The Mercedes Health Care Plan for Georgia

Georgians were rightly excited to hear the news that Mercedes and its 950 jobs were coming to town when it was revealed last month. As these corporate captures command, Georgia had to provide incentives to Mercedes in the amount of $23.3 million, which works out to $24,540 per job. Fulton county kicked in with a benefits package of its own in order to push the overall Georgia cost package to $45m, this making the real number of the cost per job closer to $47,368.

Georgia’s office of economic development, the governor’s office, and Fulton County should be lauded for landing this economic jewel (as they have been).

Can you imagine how much back slapping and high-fiving there’d be down at the Capitol if we’d gotten a company in here that’d bring as many jobs as nearly 60 Mercedes headquarters, that those jobs would be distributed around the state, not just in Metro Atlanta, at a net cost per job LESS than what we just paid for Mercedes?

We don’t want those kind of jobs, obviously. It would mostly be doctors and nurses, etc. Who needs them?

But let’s pretend we did. If you haven’t figured out we are talking about the jobs juggernaut that is Medicaid expansion. According to the Governor’s office and a Georgia State study, electing to take the Medicaid expansion would create 56,247 jobs. These would be high paying jobs, with nearly 2/3rds of those jobs being outside of Atlanta to areas that could really use them. It would shore up rural tax bases. It would even save lives, but let’s ignore that part for a minute. It’s like getting a ton more tax revenue without raising taxes (because we are getting tax revenue from the Federal dollars coming in). And that’s because the net cost of this expansion would only be $353 million. Yeah, it’s a lot, but jobs, people…jobs.

And those doctors and nurses jobs? They’d cost us $6,274 each. Why aren’t we doing this again?

Two years ago it would have been a muted response. Georgia and the general assembly were caught up in the national political picture that polarized the electorate and our gubernatorial and senatorial races meant there wasn’t a sliver of a chance we’d be able to ignore those partisan trade winds.

But now it may be different. The appetite for jobs has changed the debate such that Tennessee will decide this week whether to take the expansion and it looks like they will.

Though it would mean billions for our state, we’ve decided to let other states have our money and jobs because we’ve sacrificed them on the principal that we don’t want to have anything to do with anything that had Obama’s name on it. That’s fine, which is why we should just call this the Healthy Jobs Bill. The fact that it would provide much needed healthcare and insure many who need it, well, that’s just gravy.


  1. Raleigh says:

    A very good point. Perhaps we should look at the system where we are in competition with states to win those jobs by putting the cost burden on individual taxpayers. Until we do give that an honest look we are stuck with this one up man ship game we play with other states. In order to fix it we would be relying on the one body whose approval rating hovers around 10% so there is little hope anything can be done by congress. Until then we might as well take advantage of the additional jobs and the tax revenue those jobs will generate. This does make the state Republican argument against expansion look silly but then they really don’t need a lot of help looking silly.

  2. Charlie says:

    Here’s my issue with this (beyond the politics of this that will keep it from consideration until at least the Supreme Court rules on ACA subsidies this summer).

    In Georgia, Medicaid only reimburses roughly 83 cents of cost for every dollar of healthcare delivered. This “expansion”, as designed, doesn’t fix this disparity. As such, it’s a focus that is exclusively on the demand side of the equation with no regard whatsoever to the supply side of the equation.

    You can’t give everyone medicaid and tell them to report to a hospital or doctor that doesn’t exist. And so long as we continue to pretend we’ve “bent the cost curve” by paying suppliers under cost, we’re going to have fewer, not more, people and institutions supplying health care.

    There are states looking at block grants instead of expansion. One would hope that if Georgia was able to take the money available as a block grant, the reimbursement rates for everyone under the existing system at a minimum of cost of services. This is where any discussion on this topic should begin.

    Oh, and by the way, because ACA focused only on the demand side, DSH payments to rural hospitals are going away this year. Expect that 83 cents on the dollar to fall to as little as 68 cents on the dollar.

    This system is broken. Let’s figure out how to fix it before we pretend that adding volume is a cure all.

    • Posner says:

      “In Georgia, Medicaid only reimburses roughly 83 cents of cost for every dollar of healthcare delivered”

      But it reimburses 83 cents MORE than the uninsured patient who receives medical care in our emergency rooms anyway. And that’s how healthcare providers look at it, both hospital and regular practices–actually getting paid for patients that (for the most part) they already serve.

      What I don’t understand is people who are concerned about protecting doctors from getting paid “under cost” while those doctors they want to “protect” strongly support this extra money.

    • Stefan says:

      That’s a valid point, but in the example above it’s like worrying whether Mercedes will want to make luxury cars at the price at which the market offers. They might not, but that’s not our concern.

      The concerns you bring up are real. But they aren’t any more real than the jobs this would create. Our rural hospital network is teetering on the brink. States that have taken the expansion have seen improvements in the ability of those hospitals to remain viable. Yes, DSH payments play a role here, but unless we immediately get in and design a system to account for all the economic levers, we are better off taking the expansion and letting the relatively free market forces work themselves out.

    • Kyle Hayes says:

      I think block granting Medicaid would be a bad policy mistake. Part of the role of Medicaid, like SNAP and TANF, is to provide automatic funding increases in the event of a recession. During the 07-09 recession and slowdown, SNAP caseloads rose four times as fast as TANF caseloads. SNAP is not a block grant and TANF is.

      Making Medicaid a block grant would force states to either cut other programs or make cuts to Medicaid eligibility levels, reimbursement levels, or services covered in the event of a recession. They will have to make these decisions as enrollment and spending increases and state revenues fall (and still face the balanced budget requirements). And they will have to do all of this without the benefit of time because revenue estimates and full understanding of how deep a slowdown/recession will be lags behind the actual slowdown/recession.

      Expanding Medicaid, even with the lower reimbursement rates, is better than relying on DSH funding because DSH funding covers the kind of care where the patient waits until their condition is an emergency and ends up in the ER, unable to pay. Medicaid would allow patients to access primary care and manage chronic health care conditions so that emergencies are less frequent (and in the long run, that type of management is less costly than the DSH approach).

      I would like to have seen Congress extend the Medicaid pay bump to Medicare reimbursement levels that was enacted as a part of ACA so that we could address the immediate problem, closing rural health care systems, while we work on some Medicaid reforms. I also think some of the compromises struck in places like Arkansas can be promising because these Medicaid beneficiaries who are on ACA Marketplace plans are essentially receiving care at the same “reimbursement rate” as non-Medicaid patients on Marketplace plans. But in the long run, that approach is more expensive for government, and states have to take on 10 percent of that expense after sometime in the early 2020s.

  3. saltycracker says:

    Not sure how a massive expansion of a federal program will bring down the costs of medical delivery but it will spread it around. We have demonstrated we can’t administer this industry. Guess it is wishful thinking to look for disruptive models by providing insurance support to the poor. Working with a well regulated healthcare industry just might shift paradigms.

  4. bsjy says:

    Decrying the cost of one government giveaway to a particular company is laudable. You have exposed the fallacy of these programs: the net increase in government tax revenue is quite low.

    Using that example in contrast to another government giveaway to a larger group of people is illogical. The government does not make any money on its own. It must take from Peter if it is to give anything to Paul. (We’ve lately decided to take from Peter’s grandchildren, but the point remains valid.)

    The best thing would be to eliminate these government transfers and encourage private charity. Acknowledging that 125 years of government social security policymaking has all but eliminated private charity, the least bad government transfer is the one that might let a private company generate sales and jobs. But that’s like choosing tuberculosis instead of gangrene: they’re both dreadful.

    • Posner says:

      “the least bad government transfer is the one that might let a private company generate sales and jobs”

      Really? You’re saying it’s better for the government to give money to a foreign private company so they can make a profit than it is to give money to an individual citizen so they can get medical treatment?

      And you simultaneously decry the lack of charity in this country?

      • bsjy says:

        No. I’m saying that there might be some kind of return from the private sector jobs creator on the public sector spending/tax giveaway. I’m philosophically against welfare, be it corporate welfare or jobs programs, because the record of centralized planning is one of failure. While the free enterprise system has drastic consequences for individual participants, it turns out to be the best system of resource allocation for the overall culture/economy. We need private charity to help those hurt by the drastic consequences, but the fix is not to get some self-declared expert to plan the economy to nirvana. Those plans gang aft agley, as the poet said centuries ago.

  5. FranInAtlanta says:

    First, I resent my tax dollars going to help the poor in states that have accepted expanded Medicaid instead of the poor in Georgia.
    Second, I realize that, as hard as it is now to find a doc that will accept more Medicaid patients, we aren’t helping people get on-going preventive health care by shoving them into Medicaid.
    Third, although we will make it more difficult for all Medicaid patients to get preventive care if we expand Medicaid, we will make it easier for many to get nursing home care and for emergency providers (usually hospitals) to be reimbursed at a rate greater than zero for emergency care.
    I support accepting the expanded Medicaid while continuing to fight the current Obamacare (piece by piece if the Supreme Court lets it stand as is).
    I am a libertarian leaning establishment Republican. But I am practical – I want my tax dollars spent as close to home as possible.

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