Health & Human Services

Non-Expansion States May Pay Billions Anyway Without Any Benefits

A new study examines the costs of Medicaid expansion in states that oppose it and finds residents in those states will shoulder the burden for other states to capitalize.
December 6, 2013
There's no such thing as "free money," says Texas Gov. Rick Perry, who rejected the Medicaid expansion. FlickrCC/TexasImpact

A new report argues states that refuse Medicaid expansion are exposing their residents to billions in new taxes without seeing the benefits of broadening health coverage to more low-income adults.

A U.S. Supreme Court’s decision last year upheld the Affordable Care Act but left it optional for states to expand Medicaid to everyone earning up to 138 percent of the federal poverty level, a key element of the law. About half the states have formally signed on to expand the program. The federal government pays 100 percent of expansion costs through 2016 and reduces support to 90 percent by 2020. Opponents of Medicaid expansion have said they’re worried that 90-percent support will eventually go away, never mind concerns about a federal budget deficit that’s already in the trillions. There's no such thing as "free money," says Texas Gov. Rick Perry. The Congressional Budget Office has estimated the law will reduce the deficit by $143 billion in its first decade, with those savings accelerating after that.

Past studies have found that Medicaid expansion saves states in uncompensated health care from the uninsured and in numerous other ways. In many states hospital groups and chambers of commerce have rallied behind Medicaid expansion, arguing it provides economic benefits.

The federal government is paying for Medicaid expansion with a combination of tax and payment changes, including cuts to Medicare provider payments, increased payroll taxes on people earning more than $250,000 a year and new fees for medical device companies. Drawing on an earlier Urban Institute study looking at the costs of Medicaid expansion through 2022, the Commonwealth Fund compared gains in federal Medicaid support with a state’s contribution to the country’s tax revenue.

The report finds that no state rejecting Medicaid expansion will actually save money, and some of the states with the highest number of uninsured residents will miss out the most. Texas' decision will cost taxpayers $9.2 billion in 2022. Florida’s decision against expansion will cost the state more than $5 billion in 2022, according to the study. Georgia, which would have received $4.9 billion in federal expansion money in 2022, will end up paying an extra $2.8 billion to the federal government.

The report also compares the new federal spending to existing highway assistance to states, defense money and what states spend attracting business. Read the full study here.

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