Medicaid Expansion Would Cost States Little Compared to Benefit

For most states, the benefits of Medicaid expansion under the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) would far outweigh their costs, according to a study by the Urban Institute. The study, sponsored by the Kaiser Family foundation and the Robert Wood Johnson Foundation, examined the cost to the states in the aggregate and individually. The cost varies among states depending on the eligibility limits and benefits they had in place before PPACA.

The Medicaid expansion would cover uninsured individuals, including childless, nondisabled adults under age 65, with incomes up to an effective limit of 138 percent of the federal poverty level (FPL). All of the cost will be paid for by the federal government for the first two years, after which the federal share will decrease gradually to 90 percent by 2022. To determine the net cost, however, it is necessary to consider the money the states will not have to spend on uncompensated care, and, in some states, programs funded solely by the states.

Under the expansion, total state Medicaid spending would increase by only 3 percent between 2013 and 2022, according to the study. However, the costs are not evenly distributed. Eight states would actually save money, because they currently cover some of the newly eligible and have been receiving federal matching funds at their usual rate. About half the states would see an increase of less than 5 percent. The rest would experience increases between 5 percent and 11 percent during the same period. Much of the increase would be caused by enrollment of individuals, who were eligible under the present rules; the 100 percent federal match applies only to the newly eligible group.

As a percentage of their current Medicaid expenditures, Delaware and Vermont would save the most. States with the highest increase in expenditures under expansion include Arizona, Mississippi, Nevada and Georgia.

Payments to providers, particularly hospitals, would increase substantially under the Medicaid expansion. Hospitals would receive $314 billion more by 2022 if all states adopted the expansion. The additional economic activity would produce additional revenue for states. The added income would partially offset the loss to the states of Medicaid payments to disproportionate share hospitals.