Study says states participating in Medicaid to see smaller increase

The expansion of health care coverage for millions of the nation’s poor called for under President Obama’s Affordable Care Act will add a trillion dollars to Medicaid costs over the next decade — but states that participate in the program would see their own costs increase by less than 3 percent, according to a new study.

The report comes as many Republican governors, especially across the South, have cited those increased costs — about $76 billion over 10 years, according to the report — as a reason to opt out of the Medicaid expansion, an option the Supreme Court gave the states when it upheld the rest of the health care law in June.

“If states do adopt the expansion, the federal government will pay for most of this,” said John Holahan, one of the authors of the Kaiser Family Foundation and the Urban Institute report. “The additional state cost is pretty small relative to what spending would be without the expansion. [It] should be pretty hard for states, eventually, to walk away from.”

If all states adopt the Medicaid expansion, the federal government will pick up $952 billion of the estimated $1 trillion in additional spending in 2013-2022, the report estimates.

Even if the Medicaid expansion — which would add 21.3 million to the rolls — is rejected by all 50 states, Medicaid spending is still heading up by $68 billion for the states and $152 billion for the federal government.

“It’s always very important to look at the cost estimates in context — we are talking about health care, and health care is expensive,” said Alan Weil, executive director of the National Academy for State Health Policy, noting that with numbers quickly reaching the billions and trillions, it’s easy for people to have “sticker shock.”

According to the report, many states that take part in the program would pay more but eventually would realize savings by recouping costs from uncompensated care, for example.

Those savings actually translate to about $10 billion in lower state costs over the next decade, the report said.

The figures vary widely by region, however, and highlight the political divide behind the implementation of the law. For example, eight states — Connecticut, Delaware, Iowa, Massachusetts, Maryland, Maine, New York and Vermont — would save money by expanding eligibility because the federal government already pays a higher share of costs for some who are currently eligible for the program.

Other states such as Arkansas, Mississippi and Georgia, however, would see a net increase in state expenditures of up to about 4 percent. Dollar-wise, the net state cost increases for Texas and Florida both check in at about $4 billion, trailing only California’s $4.4 billion.

A handful of Southern states, including Texas, Florida and Louisiana, have indicated they will not participate in the expansion. Other states have been hesitant to say definitively whether they will implement it absent substantial reforms to the program, pointing to the potentially large price tag.

In June, the U.S. Supreme Court ruled that the federal government cannot coerce states to expand Medicaid rolls as part of the federal health care overhaul by withholding their share of overall Medicaid funding.

Beginning in 2014, the federal government will cover 100 percent of the costs for those newly eligible for the program as the income eligibility floor for the program increases to 138 percent of the federal poverty line, which is about $15,000 for an individual in 2012. The federal match rate begins to decrease gradually in 2017 to 95 percent before reaching 90 percent starting in 2020.

With the expansion, an additional 21.2 million people could gain coverage by 2022 and, coupled with other provisions of the law, could cut the uninsured by 48 percent, the report said.

If no states expand Medicaid, enrollment would still increase by 5.7 million because of provisions in the law that would increase participation in the program among those already eligible, including children, and the number of uninsured would decrease by 28 percent.

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