States’ Very Good Deal on Expanding Medicaid Gets Even Better

April 22, 2014 at 3:51 pm

In a little-noticed finding in last week’s Congressional Budget Office (CBO) report on health reform, CBO sharply lowered its estimates of how much the Medicaid expansion will cost states.  We’ve noted repeatedly that the federal government will cover the large bulk of the expansion’s cost.  As our new report explains, these new figures make it even clearer that the expansion is a great deal for states.

  • CBO now estimates that the federal government will, on average, pick up more than 95 percent of the total cost of the Medicaid expansion and other health reform-related costs in Medicaid and the Children’s Health Insurance Program (CHIP) over the next ten years (2015-2024).
  • States will spend only 1.6 percent more on Medicaid and CHIP due to health reform than they would have spent without health reform (see chart).  That’s about one-third less than CBO projected in February.

Moreover, the 1.6 percent figure doesn’t reflect states’ savings in providing health care for the uninsured, many of whom will now have Medicaid coverage.  The Urban Institute has estimated that if all states took the Medicaid expansion, states would save between $26 billion and $52 billion from 2014 through 2019 in reduced spending on hospital care and other services provided to the uninsured.

Improving the Odds for America’s Children

April 21, 2014 at 12:18 pm

The safety net has been more effective than critics suggest, the Center’s Robert Greenstein, Sharon Parrott, and I explain in a chapter for Improving the Odds for America’s Children, which Harvard Education Press has just published.

For our chapter, we reviewed the last 40 years of anti-poverty policies for children and offered ideas for future decades.

Here’s some of what we found, and some of what we proposed:

Household incomes have risen since 1973 for the poorest fifth of children if you include the value of non-cash benefits, as most experts favor (the official poverty figures omit them).  If you eliminated the safety net today, another 9 million children would fall into poverty.

Also, studies show that income from safety-net programs like the Earned Income Tax Credit (ETIC) and SNAP (formerly food stamps) has a powerful effect on children’s long-term success, in school and beyond.

Yet poverty and hardship continue to stunt many children’s futures.  To help families obtain incomes that are adequate to raise successful children, we recommend steps in three core areas:

  • Jobs:  Creating a funding stream similar to the successful TANF Emergency Fund — through which states placed more than 260,000 low-income adults and youth in paid jobs during the Great Recession — but one that was permanent and expanded in an economic downturn.
  • Income support:  For example, expanding housing vouchers (and making it easier for people with vouchers to move to neighborhoods with more jobs and better schools), while preserving recent improvements in the Child Tax Credit and EITC.
  • Support for work and higher earnings:  For example, raising the minimum wage and providing more funding for job training and child care assistance.

Other chapters provide analysis and policy ideas from noted experts such as Greg Duncan and Richard Murnane (on inequality), Sara Rosenbaum (health care), Deborah Jewell-Sherman (education), Jane Waldfogel and Michael Wald (child protection and family support), Joan Lombardi (child care), and others.

3 Steps States Can Take to Improve Their Rainy Day Funds Now

April 21, 2014 at 10:02 am

States can take concrete steps now to improve the structure of their rainy day funds, helping them to more effectively weather the impact of inevitable future downturns, as we explain in our new paper.

States used their rainy day funds to avert over $20 billion in cuts to services, tax increases, or both, in each of the last two recessions, highlighting the funds’ importance.  Yet these reserves filled only a modest share of states’ record-setting budget gaps; states would have weathered the storms better with bigger rainy day funds.

States shouldn’t make rapid replenishment of rainy day funds a priority until their revenues rise well above pre-recession levels, unemployment has declined further, and they have restored programs cut during the recession — and most states are not yet there.

But, when they are ready to replenish those funds, here are three steps they can take:

  1. Create a rainy day fund, if they don’t have one.  Four states — Colorado, Illinois, Kansas, and Montana — lack a designated rainy day fund.  The budgets of all of these states except Montana were hit hard by the economic downturn, and the lack of a rainy day fund left them more vulnerable to the recession’s effects.
  2. Loosen overly restrictive caps on the size of rainy day funds.  One reason rainy day funds weren’t even more effective in the most recent downturn is that 31 states and the District of Columbia cap them at inadequate levels, such as 10 percent of the budget or less.  States with overly restrictive caps could either remove the cap or raise it to a more adequate level, such as 15 percent of the budget.
  3. Ease rainy day fund rules that make it difficult to make deposits in good times.  Most states place a low priority on replenishing their funds, depositing only whatever surpluses are left over at the end of the year.  States could integrate rainy day fund transfers into the budget as part of an overall reserve policy that places a high priority on saving.

Click here to read the full paper.

In Case You Missed It…

April 18, 2014 at 1:40 pm

This week on Off the Charts, we focused on Tax Day (April 15), the federal budget and taxes, health reform, state budgets and taxes, and the safety net.

  • On Tax Day, Chris Mai compiled CBPP’s top charts on state tax issues and Chuck Marr compiled our top federal tax charts.  We recognized the efforts of volunteers who helped file more than 3 million federal tax returns free of charge for low- and moderate-income people.  We also listed our most recent analyses on tax issues.
  • On the federal budget and taxes, Chuck Marr excerpted his National Journal op-ed on why policymakers should strengthen the Earned Income Tax Credit (EITC) for childless workers.  Will Fischer highlighted proposed legislation creating a tax credit to help low-income families afford housing.
  • On health reform, Paul Van de Water pointed to new Congressional Budget Office projections that health reform’s coverage expansions will cost less than previously estimated.  Dave Chandra highlighted CBPP’s new interactive database to help states design and operate their insurance marketplaces.
  • On state budgets and taxes, Elizabeth McNichol listed five questions for states considering whether to start refilling their “rainy day” reserves.
  • On the safety net, Becca Segal explained that next month’s expansion of “community eligibility” will help alleviate hunger in thousands of high-poverty schools.  Chad Stone noted that the number of jobless workers affected by policymakers’ failure to restore emergency federal unemployment benefits continues to grow.

In other news, we issued papers on when and how states should strengthen their rainy day funds and why the lone group taxed into poverty should receive a larger EITC.  We updated our guide to statistics on historical trends in income inequality and our papers explaining that federal income taxes on middle-income families remain near historic lows and that the EITC promotes work and encourages children’s success at school.

CBPP’s Chart of the Week:

A variety of news outlets featured CBPP’s work and experts recently. Here are some highlights:

Ryan budget represents the height of irresponsibility
The New Journal & Guide
April 16, 2014

7 Facts About Our Broken Tax System
The Nation
April 16, 2014

It’s Time to Strengthen the EITC to Give Childless Workers a Much-Needed Boost
National Journal
April 15, 2014

CBO: Health Reform Is Working — and Costing Less
Huffington Post
April 15, 2014

Where your tax dollars go, in one chart
Vox
April 14, 2014

New York Times Is Right: “No Spring Break for the Unemployed”

April 18, 2014 at 12:30 pm

“As members of Congress enjoy their extended spring break, 2.3 million unemployed Americans have been left to worry about whether lawmakers will ever get around to renewing federal unemployment benefits, which expired at the end of 2013,” today’s New York Times editorial points out.  And the total number of jobless workers affected grows each week.

As we’ve explained, the Labor Department estimates that 4.9 million people will miss out on emergency benefits by the end of the year if policymakers don’t restart the federal program, known as Emergency Unemployment Compensation (see graph).

For state-by-state figures on those 4.9 million workers, click here.  For state unemployment rates and the number of weeks of state unemployment benefits available, click here.