Kaiser Study: Medicaid Expansion Poses 'Modest' State Costs

Monday, 26 Nov 2012 04:39 PM

 

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President Barack Obama's $1 trillion plan to expand Medicaid would raise state costs by only 3 percent and extend health coverage to more than 21 million low-income people as part of the new healthcare reform law, a study said on Monday.

The report released by the nonpartisan Kaiser Family Foundation said states would spend an extra $76 billion over the next decade to implement the Medicaid expansion, or 2.9 percent more than they would without the reform law. The federal government would fork out more than $950 billion to cover nearly all of the costs, the study said.

The findings point to considerable geographic differences, with states in New England and the Middle Atlantic region that already offer generous Medicaid services saving money on the expansion while those in the South and Southeast facing Medicaid cost increases of up to 11 percent.

At least eight Republican governors have rejected the Medicaid expansion as too costly since the U.S. Supreme Court allowed states to opt out in June. The study's authors described the costs increase for states as "modest", compared with huge federal outlays and savings that would result from reducing the cost of caring for the uninsured.

Released as states are mulling whether to participate in the expansion, the study said states which join the expansion would see an incremental Medicaid cost increase of only 0.3 percent given that spending could be expected to rise anyway as a result of reforms required regardless of participation.

"The key finding is that the additional state cost from the Medicaid expansion is pretty small," said John Holahan of the Urban Institute, a study co-author.

"It's hard to conclude anything other than that this is pretty attractive and should be pretty hard -- eventually -- for states to walk away from," he said.

The Medicaid expansion is a main provision of the Patient Protection and Affordable Care Act, which would extend coverage to more than 30 million uninsured Americans through Medicaid as well as new state insurance marketplaces, known as healthcare exchanges.

The expansion would provide Medicaid benefits to people earning up to 133 percent of the federal poverty level, which the study equated to $15,415 a year for an individual or $26,344 for a family of three.

The federal government would pay 93 percent of coverage costs on average over the next 10 years. Washington currently pays less than 60 percent of Medicaid costs, which are jointly funded with the states.

The cost of the new Medicaid program depends on how many people would qualify in each state and how big an increase in services would be required.

The study said that eight states could expect to see savings from the higher federal share of costs. About half would see their costs increase by 5 percent or less, while the remainder could see cost increases of 5 percent to 11 percent.

© 2014 Thomson/Reuters. All rights reserved.

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