State Savings in Medicaid Expansion Outweigh Costs

If all 50 states choose to expand Medicaid under the federal health law, they would collectively save more than they would spend, reports a new analysis.
by | November 26, 2012

If all 50 states fully expanded Medicaid under the Affordable Care Act (ACA), they would collectively save more money than they would spend, according to an analysis from the Kaiser Family Foundation released Monday.

States would spend a combined $8 billion through 2022 to fully expand the low-income insurance program (compared to expected spending with other ACA provisions but without the expansion). That accounts for the small state match starting in 2017; the ACA specifies that states will never be responsible for more than 10 percent of the costs for the expansion population.

Over the same period, states would save a combined $18 billion because they would spend less on uncompensated care payments, which states pay to hospitals and other health-care providers for the care they provide to people without insurance. That equals $10 billion in combined savings by 2022.

The $8 billion in incremental state costs (which includes state spending of the expansion population plus expected spending for currently eligible individuals who enroll to satisfy the individual mandate) is a 0.3 percent increase over what states would expect to spend without the expansion. The federal share, meanwhile, would increase by $800 billion, or 21 percent, if all states expand.

"There isn't anything to conclude except this is pretty attractive and should be pretty hard for states to turn down," said John Holahan, director of the Urban Institute's Health Policy Research Center, which oversaw the analysis. Analysts generally anticipate that most states will eventually sign onto the expansion, despite any initial public posturing to the contrary. The White House has not yet set a process for states to formally declare their intentions.

An estimated 21.3 million people are expected to enroll by 2022 if all states expand, according to Kaiser, a 41 percent increase compared to projected enrollment without the expansion.

While states would experience collective savings, when the data is broken down by individual states, some have much more -- or less -- to gain.

Vermont, for example, is projected to experience the largest relative savings: $669 million in state dollars by 2022, an 8.5 percent reduction, while adding 14,000 people to its rolls and cutting its percentage of uninsured by 35 percent. Delaware, Massachusetts and New York are some of the other states projected to see net savings with full expansion.

On the other hand, there are states like Arizona, Nevada and North Dakota. Those three states would see the largest relative increases in state spending if they fully expanded. Nevada ranks at the top: $1.2 billion by 2022, an 11.3 percent increase. States like Texas and Mississippi (which would spend an additional $9.6 billion and $1.2 billion, respectively) would more than halve their number of uninsured -- but their state leaders have been among the most vocal in opposing the expansion.

Unsurprisingly, bigger states appear to be in line for greater annual uncompensated care savings. California ($1.9 billion), Florida ($1.3 billion), North Carolina ($1.4 billion) and Texas ($1.7 billion) would see the largest savings in that department, according to Kaiser, which would significantly reduce the financial burden of the expansion for those states.

Analysts expect those figures to be a major part of the push from health-care providers, which will likely be lobbying hard for resistant states to expand. They've also become part of the pitch by state officials to their skeptical colleagues: Arkansas Gov. Mike Beebe's office, for example, has included uncompensated care savings in its reasons for supporting the expansion to a newly elected Republican legislature.

"The choice we face is to help people and save money or to not help them and try to find dollars elsewhere," Andy Allison, director of Arkansas's Medicaid office, told Governing.

Governing created the map below this summer after the Supreme Court decision that made expanding Medicaid optional for states. States are shaded based on what percentage of their uninsured population would qualify for Medicaid if eligibility is expanded to 133 percent of the federal poverty level, as the ACA specifies. Click on a state for more details.


Zoom out to view Alaska and Hawaii data.

SOURCE: Medicaid eligibility estimates obtained from Urban Institute analysis of American Community Survey and Integrated Public Use Microdata Series data. State spending figures obtained from Medicaid Coverage and Spending in Health Reform: National and State‐by‐State Results for Adults at or Below 133% FPL, published May 2010 by the Kaiser Family Foundation.


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