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Wednesday, August 15, 2012

Medicaid Expansion is a Win-Win for States

Patrick Smith

Staff Writer

In the weeks following the Supreme Court’s decision to uphold the Affordable Care Act, much of the attention surrounding the law has focused on the expansion of Medicaid. The Court made the expansion optional, and many conservative governors quickly stated their resistance to adopting the Medicaid expansion. Why, though? A closer look at the benefits of the expansion shows that states will win big when they expand Medicaid.

The law’s Medicaid expansion will extend the program to all individuals with incomes up to 133 percent of federal poverty (about $25,400 in annual income for a family of three). Due to this, the number of adults who will gain health coverage is enormous. In fact, a study by the Kaiser Family Foundation estimates that the Medicaid expansion would reduce the uninsured in the Medicaid-eligible income group by nearly half, covering 11.2 million people by 2019.  

In fact, many of the states who are currently resisting the expansion would benefit the most. The same study finds that South Carolina, for example, would see at least a 56.4 percent reduction in uninsured adults with incomes that make them eligible for Medicaid.

This begs the question, why are some states stubbornly opposing this dramatic increase in insured adults? The ever-faithful excuse for opposition to any sort of reform, of course—fear of fiscal calamity. Republican governors have made gloom and doom statements, claiming that the expansion would explode their budgets. A quick look at what’s actually in the law, however, reveals this fear is irrational.

The federal government will foot the cost of the expansion for the first three years, starting in 2014. The percentage of federal funding eventually levels off at 90 percent in 2020. What’s more, the Medicaid expansion will produce net savings in overall health care state spending. By greatly reducing the number of uninsured, the expansion will result in a decline in state spending for uncompensated hospital care, mental health and substance abuse services, HIV services, and other health spending.

Independent experts (including The Lewin Group and the Urban Institute) have quantified how much health spending state budgets can save by moving forward with the Medicaid expansion.  For example, The Lewin Group estimated $101 billion in net savings to the states from the Medicaid expansion between 2014 and 2019. In fact, It would be fiscal malpractice for any state to turn away this federal financial help. Despite the claims of fiscal fears, it’s easy to see that resistance to the expansion comes down to politics not dollars. However, with the lives of millions of uninsured Americans at stake, making sure that people receive coverage is just a bit more important than scoring a few points among conservative circles.