Report: Expanding Medicaid programs a win for both residents and state budgets

Here’s what states get when they expand Medicaid: more savings, more revenue, more jobs, more access to care for their communities.

That’s the conclusion from a Robert Wood Johnson Foundation issue brief released this month that compared the differences between states that chose to expand Medicaid eligibility under the Affordable Care Act and those that opted out. Under the health reform law, the federal government will pay the entire cost of expanding state Medicaid programs up to 138 percent of the federal poverty level through 2016, phasing down to 90 percent by 2020. It’s a pretty good deal and most states have taken up the offer; however, a 2012 Supreme Court ruling that made Medicaid expansion optional means that 19 states have yet to adopt the Medicaid expansion. That also means many of their residents have now fallen into an unfortunate coverage gap in which they don’t qualify for Medicaid and don’t qualify for subsidies through the new health insurance market. But for states that have expanded Medicaid, it’s been a win-win for residents and state budgets.

Based on data from 11 states and Washington, D.C., the brief found that Medicaid-expansion states are generating savings and revenue, while creating jobs and ensuring access in rural communities, which often struggle with provider shortages. In particular, the brief reports that between fiscal years 2014 and 2015, state Medicaid spending in expansion states grew by half as much as spending in states that didn’t expand. By pulling in new federal funds, expansion states created more jobs, too: On average, expansion states saw jobs grow by 2.4 percent in 2014, compared to 1.8 percent in states that didn’t expand Medicaid.

More insured residents also means health care systems incur less uncompensated health care costs. The brief estimates that hospitals experienced $7.4 billion less in uncompensated costs in 2014 than they would have without Medicaid expansions. In fact, expansion states experienced a 26 percent reduction in uncompensated care costs, compared to a 16 percent reduction in nonexpansion states. When it comes to access in rural communities, the percentage of rural hospitals at risk of shutting down is about twice as high in nonexpansion states than in states that did expand Medicaid. Brief authors Deborah Bachrach, Patricia Boozang, Avi Herring and Dori Glanz Reyneri write:

Evidence from states that have expanded Medicaid consistently shows that expansion generates savings and revenue which can be used to finance other state spending priorities or offset much, if not all, of the state costs of expansion. Medicaid expansion is also bringing hundreds of millions of federal dollars annually to states, which ripples through state economies, creates jobs, and strengthens struggling and rural hospitals.

The brief highlighted some impressive savings from the expansion states studied, including:

• Maryland: In fiscal year 2015, the state saved $8.2 million attributed to women who enrolled in Medicaid and became pregnant. The state experienced a $13.6 million reduction in uncompensated care funding to hospitals and expects an additional $26.6 million in revenue through insurer taxes.

• Kentucky: The state saved $1.7 million in fiscal year 2014 and is expected to save $7.9 million in fiscal year 2015 related to enrollees living with a disability, as such enrollees are now covered under the new expansion instead of having to pursue a separate disability determination to qualify for Medicaid. Kentucky is also expected to save $21 million in fiscal year 2015 in state mental and behavioral health spending.

• Michigan: In fiscal year 2015, the state is projected to save $190 million through transitioning adults who previously accessed behavioral health care through a state-funded program into the expanded Medicaid program. Michigan is also projecting savings of $19 million in state correctional health care spending, as well as revenue gains of $26 million through the state’s Health Insurance Claims Assessment.

Fortunately, states that opted out of Medicaid expansion and missed the 2016 cut-off for 100 percent federal financing may get another chance. In his fiscal year 2017 budget proposal, President Obama proposed full federal funding for the first three years of Medicaid expansion for states that decide to expand eligibility in the future. Of course, to become a reality, the proposal first has to make it through Congress.

To download a full copy of the new Medicaid issue brief, visit the Robert Wood Johnson Foundation.

Kim Krisberg is a freelance public health writer living in Austin, Texas, and has been writing about public health for nearly 15 years.