What the Research Says about “Right-to-Work” Laws, Employment and Wages

As several Kentucky counties have passed or are considering local “right to work” (RTW) laws, serious research calls the benefits of such laws into question. The best evidence suggests that RTW fails to result in stronger job growth including in manufacturing while resulting in lower wages and benefits for workers in RTW states.

RTW

RTW laws prohibit unions and employers from including a provision in contracts that requires employees who benefit from union representation to pay their fair share toward those costs. In becoming RTW, Kentucky counties including Warren, Todd and Boone are the first local governments in the nation to join the 25 states with RTW laws, including most recently Indiana and Michigan in 2012 and Wisconsin in 2015. Despite its name, RTW does not increase or enhance access to jobs, nor does it ban forced union membership, as such is already illegal under federal law.

Proponents are making bold claims about the potential of RTW to boost Kentucky’s economy, in particular that it will grow manufacturing jobs as existing companies expand and new ones locate here. But studies that use careful statistical techniques to analyze the experience of states do not support claims of the economic benefits of these laws, while pointing out potential harm to workers in terms of job quality.

What the Research Says about “Right-to-Work” Laws

Kentucky a Loser in Proposed Tax Giveaway to Wealthiest

The U. S. House of Representatives is expected to vote this week to repeal the federal estate tax, an idea that would worsen growing inequality and reduce revenue needed for investments that move our economy forward. As a poor state, Kentucky is an especially big loser in this proposal.

Contrary to the impression given by those clamoring for repeal, only the wealthiest 0.2 percent of estates face the estate tax. Kentucky is expected to have only about 40 estates owing the tax in 2016, or 0.7 percent of taxable estates nationwide. In contrast, our state makes up 1.4 percent of the U. S. population, meaning Kentuckians are deeply under-represented in the super-rich group that would gain from estate tax repeal.

At the same time, Kentucky is over-represented in our reliance on federal dollars to strengthen our economy and invest in our people and communities. Kentucky receives about $6,496 per person annually in federal aid to individuals, ranging from Medicare and Social Security to Pell Grants and unemployment benefits. That’s eighth-highest among the states and 15 percent more than the U. S. average of $5,662. And like all states federal money comes to Kentucky every year for areas like infrastructure, education, research and economic development that support commerce and improve quality of life.

estate tax

Eliminating the tax would cost $269 billion in reduced tax revenues over the next decade. And repeal would provide a tax cut of over $3 million on average to the estates that will benefit, with the country’s richest 316 estates—worth at least $50 million—getting a tax giveaway averaging more than $20 million apiece.

Repeal would also deepen soaring wealth inequality. The wealthiest 1 percent of U. S. families have 42 percent of all wealth. Inheritances make up 40 percent of all household wealth and skew heavily to the very top. The estate tax serves as a backstop to the income tax, ensuring that prosperous individuals who hold significant wealth in unrealized capital gains pay some tax on their earnings that they wouldn’t otherwise pay if they held those assets until death. More than half of the wealth of large estates is in the form of unrealized capital gains.

Getting rid of the estate tax would be on top of actions starting in the early 2000s to raise the threshold of wealth needed to be eligible for the tax and cut the rate. The share of Kentucky estates owing estate tax has fallen from 1.5 percent in 2000 to just 0.1 percent in 2012. The estate tax is now a very modest tax applying to a shrinking number of very large estates, with an average effective rate of only 16.6 percent.

We need a tax system that fairly generates the revenues for investments that make our economy stronger and our communities better. Estate tax repeal is a step in the opposite direction.

New Gallup Poll Shows Kentucky Now a Leading State in Insurance Coverage

Kentucky is a standout state in reducing the share of people without health insurance, rocketing from 39th to 11th among the states in its rate of uninsured according to a new Gallup poll.

The poll shows that Kentucky’s uninsured rate dropped from 20.4 percent in 2013 to 9.8 percent in 2014; even better than a midyear estimate from Gallup of 11.9 percent. Kentucky had the second sharpest one-year reduction in uninsurance rates for adults in the nation.

new gallup poll health insurance feb 2015 table.docx

A big reason for Kentucky ranking so high is the state’s decision to expand Medicaid. A recent independent study on the Medicaid expansion in Kentucky showed that 310,000 Kentuckians enrolled in Medicaid through the expansion—compared to initial projections of 147,634. The new study also indicates that the expansion is making an important contribution to the state’s economy; it is now estimated to have a positive cumulative impact of $30.1 billion on Kentucky’s economy through 2021 (the original projection was $15.6 billion).

Kentucky choosing to set up its own state health insurance exchange, Kynect, may also be a factor in the state’s success in dramatically lowering uninsurance rates. According to Gallup, the uninsured rate declined more in states that both chose to expand Medicaid and set up their own state exchanges or partnerships in the health insurance marketplace. In the 21 states that implemented both of these actions, the uninsured rate declined 4.8 points, compared with just a 2.7-point drop across the states that implemented only one or neither. For states that did not participate in either, the gap in uninsured rates existing in 2013 between them and those that both expanded Medicaid and set up their own state exchanges or partnerships nearly doubled in 2014.

Two surveys—by the Centers for Disease Control and the Urban Institute—have been collecting health insurance data quarterly, and their latest reports also indicate further gains in health insurance coverage in 2014, particularly for states that expanded Medicaid. However, state level data is largely unreported by these surveys. Census data won’t show the full effect of the ACA thus far until September.

But the Gallup poll, coupled with the recent report of the economic impact of Medicaid expansion, suggests remarkable success.

new gallup health insurance feb 2015 table2

Source: Gallup

Independent Study Says Medicaid Expansion a Good Deal for Kentucky’s Economy

In recent months, some have expressed concern that the cost of Kentucky’s Medicaid expansion may exceed its benefits—especially in light of greater than expected participation by low-income Kentuckians. However, a new independent report from Deloitte and the University of Louisville’s Urban Studies Institute shows that a net positive fiscal benefit to Kentucky is still anticipated because greater enrollment also means higher than projected job creation from more federal dollars flowing in to the state.

The report shows that a total of 310,000 Kentuckians enrolled in the Medicaid expansion in 2014 (compared to initial projections of 147,634), and the expansion is now estimated to have a positive cumulative impact of $30.1 billion on the state’s economy through 2021 (the original projection was $15.6 billion). The net cumulative impact on the budget is also positive over the first eight years—becoming only slightly negative in 2021 when the state’s share is fully phased in at $45 million net costs.

The $30.1 billion positive economic impact between 2014 and 2021 largely results from:

Increased Revenues for Healthcare Providers – There were $1.16 billion in new Medicaid revenues to healthcare providers just in 2014—with $506.6 million going to hospitals alone.

Job Growth – One of the most important impacts of the Medicaid expansion is the resulting growth in jobs. The report estimates that the expansion resulted in 12,000 new jobs in Kentucky in 2014 due to related spending—and 5,400 of them were healthcare sector jobs. Through 2021 more than 40,000 jobs are expected to be created, resulting in more than $1 billion in income, sales and occupational tax revenues over the next eight years.

Federal Funds Replacing Some General Fund Dollars – The Medicaid expansion has enabled General Fund budget reductions to several state agencies—Department for Public Health; Department for Behavioral Health, Developmental and Intellectual Disabilities; and Department of Corrections—because under expanded Medicaid some of the costs are covered by federal money. For instance, adults under 138 percent of the Federal Poverty Level can now receive medical treatment at local health departments through Medicaid rather than exclusively through General Fund dollars.

Reduction of State and Local Expenditures for Uncompensated Care – The Quality Care Charity Trust Fund (QCCT) at the University of Louisville Hospital has been in place—and funded by the state, local government and university—to cover the medical expenses of those who cannot afford to pay for their care. Budgeted contributions to the QCCT are now being reduced because of the Medicaid expansion’s coverage of more low-income Kentuckians.

uncompensated care graph 2015

Source: Deloitte, “Commonwealth of Kentucky Medicaid Expansion Report 2014.”

Avoiding $99.5 Million Cost to the State of Not Expanding – The report makes the point that it would cost the state money not to expand, noting that “without Medicaid expansion, the state may not experience some of the near-term direct costs associated with the Medicaid expansion population, but the result of such a decision could be the forfeiture of the economic benefits associated with increased jobs and tax revenue.”

Of course, in addition to the Medicaid expansion’s direct economic payoff, expanded health coverage can be expected to improve the health of the population as well. However, the estimates in the report do not take into account the potential economic benefits of improved health through increased coverage.

Kentucky’s decision to expand Medicaid has played an important role in the state’s uninsurance rate dropping so substantially—according to Gallup, from 20.4 percent in 2013 to 11.9 percent in mid-2014, the second largest drop in the nation. In addition to the 310,000 Kentuckians enrolled in Medicaid in 2014 through the expansion, an additional 36,702 enrolled in Medicaid under the traditional (pre-expansion) qualification guidelines.

The report also shows that participants in Kentucky’s Medicaid expansion are seeking out preventive care, which will likely positively impact health outcomes. For instance, in 2014:

  • 232,000 members had a non-annual physician office visit;
  • 90,000 members received cholesterol screening;
  • 80,000 members received preventive dental services;
  • 46,000 members participated in diabetes screening;
  • 34,000 members had cervical cancer screening;
  • 26,000 members had breast cancer screening.

And the report indicates that the Medicaid expansion is providing better access to substance abuse treatment in our state. A least 13,000 people with a substance use disorder diagnosis have received treatment services, and more than 300 new behavioral health providers have enrolled in Medicaid.

The new study of the state’s Medicaid expansion more than confirms that it was a smart move for Kentucky. The analysis overwhelmingly shows that the expansion is proving to be good for the state’s economy as well as the health of its citizens.

Evidence of Benefits of Medicaid Expansion Starting to Come In

Kentucky is starting to see the benefits of its decision to expand Medicaid through the Affordable Care Act (ACA) in dramatic reductions in the number of uninsured across Kentucky counties and increased use of preventive care services, according to a recent presentation to the Interim Joint Committee on Health and Welfare by Kentucky Medicaid Commissioner Lawrence Kissner.

As seen in the maps below, the ACA has substantially increased the share of Kentuckians with insurance all across the state. In 2012, 75 Kentucky counties had uninsurance rates of at least 17 percent—with 11 of these counties greater than 20 percent. Now, according to Commissioner Kissner, there are potentially no counties with uninsurance rates above 17 percent—and just two counties that fall into the category of 14 to 17 percent of the population being uninsured. The maps indicate that in several southeast Kentucky counties where more than 17 percent of the population was previously uninsured, the uninsured rate may have fallen to less than 5 percent. medicaid expansion map 2012 medicaid expansion map after implementation Source: Lawrence Kissner, “ACA Update,” presentation to the Interim Joint Committee on Health and Welfare July 16, 2014.

Medicaid has also seen increased use of preventive care and screening, which could play an important role in improving the state’s health in the future. According to Commissioner Kissner, in the past year the utilization of an annual dental visit through Medicaid increased by 15.8 percent. Use of adult preventive services increased by 36.7 percent; breast cancer screening increased by 20.6 percent; cervical cancer screening increased by 3 percent; and colorectal cancer screening increased by 16.1 percent.

Commissioner Kissner’s presentation also helps make clear how important Medicaid is as an often temporary safety net for individuals and families in Kentucky struggling to make ends meet. His presentation notes that the state’s Medicaid program experiences a lot of “churn”—there is a consistent influx of new members but a roughly equivalent number who leave the program each year. For instance, only 81 percent of the individuals enrolled in Medicaid in Kentucky in June of 2012 were still enrolled in June of 2013. 151,424 persons had left the program and had been replaced by 153,822 new individuals. Going back to June 2011, only 70 percent of members were enrolled in Medicaid all three years. With Medicaid expansion, more Kentuckians will have the financial and health security that Medicaid provides when they fall on hard economic times, and as they struggle to get back on their feet.