead, he repeated the projection that 40,000 jobs will ultimately flow from the Medicaid expansion.

“Since January 2014, Kentucky has seen tremendous job growth thanks in large part to Medicaid expansion,” the governor said. “…And while many of these new opportunities are for health care professionals, the job growth as a result of Medicaid expansion is not exclusive to the health care field.”

A spokeswoman for Deloitte did not return a phone call and email seeking comment. No Deloitte employee’s name is listed on the 74-page study.

Barry Kornstein, research manager at U of L’s Urban Studies Institute, said “structural” issues in the healthcare industry – like a shortage of doctors – might explain why the model’s initial employment projections were overly optimistic.

“You’d have to have some really honest, open conversations with some top level administrators of hospitals and large physician practices to really understand what’s going on,” he wrote in an email.

But Kornstein said the Medicaid expansion eventually should lead to significant job growth in Kentucky.

“In the long run, if we’re going to have half a million more people accessing the healthcare system on a regular basis than we otherwise would have (out of 4.5 million people), something’s got to give,” he said.

Monthly government data show Kentucky’s “health care and social assistance” sector has picked up – gaining nearly 10,000 jobs since the Medicaid expansion started in January 2014 through October 2015. But that’s still short of the 15,509 jobs predicted by the model in 2015.

Robin Rhea, a former policy adviser to Haynes, who spoke to WDRB at the request of the Cabinet for Health and Family Services, said it’s too soon to declare the job projections invalid.  

“I think until you’ve got enough time to see, was it a timing issue, or was it because their model is fundamentally flawed, you just keep revisiting those reports and updating with new data,” he said.

But Troske, the University of Kentucky economist, said the software program that was used to predict the employment growth – called IMPLAN – is “a bloody simplistic model,” the results of which are “meaningless” when applied to a big, complicated policy like the Medicaid expansion.

“Understanding the impact of the Medicaid expansion on Kentucky is not something IMPLAN is capable of doing,” said Troske, who was not involved in the Medicaid expansion study.

When compared to employment statistics from the government, the model estimates should not be given much weight, Troske said.

“Which one would you believe? I know which one I’d believe,” he said.

Company that produced study also got millions for health exchange work

Meanwhile, Haynes rejected the notion that Deloitte’s ability to objectively evaluate the economics of the Medicaid expansion is compromised by the company’s multi-million-dollar contract with Kentucky for technical work on the Kynect exchange.

Haynes said Deloitte’s technical staff working on the insurance exchange were “a completely separately team” from the consultants who prepared the study.

“Of course they are objective. They have a national – an international – reputation to put out a report that is objective, and especially a report that is as high-profile as this one,” Haynes said.

Instead of bidding the economic study separately, the study was added to Deloitte’s plate through a “statement of work” under the company’s “master agreement” with the state, cabinet officials said. The state’s online contract database says Deloitte’s agreement is worth $125 million.

Despite Haynes’ confidence, Deloitte’s own marketing materials seem to show the company’s vested interest in the success of Beshear’s healthcare policies.

In a three-page “client spotlight” document on its website, Deloitte presents Kentucky as a shining example of the benefits of a state-created insurance exchange.

Deloitte also built health insurance exchanges for Connecticut, Rhode Island and Washington, according to a 2013 USA Today story.

“What’s more, the (Kynect) exchange has boosted employment – creating new jobs among agency, issuers and healthcare providers,” according to the Deloitte document.

Copyright 2015 WDRB News. All rights reserved.

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