Report: Expanded Medicaid programs are saving states millions of dollars

More than $30 million in Arkansas, $25.8 million in Kentucky, $105.5 million in Washington and $180 million in Michigan. That’s how much money just four states during just one fiscal year saved under their newly expanded Medicaid programs.

A recent report from the Center on Budget and Policy Priorities (CBPP) summarizes the benefits of Medicaid expansions on uninsurance rates, state health care spending and uncompensated care, finding that “contrary to critics’ claims that Medicaid expansion is financially unsustainable for states, there is increasing evidence that expansion has saved states money, and these savings are expected to grow over time.” First, here’s a little background on health reform and Medicaid.

The 2010 passage of the Affordable Care Act required states to expand Medicaid eligibility to Americans younger than 65 with incomes up to 133 percent of the federal poverty level. However, in 2012, the Supreme Court ruled that states could choose not to expand Medicaid without jeopardizing federal funding. Fast forward to 2015 and so far, 29 states and Washington, D.C., have expanded their Medicaid programs. Under the ACA, the federal government pays 100 percent of the cost of expanding Medicaid through 2016; the rate falls incrementally down through 2020, at which point the feds will pay 90 percent of the cost from then on.

Still, the high federal matching rate hasn’t been enough to entice all state policymakers to put people’s health before politics. (NPR published a piece just today on what’s happening in some states as they consider expanding Medicaid.) The recent CBPP report, authored by policy analyst Jesse Cross-Call, illustrates why the 21 states without an expanded Medicaid program are missing an opportunity to truly bend the health care spending curve in the long run, while many of their poorest residents remain cut off from affordable and comprehensive health care coverage.

According to the report, states that expanded Medicaid have experienced the greatest gains in insurance coverage. For example, in just one year, uninsurance rates in Arkansas and Kentucky dropped in half, from 22.5 percent to 11.4 percent and from 20.4 percent to 9.8 percent, respectively. In fact, nine of the 10 states with the biggest drop in residents without insurance were Medicaid expansion states. Because the ACA was designed under the assumption that states would expand Medicaid, residents in non-expansion states now fall into a gap in which they don’t qualify for Medicaid and don’t qualify for subsidies in the new health insurance marketplace. That means millions of Americans still can’t access affordable health care.

In addition to declining uninsured numbers, expanding Medicaid comes with serious financial benefits for state budgets too, as newly insured residents no longer depend on state-funded uncompensated care, Medicaid programs pull in more federal matching dollars, and states collect more tax revenue. Here are just a few examples from the CBPP report:

  • Arkansas’ decision to expand Medicaid saved the state $30.8 million in fiscal year 2014, and the state estimates it’ll save an additional $88.8 million in fiscal year 2015.
  • In addition to the $25.8 million Kentucky saved in fiscal year 2014 thanks to Medicaid expansion, the state predicts it will save an additional $83.1 million in fiscal year 2015.
  • As a result of Medicaid expansion, New Jersey policymakers expect to save nearly $3 billion through 2020 thanks to an increase in federal Medicaid funds.
  • New Mexico is on course to save $60 million between 2014 and 2016. The state also collected $30 million in new revenue in 2014 via taxes on managed care plans that serve the new Medicaid population.
  • In Washington state, the Medicaid expansion saved $105.5 million in fiscal year 2014, and the state expects to save an additional $286.6 million in fiscal year 2015.

Of course, increasing access to affordable health insurance has also led to big declines in uninsured and uncompensated care at hospitals. For example, the CBPP report notes that the Arkansas Hospital Association reported that admissions of uninsured patients fell by more than 46 percent between 2013 and 2014, while the Arizona Hospital Association reported a 31 percent drop in uncompensated care.

“Health reform’s Medicaid expansion has proven successful for the states that have taken the option, reducing both their uninsured populations and their health care-related costs and producing budgetary savings,” writes Cross-Call. “Meanwhile, policymakers in non-expansion states — many of which have high uninsurance rates, limited Medicaid eligibility for parents, and no eligibility for poor adults without children — have forgone significant savings and have placed the burden from their decision not to expand on their poorest residents.”

To read a full copy of “Medicaid Expansion Is Producing Large Gains in Health Coverage and Saving States Money,” visit the Center on Budget and Policy Priorities.

Kim Krisberg is a freelance public health writer living in Austin, Texas, and has been writing about public health for more than a decade.

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