Some Questions Answered: State-by-State Spending Estimates Under the Medicaid Expansion – Say Ahhh! A Children’s Health Policy Blog

Yesterday the Kaiser Commission on Medicaid and the
Uninsured and the Urban Institute released some long-awaited state-by-state
of the impact on
adult coverage of the Medicaid expansion included in health reform, along with
estimates of the state and federal cost of the expansion. The new report
provides some valuable new estimates that highlight that states will get a huge
bang for their buck out of the Medicaid expansion and see major gains in

Let’s start with the big picture – the Medicaid expansion
will significantly reduce the number of uninsured. In fact, by 2019, the number
of uninsured adults under 133% of the FPL will decline by 11.2 million (a 45%
reduction). Nationally, enrollment in Medicaid is expected to increase by
27.4%. The impact of the expansion will vary by state, as states with more
limited coverage pre-reform will see larger declines in the number of
uninsured.  And, it could be even
greater if states step forward and actively pursue maximizing the enrollment of
eligible people.

The study’s lead author, John
Holahan, put it starkly in an interview with the Washington Post, saying that
the states “will come out ahead” and that “it is just crazy” for states to
issue gloom and doom predictions about the fiscal impact of health reform. In the study itself, he estimates that the federal government will pay $443.5
billion for the Medicaid expansion (or about 95% of the cost) through 2019, an
increase of about 22% in federal Medicaid spending. Increases in state spending
are very small in comparison – only about $21 billion or 1.4% more than they
would have spent on Medicaid if health reform had not been enacted.  While the federal share of spending
varies modestly by state, it is important to note that the study concludes that
the federal government will pick up at least 93% of the new spending through
2019 in each and every state. (Note – the study looked at two scenarios – a standard scenario using participation rates for new enrollment that approximate current participation rates and an enhanced scenario that assumes more robust participation due to the individual mandate and increased federal and state outreach efforts. The numbers cited in this blog refer to the standard scenario.) 

Moreover, the study identifies a number of sources of
potential savings to states that if taken into account in future state-by-state
estimates could be expected to show states saving money.  Most notably, the current
state-by-state estimates do not factor in any of the savings in uncompensated
care spending that states will experience as more people gain coverage through
Medicaid and the new subsidized Exchanges (e.g., state spending on public
hospitals, community clinics, mental health programs, etc. that can be reduced
when more people have coverage). During the briefing, Dr. Holahan gave a rough estimate that states’
uncompensated care savings could easily reach $80 billion through 2019, an
amount that is far more than the $21 billion they are expected to spend on
Medicaid expansion.

The estimates released yesterday are an important
confirmation that significant coverage gains will be made through reform and
that states will come out ahead in spending.  Yes, there is still some uncertainty around the Medicaid
expansion in health reform – it’s hard to predict how many people will enroll
in the program and how aggressively states will pursue new and existing
enrollees. But while some questions remain unanswered, the numbers released
today are a much-needed “first look” grounded in data on the gains states can
expect to experience under health reform.

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