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Medicaid Expansion: ‘Free’ Federal Money?

Where the States Stand

Figure 1. States position on Medicaid Expansion under the ACA.

Via: The Advisory Board Company

To expand, or not to expand Medicaid, that is the question.

Why are some states skeptical about Medicaid expansion and making the assumption that the “plan is [too] costly?” If the states expand their Medicaid program, they would receive federal funds up to 100 percent until 2017 under the ACA. It seems silly that the states would reject the idea of expanding Medicaid programs if it could potentially benefit them financially as a result of the reduction in uncompensated health care costs as well as reducing the number of uninsured individuals.

The purpose of Medicaid expansion under the ACA is to provide broader health coverage to lower-income individuals. States are not required to implement the provisions, however, it is “the single largest source of coverage for nursing home and community-based long-term care.”

Here are some numbers to put the importance of Medicaid in our health care system into perspective. For example, it covers approximately 31 million children and 16 million adults in low-income families. There are also 1.6 million institutional residents and 2.8 million community-based residents under the long-term care assistance. Medicaid also contributes 16% of our national health spending and 40% of long-term care services.

According to a FY 2011 state spending report conducted by National Association of State Budget Officers (NASBO), Medicaid accounts for 23.7% of total state expenditures. Also, NASBO projects that Medicaid’s total state expenditures will continue to increase especially during an economic decline.

Setting aside any political differences and partisan issues, are some states actually better off rejecting the expansion? Could the states be negatively affected if they implemented provisions to expand coverage and enrollment for Medicaid under the ACA?

From Figure 1, the Advisory Board Company provides a summary of where each of the states stands with Medicaid expansion. Under the ACA, the states are given the freedom to decide for themselves whether or not to participate with Medicaid expansions. This allows for governors and state leaders to determine individual states Medicaid expansion. There are 14 states reporting that they will not be participating in the expansion, 3 states are not in favor of participating, 4 states are in favor of participating, 24 states and the District of Columbia will be participating, and the remaining 5 states are still undecided with the expansion.

Charles J. Milligan, Deputy Secretary for Health Care Financing, spoke at the “Medicaid 101: What You Need to Know” event hosted by The Kaiser Commission on Medicaid and the Uninsured along with Alliance for Health Reform. Milligan had written an article for Health Affairs blog back in August 2012 about the positive implications of expanding Medicaid for Maryland and stated that the expansion would be “the smart decision….” He mentions in the article that the expansion will “generate economic activity and jobs, save the state money, protect the safety net and other health care providers.” But also, it will reduce hospital’s uncompensated care and help lower premiums for private payers. This may be good news for Maryland residents since the state is planning to expand their Medicaid program under the ACA.

Let us look at another state.

Take South Dakota for example; the Heritage Foundation released data showing that there would be a negative impact on the state if SD was to expand their Medicaid program. The expansion would cost taxpayers approximately $95 million through the year 2022. Compared to the other states, SD does not take in enough revenue from taxpayers to make up the increased costs. SD collected a total of $1 billion in their revenues in FY 2012 compared to the $33.1 billion total state revenues MD received. Therefore, it may be in their best interest if SD did not expand their program under the ACA. Perhaps SD will look to other Medicaid reforms or continue with their current program.

To put it into perspective, South Dakota’s total Medicaid spending for FY 2010 is calculated to be $784 million compared to the $7.08 billion Maryland spends on Medicaid.

I think it is important to be able to extend health coverage to individuals who cannot afford it without any state or federal help. The decision to expand Medicaid should take into consideration with extensive research and analysis looking at both positive and negative effects that it has on the states. I hope that the governors of the undecided states make the decision for the best interest of their residents as well as weighing the future economic outlook when making a final decision. It is important not only to seek immediate solution for healthcare but also to look ahead in avoiding any dire financial crisis that Medicaid expansion could initiate later down the road.

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