The Consequences Of Not Expanding Medicaid

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Don Taylor has a post up today on the Affordable Care Act and the decision (or not) to expand Medicaid under the health care reform law. So far 24 states and the District of Columbia are moving ahead with plans to expand the program, with 21 outright or ‘leaning’ towards rejection, and another 6 are currently somewhere in-between, according to the most recent count from the Advisory Group.

Using data from the Kaiser Family Foundation, Taylor has figured that in 2016, “the 24 expanding states will receive $30.3 Billion additional federal dollars, while those not expanding will forego an additional $35.0 Billion they could have had (the fence sitters have an aggregate $15.2 Billion at stake in 2016).” As he continues, this “represents a huge redistribution of federal money from non-expanding to expanding states.” You should click-through to read the rest, as well as see those states with the most to gain and lose. Interestingly, as he also notes, historically speaking states that aren’t expanding Medicaid have (for the most part) received more in taxpayer spending than they’ve contributed on net in taxes. Taylor plans on writing more about what this might mean for the future of health care reform, yet the cost to states that don’t expand doesn’t stop here.

Earlier this month the Kaiser Commission on Medicaid and the Uninsured released their annual survey detailing state-by-state budget and impact information. A blog post over at Academy Health summarizes the pertinent findings, but also linked to this Center for Budget and Policy Priorities analysis on the most surprising conclusion; that state spending on Medicaid will grow more slowly for those choosing to expand the program under the ACA.

Here’s the CBPP graphic:

CBPP M'caid Expansion Graph

The author, Judy Solomon, goes on to write:

Medicaid enrollment will grow in all states in 2014 as people who are already eligible enroll for the first time — spurred by health reform’s individual mandate that most Americans have health insurance or pay a penalty, as well as by significant outreach and new simplified enrollment procedures.  The federal government will pick up the costs of this increased enrollment at the state’s regular matching rate, which averages 57 percent, leaving the state to pay 43 percent on average.

There are two things going on here to forecast that expansion states will see slower growth: 1) The federal government picks up 100% of the expansion costs for states in the beginning, slowly coming down to no less than 90%, and 2) those states expanding also expect to see savings in related services. Of course opponents can poke holes in these two aspects. The latter could simply be wrong, and former hinges one what they see as ‘political promises’ for funding that won’t stand in the face of long-term federal budget issues — despite there being no precedent for such thing.

Unsurprisingly, those objections seem weaker to me than the evidence that non-expanding states will be in a worse budgetary situation compared to expansion of the program. As the Governors of several red states (Arkansas, Michigan, Arizona, Ohio, etc) have collectively argued, it makes pragmatic sense to expand Medicaid under the existing deal. Doing so avoids being on the right side of that CBPP graphic, as well as other unintended deleterious consequences.

There are alternative reasons for not accepting the expansion, of course. But those are less consistent with practical governing and more with varying philosophical objections to spending public money on low-income residents, currently accommodated by the political environment. The latter is a less-popular stance to present to folks on the ground, so we end up with spurious appeals to Medicaid’s effects. On the contrary, the non-spurious real effect for non-expansion states is they will host most of the uninsured in this country staring next year. Moreover, their decision to forgo expansion will leave some 5.2 million low-income Americans in the coverage gap between existing Medicaid eligibility and subsidy availability on the new insurance exchanges.

It is entirely possible that states will follow a similar, if more uneven, path towards universal acceptance of greater Medicaid coverage as it did for the traditional program. In the meantime, though, these are the real consequences; a net-transfer of federal spending from poorer red states to wealthier blue ones, greater cost growth in states that don’t expand, and millions of American left behind.

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4 responses to “The Consequences Of Not Expanding Medicaid

  1. Pingback: Obamacare fever is masking the differences that matter | The McLean Parlor·

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  3. Pingback: That Obamacare Chart is Still Pretty Useful | Punditocracy·

  4. Pingback: Let’s not forget about the Medicaid coverage gap | Punditocracy·

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