Ohio conservatives are demanding the the Ohio House spend $1 billion in the biennium to deny the Medicaid expansion on the grounds that it increases the federal deficit.  You know what else increases the federal deficit?  Not expanding Medicaid in Ohio.

The federal government will spend around $1.3B annually to expand Medicaid coverage in Ohio.  Without expansion, the there will still be another $0.9B in federal spending, as detailed below.

The proposal, then, is to reduce the federal deficit by $400 million while throwing the Ohio budget $500 million out of balance.

This is a strange thing to worry about.  Ohioans will pay the same federal taxes regardless of whether we expand Medicaid.  The new taxes in Obamacare aren’t indexed to the spending in Obamacare; we’ll just be paying taxes and getting nothing.  If “relative federal deficit reduction through tax increases” is a goal unto itself, the Ohio’s state legislators ought to run for Congress!  They’d beat our federal delegation handily.

As we’ve discussed before, providing Medicaid coverage is much less costly than providing subsidized private coverage through the health exchange i.e. the federal subsidy on the Exchange is greater than federal Medicaid spending.  This is true for Ohioans below 218% of poverty.  Without the Medicaid expansion, the 197,100 uninsured Ohioans earning between 100-138% of poverty will get a subsidy of $4600-$5000 per person.  Let’s assume that the population is evenly distributed, and the average subsidy will be $4800.

This means new federal spending on exchange subsidies will be $859,680,000 if Medicaid isn’t expanded.

It’s also worth mentioning that estimates show expanding Medicaid will create 27,000 health care jobs.  These are jobs that will pay federal income and FICA taxes.  This is because the newly insured will go to the doctor more often, and more people will be able to earn a living in the health care sector.  If people don’t go to the doctor more often, then federal Medicaid spending will be lower.

Let’s assume that the distribution of high-wage and low-wage jobs created is the same as in this forecast published in 2011 by the Kasich administration, with 61% of the jobs going to practitioners and 39% to support.

New hires Average salary Income tax collection FICA collection
Practitioners 12,217 $66,000 7.9% 12.4%
Support 7746 $25,000 0% 12.4%

This means the federal government may stand to lose $55,940,000 in income taxes and another $124,300,000 in FICA taxes if these new health care jobs aren’t created – or over $180 Million in federal revenue.