Governor Beshear's announcement that he’ll expand Medicaid in Kentucky included release of a report showing that expansion will result in a net savings of $802 million to the state budget over the next eight years. The report also demonstrates that not expanding Medicaid would cost the state $39 million over that same period.
But how can expanding health insurance to 308,000 Kentuckians save money in the budget, and how can not doing so increase costs? Here's how.
KCEP Director Jason Bailey made the following statement today about Governor Beshear’s announcement that he will accept the Medicaid expansion:
“Governor Beshear’s decision today to expand Medicaid will increase the health of Kentuckians and strengthen the foundation of our economy. It will allow hundreds of thousands of our neighbors the dignity and security of health care coverage, improving quality of life and allowing Kentucky to make much-needed progress on our poor indicators of health.
The governor’s move will mean coverage for around half of the state's uninsured adults, including workers who toil at low-wage jobs in restaurants, construction sites, nursing homes and day care centers, as well as 9,500 uninsured veterans. It will also allow the state to take advantage of a great deal, generating hundreds of millions of dollars in new income to health care providers that will translate into jobs for nurses and health practitioners across the state. The expansion is a great step toward a healthier state and a stronger Commonwealth.”
In Kentucky, nearly 41 percent of low-income women aged 19 to 44 are uninsured. However, if the state expands Medicaid through the Affordable Care Act (ACA), these women could gain coverage and improve their health and the health of their babies.
The Governor will be deciding soon whether or not to expand Medicaid eligibility in Kentucky through the Affordable Care Act. If the state does move forward with the expansion, nearly 280,000 uninsured Kentucky adults could receive health coverage. These uninsured Kentuckians who stand to benefit live across the state; in many counties, approximately half of the uninsured would qualify for coverage.
If Kentucky moves forward with the Medicaid expansion, uninsured workers across Kentucky's economy could gain health coverage. Workers at restaurants, construction sites, grocery stores and child care centers are among those who would benefit.
9,500 uninsured Kentucky veterans and thousands of their family members could gain health insurance coverage if the state makes the right decision to move forward with the Medicaid expansion now under consideration.
While the primary pension challenge Kentucky faces is how to find the revenue to pay back the existing unfunded liability, much of the attention has instead focused on moving new employees to a defined contribution plan or a hybrid plan like the cash balance option included in Senate Bill 2. However, there are a number of reasons to prefer Kentucky’s existing defined benefit design over such a plan.
The cash balance plan for new workers proposed in Senate Bill 2 would make paying Kentucky’s unfunded pension liability harder by adding approximately $55 million in state costs over the next 20 years, according to the actuarial analysis produced for the bill.
Income gaps widened more in Kentucky than in all but eight other states between the late 1990s and the mid-2000s—and more than all but three other states from the late 1970s to the mid-2000s—according to a new study by the Center on Budget and Policy Priorities and the Economic Policy Institute.
The state’s task force on public pensions heard consultants’ recommendations this week that include several ways to raise employee costs and cut benefits, some of which may not be legal. Yet even if all of the recommendations were to become law they would only reduce a small portion of Kentucky’s unfunded pension liability.
This limited impact and emphasis on employee sacrifice are the results of an approach that includes just one revenue measure (taxing retirement benefits) rather than the kind of broad, long-term revenue plan that is needed to truly address the problem.
The share of Kentuckians without health insurance dropped last year, according to Census Bureau figures released today. 14.4 percent of Kentuckians did not have health insurance coverage in 2011, a decrease from 15.3 percent in 2010.
The federal Earned Income Tax Credit (EITC) is widely known as a highly effective antipoverty program that helps low-income families make ends meet and provides long-term benefits for children. In 2010 it lifted 6.3 million individuals out of poverty. To further capitalize on the success of the program, 25 states have adopted state EITCs linked to the federal credit. The Kentucky Chamber of Commerce, however, raises concerns about an EITC for Kentucky in their recent publication, “Should Kentucky Adopt a Credit that is Based on the Federal Earned Income Tax Credit?" This paper’s claims about EITCs deserve closer scrutiny.
An increase in the federal minimum wage to $9.80 an hour would raise wages in Kentucky by $606 million over the next three years and benefit one out of every four of the state's workers, according to a new report by the Economic Policy Institute (EPI). Contrary to stereotypes, increasing the minimum wage would primarily benefit adults whose families depend on these jobs to make ends meet.
The report examines the impact of legislation introduced in both houses of Congress to incrementally raise the federal minimum wage from its current $7.25 an hour to $9.80 an hour over three years. The proposal would also raise the minimum wage of tipped workers to 70 percent of the regular minimum wage.
“Benefits on brink,” your July 20 editorial on our study of how public and private compensation compare in Kentucky, says that its findings could become “little more than an academic argument” because public benefits are “on course for a nasty train wreck” and “there may be no choice but to get on a different track sooner rather than later.”
Kentucky does have a big problem with the funding level of its public pension system. But the problem we face now cannot be described as one of generous pension benefits for public workers. Kentucky’s benefits for new workers are below average compared to other states after the 2008 cuts, and as described in our report, overall compensation in the public sector in Kentucky is lower than private-sector counterparts. Also, legal experts say that because of the inviolable contract, Kentucky cannot throw out the system for current employees to get “on a different track.”
The existing funding gap must be addressed regardless of what we do moving forward. Kentucky’s problem is caused primarily by the legislature not making its required contribution to the system in 13 of the last 18 years. Although harmed by the severe recession, most other state pension systems will pull through fine because, unlike Kentucky and a few other states, they paid their bills on time.
Organizations trying to make the national problem look worse are using faulty math to support their agenda of attacking public-sector workers and unions. Furthermore, proposals to move away from a traditional defined-benefit pension system to a defined-contribution, 401(k)-style system fail to recognize the huge inefficiencies of the latter. A dollar put by the state into a defined-benefit system will result in bigger benefits and more secure retirement than the same dollar put into a defined-contribution system. That’s because the latter have much higher administrative costs and lower investment returns. They miss out on the risk-sharing and pooling benefits of a traditional pension system.
That impacts not just public workers and their families, but the entire Kentucky economy. Retirement income from state and local government employees pumps $1.6 billion annually into the Kentucky economy, which translates into jobs at local stores, restaurants and doctor’s offices.
Kentucky needs to take a hard look at what mechanisms the many states that have kept their traditional pension systems in financial shape use to ensure adequate payments are made on time, and not cut off our nose to spite our face.
While a state task force considers further cuts to public employee pension benefits, a new report shows that Kentucky public workers are already undercompensated compared to their private sector counterparts. Public sector workers receive 12.8 percent less total compensation on an annual basis and 9.2 percent less on an hourly basis.
The report is authored by Dr. Jeffrey H. Keefe, an associate professor of labor and employment relations at the School of Management and Labor Relations, Rutgers University.
The Supreme Court's decision that the health care reform law is constitutional has not brought an end to ideological attacks on the law and calls for its full repeal. But if you sift through the claims about health care reform and look at the facts, the benefits to Kentucky are clear. Here are five reasons Kentucky should move forward with the new law.
Through the expansion of Medicaid in 2014, the state will be able to provide health insurance to around 300,000 uninsured Kentuckians at an estimated cost of less than one percent of the state budget over the first six years.
The 2014 expansion of Medicaid in the Affordable Care Act will benefit Kentuckians substantially, while the federal government will largely pick up the bill. According to one analysis, Kentucky will see a 37.3 percent increase in Medicaid enrollment at only a 3.5 percent increase in state Medicaid costs.
The Supreme Court's decision today to uphold the Affordable Care Act (ACA) is good news for Kentucky, a state with tremendous health challenges and a growing number of families that struggle to afford health care coverage.
More than one in seven Kentuckians lack health insurance, but when the ACA is fully implemented in 2014 around half of the uninsured will obtain insurance through the expansion of Medicaid to the working poor. Many thousands more individuals and employees of small businesses will gain coverage through access to a health insurance exchange beginning that year, where they can buy coverage with the help of tax credits.
In Kentucky, the big job losses since the beginning of the recession have been in middle-skill industries like manufacturing and construction that have historically meant middle-class wages for workers without a college education. Kentucky has lost a net 35,400 manufacturing jobs since December 2007 and 18,800 construction jobs.[i]
Caseloads for Temporary Assistance for Needy Families (TANF), a safety net program designed to help families facing economic hardship meet basic needs, have declined sharply since 1995. Some policymakers have cited this decline as proof of the success of the 1996 welfare reform law.
Senate Bill 118, which passed the Senate yesterday, would require applicants for all public benefits to provide proof of lawful presence in the United States. While the bill’s proponents say it is needed to bar illegal immigrants from state and federal public benefit programs, the legislation instead threatens benefits for citizens most in need of assistance, adds costs to the state and promotes inaccurate stereotypes about immigrants.
House Bill 26, which is scheduled to be heard tomorrow in committee without a vote, proposes to eliminate public assistance for low-income individuals suspected of drug use unless they can pass drug tests or enroll in treatment programs. The bill is costly, inefficient and possibly illegal; is unfair and potentially harmful to the low-income families that are singled out; and is not an effective way to make much-needed progress on Kentucky’s drug problem.
According to a new report from the Economic Policy Institute (EPI), 200,000 fewer non-elderly Kentuckians had health insurance through an employer in 2010 than in 2000. The report finds that employer-sponsored insurance declined 9.3 percentage points over that period. Only 58.7 percent of Kentuckians under age 65 had this type of coverage in 2010.
Kentucky owes interest payments on the nearly one billion dollars borrowed from the federal government to pay unemployment insurance benefits during the economic downturn. The next interest payment, due September 30, is estimated to be $44 million. In addressing these looming payments, the best strategy is for Kentucky to re-enact an employer surcharge.
The loss of over 100,000 Kentucky jobs during the severe economic downturn of the last few years would have been even worse for the economy—and Kentucky families—if it wasn’t for unemployment insurance (UI). As the state’s unemployment insurance system rebuilds its trust fund in future years, it is important that already-limited benefits for workers be protected.
Over 17 percent of Kentuckians live below the poverty line according to preliminary Census data released today, a substantial increase from over 12 percent ten years ago. Census also reported that 640,000 Kentuckians lack health insurance.
Testimony on House Bill 182--Limiting the Interest Rate on Payday Lending to 36 Percent
House Banking and Insurance Committee, Kentucky General Assembly
February 16, 2011
Melissa Fry Konty, Ph.D.
Research and Policy Associate, Kentucky Center for Economic Policy
Thank you for giving me the opportunity to speak with you. My name is Melissa Fry Konty. I am a Research and Policy Associate at the Kentucky Center for Economic Policy.
In 2008, Kentuckians paid upwards of 400 percent APR on an estimated three million payday loans, totaling approximately $158 million in predatory loan fees.
When we say “predatory fees” we refer only to those fees paid by borrowers who take out five or more loans in a year: those borrowers who are stuck in the debt trap. The fees associated with these repeat loans are considered predatory, as they are collected as the result of a business model built on people’s inability to repay a loan with such a short term. Trapped borrowers incur a new set of fees every 14 days to borrow the same principal amount.
According to the Commonwealth’s new database, 83 percent of Kentucky’s payday loans from April 30 through September 30, 2010 went to consumers who took out five or more loans during that five month period. Just 2.5 percent of payday lending revenue was generated by customers who took out only one loan during that same five month period. In total, from January through September 2010, 182,159 people took out 1.6 million loans for an average 8.6 loans per borrower. These borrowers paid more than $80 million in fees.
High payday lending fees drain resources from communities large and small across the Commonwealth. Sixty-four percent of payday lenders in Kentucky are nationally owned and their profits leave the state. Nine of the 10 largest payday lenders in Kentucky are out of state companies.
Some suggest that a rate cap will drive payday lenders out of business and lead to job loss in the state. But threats of job loss are highly exaggerated. Turnover in the payday loan industry is consistently high, upwards of 60 to 80 percent annually.In some cases, approximately 50 percent of turnover for storefront managers and employees occurred within the first six months of their hire date. Moreover, ending 400 percent APR does not end payday lending, it simply means that these companies can no longer charge exorbitant interest rates for these loans. As has happened in other states, they certainly have the choice to keep their doors open by offering payday loans at 36 percent and by marketing other products and services that comply with Kentucky’s common sense usury laws.
In a recent poll of Kentucky’s registered voters, 73 percent of citizens across the state said they want a 36 percent rate cap on payday loans. Even when we mention the possible loss of jobs in the payday industry, a clear majority of voters support the 36 percent rate cap.
The state’s database tracking information about the use of payday loans has not curbed the debt trap from predatory payday lending, but it has confirmed that one exists. Only a return to a 36 percent rate cap can stop predatory payday lending in Kentucky. We urge you to pass House Bill 182 out of committee and to the House floor.
Kentucky Coalition for Responsible Lending. 2010. The Debt Trap in the Commonwealth: The Impact of Payday Lending on Kentucky Counties. http://kyresponsiblelending.wordpress.com.
These figures include historically loaded transactions for January through April 29. Payday lenders were not yet using the database so these figures were historically loaded and may be incomplete, but they are the most complete data we have for January 2010 to September 30, 2010. The mean number of transactions (i.e. number of transactions/number of borrowers) is 8.6 for this period.
Kentucky stands to miss out on $90 million in federal incentive monies unless it enacts measures by August to modernize its unemployment insurance system. 38 states have acted to receive at least partial incentive monies, but Kentucky did not include these updates in 2010 unemployment insurance legislation. Modernization would assist workers now being left out and inject additional dollars into the Kentucky economy.
Payday lending has become widespread in Kentucky since the practice began in the early 1990’s. Kentuckians paid upwards of 400 percent interest on more than four million loans for an estimated $158 million in predatory payday loan fees in 2008. KCEP parent MACED is the primary author of this report released by the Kentucky Coalition for Responsible Lending. The report explores the geography and magnitude of high-cost payday lending, and recommends a state 36 percent cap on payday loans to address the problem.