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Wednesday, June 2, 2010

Health reform: A good deal for the states

Erin Kelly

Staff Writer

This week, the Kaiser Family Foundation released a new state-by-state analysis showing that the federal government will assume all but a very small percentage of the cost to expand Medicaid, dramatically reducing the number of uninsured Americans at a bare minimal cost to the states.

Before Congress passed health reform, eligibility requirements to qualify for Medicaid varied state to state. For example, in Alabama, a parent cannot qualify for Medicaid if they make more than 24% of poverty (or $4,395 for a family of three in 2010), whereas in Wisconsin, parents that make up to 200% of poverty ($36,620 for a family of three in 2010) may be eligible. The new law sets a national eligibility threshold at 133 percent of the federal poverty level ($14,400 for a single adult or $29,350 for a family of four).

There is no question that states are struggling with tight budgets due to the impact of the recession that started back in 2008—reducing revenues at the same time the number of people laid off from jobs and need help grows. Thus, it is hard for states to find room in their state budgets to help uninsured families with health insurance coverage.. That’s why the Kaiser Family Foundation analysis of the Medicaid expansion in health reform is such good news for states.

According to the Kaiser Family Foundation, with the federal government picking up most of the tab in expanding Medicaid, the states will have gain without strain on their budgets. According to Diane Rowland, executive vice president of the foundation,

For a relatively small investment of state dollars, states could see huge returns in terms of additional coverage for their lowest income residents -- with federal dollars covering the bulk of the bill.

In fact, nationally Medicaid enrollment is expected to increase by 27.4 percent compared to an increase in state spending of only 1.4 percent (over current baselines). At the same time, the reduction in the number of uninsured people in a state will reduce the need for state spending for uncompensated care (payments by the state to hospitals and other providers who treat uninsured patients).Further, the influx of new federal dollars flowing to a state is good for the state’s economy—generating new business activity, jobs and wages (see Medicaid: Good Medicine for State Economies).

Sounds like a win-win to us.