Feds will pay the bulk of Medicaid expansion costs under overhaul, study finds

The Fiscal Times: "As states complain about the burden of expanding health care to millions of poor Americans under the new federal health-care law, a study released Wednesday suggests their claims may be overstated. The issue is the cost of expanding Medicaid ... and the report from the Kaiser Commission on Medicaid and the Uninsured says states are likely to reap huge benefits for relatively little cost, and may even end up in the black." Provisions of the health care law, which begin in 2014, will expand the program's eligibility to adults with incomes of less than 133 percent of the federal poverty level. "That's expected to add 15.9 million people to the Medicaid ranks by 2019, at a cost of $465 billion, though only $21 billion would come from states" (Graham-Silverman, 5/27).

The Washington Post: "The federal government will bear virtually the entire cost of expanding Medicaid under the new health-care law," according to the study, which "directly rebuts the loud protests of governors warning about its impact on their strapped state budgets. ... Under the new law, the federal government will pick up 100 percent of the cost for all newly eligible people through 2016, a rate that will drop gradually to a 90 percent match in 2020 and beyond." The Post notes that a "disproportionate share" of the people likely to enroll in the expanded Medicaid will come from the South and West. Many of these states currently have "stringent eligibility rules" for childless low-income adults. (MacGillis, 5/26). 

CQ HealthBeat includes a link to the report and notes that "a state-by-state analysis by the Urban Institute for the foundation shows the distribution of new enrollees and costs. The report uses two methods to estimate Medicaid enrollment and coverage" (5/26).

Modern Healthcare: "John Holahan, director of the health policy center for the Urban Institute and an author of the study, said the research excluded potential savings to state subsidies for care for the uninsured, which would likely offset additional spending for adults newly enrolled under Medicaid expansion, he said. 'Every single state and many localities now spend a fair amount of money to provide for the uninsured,' he said. 'Much of the need to do that will go away'" (Evans, 5/26).

NPR: The study "suggests that the Medicaid expansion might cost states less than they think, and some states might actually make money on the deal. ... Then why are states still so unhappy? Alan Weil, executive director of the National Academy for State Health Policy, says some states think of the Medicaid expansions as a pair of $200 shoes on sale for $20. 'If you like the $200 pair of shoes it's a great deal because you only have to pay 20 dollars.' But at the same time, he says, 'if you look in your wallet and you have a 10 and a couple of ones and some change and you're not sure you can come up with the 20 dollars it doesn't really matter what a good deal it is.' Thus, he says, 'much of the difference in perspectives in state response to the Medicaid expansion has to do with whether they're focusing on what they're going to get ... or what they feel they can afford'" (Rovner, 5/26). 

Stateline.org: "The law expands Medicaid, the state-run health insurance program for the poor, but it's anybody's guess as to how many new patients will sign up. Up to now, the most-often cited estimate came from the nonpartisan Congressional Budget Office. Across the country, the CBO expects 16 million new Medicaid and children's health insurance enrollees, a number it estimates would cost the states a total of $20 billion to cover between 2014 and 2019. But a report released yesterday shows state Medicaid costs could increase by more than twice that amount — to $43 billion — thanks to enrollment that could far exceed CBO estimates. The higher figure, from the Kaiser Commission on Medicaid and the Uninsured, is based on the prospect of as many as 23 million people enrolling in Medicaid. ... Whether enrollment ends up closer to the low estimate or the higher one represents one of health care reform's biggest unknowns" (Grovum, 5/27).

(KHN is a project of the Kaiser Family Foundation.)