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Friday, February 7, 2014

New Study from the Commonwealth Fund Finds that Forgoing Medicaid Expansion Would Cost State Residents Billions of Tax Dollars

Dee Mahan

News about the benefits of expanding Medicaid just keeps coming. On December 5, 2013, the Commonwealth Fund published a study looking at the financial benefits for states that expand Medicaid under the Affordable Care Act. This new study takes a slightly different look at what Medicaid expansion could mean for state finances: It finds that states that reject the Medicaid expansion are costing their residents billions of dollars in taxes.

The report, How States Stand to Gain or Lose Federal Funds by Opting In or Out of the Medicaid Expansion, joins the long list of studies that show how states can reap significant rewards if they expand Medicaid. For example, Medicaid expansion can improve residents' health and reduce mortality, it can reduce uncompensated care costs, and it can create jobs and business activity because of the added federal funds flowing into states.

This study uses projections for 2022, when the federal government will pay 90 percent of the costs of expansion, and states will pick up 10 percent of costs. It looks at the federal dollars flowing into states to expand Medicaid and three ways this positively affects state residents and finances.

  1. Putting Medicaid funding into context: On average, Medicaid expansion brings in about 2.35 times more federal dollars than what states would get through the highway funds program and 1.25 times more than the amount states get from federal support for defense procurement contracts.
  2. The costs of not expanding for residents: The vast majority of the Medicaid expansion will be paid for with federal funds, and those funds are raised by collecting federal taxes from residents in every state. Residents pay those federal taxes whether their state expands Medicaid or not. In states that participate in the expansion, much of that money will flow back into the state in the form of health coverage for low-income residents and payments to hospitals and other health care providers. The report looks at the federal funding states would forego if they don't expand Medicaid, adjusted to reflect the federal taxes state residents pay to fund the expansion. In every state, taxpayers would lose hundreds of millions to billions of dollars in 2022 alone.
  3. Comparing the costs of expanding Medicaid with other state efforts to bring in money: On average, the cost of the Medicaid expansion will be less than one-sixth of what states spend to attract private businesses, through costs like tax breaks.

So, what does this all mean?

  • Medicaid expansion will bring federal dollars into states at a level that's on par with programs that state politicians lobby to draw funding from.
  • In states that don't expand Medicaid, residents are paying millions, or even billions, to fund a federal program that doesn't benefit their state.
  • For less than they pay on average to attract private businesses, states can get federal funds that will provide health care for their citizens, money for hospitals and other health care providers, and jobs in the health care sector that will generate jobs and business activity in other sectors.

Above all, states that don't choose to expand Medicaid are costing their residents billions of tax dollars. And state residents should let their politicians know that's not acceptable.