Medicaid Expansion Isn’t Hurting State Budgets

State Medicaid spending rose just 2.7 percent in state fiscal year 2014, when health reform’s Medicaid expansion took effect in more than half of the states, a new report from the National Association of State Budget Officers (NASBO) estimates.  Along with Kaiser Family Foundation projections that state Medicaid spending in fiscal year 2015 (which began July 1 in most states) will grow more slowly in states that have expanded Medicaid than in the others, the NASBO report provides evidence that the Medicaid expansion isn’t hurting state budgets.

Both reports note a significant rise in total Medicaid spending — federal plus state — in fiscal year 2014 as 27 states plus Washington, D.C. extended eligibility to most people with incomes up to 138 percent of the poverty line.  Kaiser projects a 14 percent increase in total Medicaid spending in fiscal year 2015.

But since the federal government covers the entire cost through 2016 of covering people newly eligible for Medicaid due to the expansion (and no less than 90 percent after that), the story on state Medicaid spending is different.  Kaiser projects a 4.4 percent increase this fiscal year for Medicaid expansion states and a 6.8 percent increase for non-expansion states.

The NASBO and Kaiser reports focus on state Medicaid budgets, but Kaiser notes that expansion states will likely realize savings outside Medicaid, including in mental health, corrections, and state-funded programs for the uninsured.

As state legislative sessions approach, policymakers in a number of the 22 states that have yet to expand Medicaid are taking a fresh look.  Governors in Wyoming and Utah last week released details of their expansion plans.  These and other states considering the Medicaid expansion should note the mounting evidence that it’s no budget buster.

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