Healthcare / Medicaid Expansion

Medicaid Expansion: What Do States Stand to Lose?

A recent study by the RAND Corporation, published in the Journal of Health Affairs, finds that states stand to lose $8.4 billion annually if they do not expand their Medicaid program – a move initially prescribed by the Affordable Care Act, but deemed voluntary by the Supreme Court decision.  The $8 billion is money states could potentially receive from the federal government to pay for new Medicaid enrollees, dubbed “newly eligibles.”  If states do not expand their programs, it was estimated that they could face up to $1 billion more in costs to cover uncompensated care.

According to the Kaiser Family foundation, only 23 of the 50 states have decided to go forward with the Medicaid expansion. Twenty states have decided to opt out of the expansion, while eight are still debating whether or not to go forward.

If states stand to gain $8 billion, why haven’t all states gone forward with the Medicaid expansion?

There is clearly more to the situation than a mere increase in federal funding.

Some states cite questions regarding the fiscal soundness of the expansion program as their primary concern.  Healthcare entitlement programs are taking up a large percentage of states’ budgets and are expected to continue to grow, forcing other programs to find ways to do more with less.

Under the current Medicaid expansion, the federal government would cover 100 percent of the newly eligible from 2014 to 2016.  By 2020, the federal government would phase its coverage down to 90 percent.  However, if the federal government cannot provide the funding guaranteed, states may need to cover a larger share of Medicaid costs for the newly eligible.

U.S. Representative Joseph Pitts (R) said, “These projections are based on a government already trillions of dollars in debt finding a way to pay for a massive expansion of state programs.”  The uncertain future of the federal government’s ability to cover the Medicaid expansion is a large concern for state governments.

Quality of, and access to, care for individuals on Medicaid are two other issues that have been raised.  It is no secret that there are hospitals, primary care physicians, and specialists who will not take Medicaid patients due to lower reimbursements.  This is a real concern for individuals on Medicaid and their access to care.

Unlike Medicare, those enrolled in Medicaid are not always eligible for benefits, as eligibility is dependent on income.  Individuals may cycle on and off the program repeatedly.  Achieving positive healthcare outcomes is much more difficult for both patients and providers if the individual is bouncing back and forth between insurance plans, or between being insured and uninsured.

Finally, the RAND findings do not account for cultural and demographic differences between states.  A state like New York is very different from a state like Utah.  Demographics play a very important role in healthcare costs, as different populations are likely to have different health issues.  To accurately evaluate the costs and benefits of the expansion, states must consider their demographics to calculate the real costs they will face.   Medicaid cannot be looked at on an aggregate level, but must be viewed on an individual state level since it is essentially a state run program.

Only time will tell how Medicaid expansion will fare.  Regardless of whether a state opts in to the Medicaid expansion program or not, they in some way will have to pay for the medical needs of the uninsured expansion, whether that is through higher taxes or lower federal funding. Of course there are benefits from the Medicaid expansion as far as insuring more Americans and providing some, albeit imperfect, access to care.  However the question remains: is this the best way we can provide health insurance to individuals or can we do better for America?