Could expanding Medicaid help Nevada’s economy?

By David McGrath Schwartz

Sunday, July 8, 2012 | 2 a.m.

It’s not going to create a Higgs Boson particle, but Gov. Brian Sandoval’s twin desires to not raise taxes and diversify the economy might be colliding.

So far, Sandoval’s pending decision on whether to expand the state’s Medicaid system has been argued on the issue of government spending versus expanded access to health care.

But Robert Lang, a professor of urban affairs at UNLV, sees the debate differently. He argues it’s about jobs.

Las Vegas’ health care industry is dramatically smaller than in other states, meaning we have fewer doctors, nurses and receptionists than would be expected.

Given our population’s size, age and income, the health care industry should make up 18 percent of our overall economy. In Southern Nevada, it’s about 12 percent, according to a study co-authored by Lang last year.

“There’s a lot of medicine missing from Southern Nevada,” he said.

Expanding the health care industry to meet the national standard would mean 40,000 jobs for Southern Nevada.

And that’s where the decision on whether to expand Medicaid comes in.

The U.S. Supreme Court decision this month upheld key parts of the Affordable Care Act but left it up to the states to decide whether to expand Medicaid, the state-run health program for the poor and disabled.

Sandoval, a Republican, has expressed grave concerns about the cost of the expansion to the state.

Although the federal government will pay for all direct costs of the expansion initially, that share will drop to 90 percent by 2020. Plus, the state would shoulder administrative costs.

Sandoval has said he would have to consider cutting education or explore other “untenable” avenues — such as raising taxes — for the state to afford the expansion.

But Lang said direct costs to Nevada should be weighed against the economic benefits. Economic diversification has been a priority of Sandoval’s administration, and health care is identified as one of the seven industry sectors the state is trying to attract. The governor’s economic development plan also identifies Nevada’s “under-capacity health care system” as one of the state’s liabilities.

Expanding Medicaid “might be a chance to put a lot of money in play,” Lang said.

Advocates for Medicaid — from patient advocates to doctors and hospital representatives — have argued that for every dollar spent on the program, there’s a multiplier effect. In English, money earned by a Medicaid provider is then spent elsewhere in the economy for things such as renting office space, buying lunch or getting haircuts.

Larry Matheis, executive director of the Nevada State Medical Association, which represents doctors, said that for every dollar of Medicaid spent in Nevada, $3 gets circulated in the economy.

“I’d think there would be a positive effect on the economy that comes from expansion of the Medicaid program,” said Matheis, who added his association hasn’t taken a position on expanding the program.

But more people on Medicaid doesn’t automatically mean a windfall for providers such as hospitals.

Bill Welch, president/CEO of the Nevada Hospital Association, said the state reimbursement rates for Medicaid patients pay for just 53 to 58 percent of the cost of care.

In other words, hospitals lose money on Medicaid patients, he said.

Still, that’s better than they do on those without insurance. Hospitals recover about 6 percent of the cost of treating those without insurance, he said. Welch said Nevada hospital CEOs will meet this week to decide whether to take a unified position on the Medicaid expansion.

But, he noted, Medicaid reimbursement rates are at levels from the late 1990s.

To increase those rates would, of course, further complicate the original question of whether to expand Medicaid: Can the state afford it?