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June 05, 2013 7:00 AM The Medicaid Expansion Is a Great Deal for States

By Aaron Carroll

It’s ironic that my Viewpoint in JAMA Pediatrics was published at the same time as this piece in Health Affairs. “For States That Opt Out Of Medicaid Expansion: 3.6 Million Fewer Insured And $8.4 Billion Less In Federal Payments“:

The US Supreme Court’s ruling on the Affordable Care Act in 2012 allowed states to opt out of the health reform law’s Medicaid expansion. Since that ruling, fourteen governors have announced that their states will not expand their Medicaid programs. We used the RAND COMPARE microsimulation to analyze how opting out of Medicaid expansion would affect coverage and spending, and whether alternative policy options—such as partial expansion of Medicaid—could cover as many people at lower costs to states. With fourteen states opting out, we estimate that 3.6 million fewer people would be insured, federal transfer payments to those states could fall by $8.4 billion, and state spending on uncompensated care could increase by $1 billion in 2016, compared to what would be expected if all states participated in the expansion. These effects were only partially mitigated by alternative options we considered. We conclude that in terms of coverage, cost, and federal payments, states would do best to expand Medicaid.

The paper is already making waves. Austin highlighted Ezra Klein hitting it in Wonkbook this morning. Here’s Sam Baker at The Hill. Unfortunately, I think the paper is gated, but if you can get your hands on it, it’s worth a read. The conclusion:

The bottom line is that the expansion of Medicaid eligibility is a key provision of the Affordable Care Act. If the fourteen states that have said they will opt out of Medicaid expansion do so, 3.6 million fewer people will have health insurance than would otherwise be the case. This would save the federal government around $8.4 billion a year compared to the full expansion of Medicaid. However, the states that opted out of Medicaid expansion would see a net increase in spending in the short term because they would spend more on uncompensated care. Furthermore, even states that opt out of the expansion will be subject to the reductions in Medicare payments and disproportionate-share hospital payments, as well as various other taxes and fees in the Affordable Care Act. Thus, there may be large net transfers of federal funds out of the states that do not expand Medicaid.
If some states choose not to expand Medicaid eligibility in spite of the budgetary and economic impact of that decision, the federal government could consider expanding the eligibility for premium and cost-sharing subsidies on the individual exchanges to people with incomes below 100 percent of poverty. However, making people eligible for subsidies would not fully make up for the decline in the coverage rate that would result from failing to expand Medicaid eligibility.

My thoughts on how this might play out remain unchanged from a year ago. You can still read them here.

[Originally posted at The Incidental Economist]

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Aaron Carroll ,MD, is an associate professor of Pediatrics and the associate director of Children’s Health Services Research at Indiana University School of Medicine.
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