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Failing to Expand Medicaid Costs Individuals, Too

We’ve written about the growing cost to states of not expanding Medicaid as part of health reform.  But let’s not forget that state policymakers’ decisions not to expand have a severe human cost, too, as an article in today’s Wall Street Journal makes clear.

The Journal details the plight of uninsured low-income workers in Alabama — one of the states that hasn’t expanded Medicaid — who are struggling to afford medications for chronic health conditions, or are forgoing needed care entirely because they lack health coverage.  These are some of the nearly 5 million individuals in 25 states caught in a “coverage gap” — with income too low to qualify for help buying private coverage through the new marketplaces and too high to qualify for Medicaid — that exists because their state has not expanded Medicaid (see chart).

While Alabama Governor Robert Bentley opposes the expansion, a growing number of policymakers in non-expansion states are realizing that it doesn’t have to be this way.  Utah Governor Gary Herbert has announced he will push to expand this year because “doing nothing is not an option.”  And lawmakers in Nebraska, New Hampshire, and a handful of other states are charting their own paths toward expansion.

The Medicaid expansion is a good financial deal for states, and they can expand with the knowledge that the federal financial commitment to the expansion is solid, as we’ve previously explained.  Today’s Journal makes it clear how much individuals stand to gain from expanding as well.


02 2014

History Rebuts Claim That Federal Medicaid Matching Rates Are Unstable

As I explained last week, there’s no evidence to support claims that the federal government will renege on its commitment to finance nearly all of the costs of health reform’s Medicaid expansion.  Some critics also assert that Congress frequently changes the formula that determines what share of states’ Medicaid costs the federal government will cover (also known as the FMAP).  But a look at Medicaid’s history shows the exact opposite.

The federal government picks up about 57 percent of state Medicaid costs on average, and that average has remained remarkably steady for decades.  (Federal matching rates for individual states can vary from year to year, but that’s because the formula takes into account changes in states’ per capita income.)

In fact, the federal government has only modified the overall FMAP formula three times in the last 35 years.  And the past two times, it raised matching rates temporarily (for fiscal years 2003-2004 and 2008-2011) to provide state fiscal relief in response to economic downturns.

The only time the federal government cut Medicaid matching rates was in 1981, when President Reagan and Congress enacted a temporary reduction for 1982-1984.  The rates, however, returned to their previous levels in 1985.

That’s hardly a pattern of arbitrary cuts in federal Medicaid funding.


02 2014

The Federal Financial Commitment to the Medicaid Expansion Stands

Health reform’s Medicaid expansion is a great deal for states.  The federal government will finance nearly all of its costs, picking up 100 percent of expansion costs for the first three years (2014-2016) and no less than 90 percent on a permanent basis.  In fact, as a recent analysis from Virginia shows, the Medicaid expansion can actually save states money.

Some policymakers who oppose health reform in states that have not yet taken up the expansion, however, continue to claim that the federal government will renege on its financial commitment to the expansion.  They argue that states shouldn’t adopt the expansion because federal deficit reduction efforts will inevitably lead to requiring states to pay for a greater share of the expansion costs.  There is no evidence to support this claim.

Federal spending on both Medicaid and Medicare has been growing much slower in recent years than previously projected.  The Congressional Budget Office (CBO) expects the federal government to spend $1.2 trillion less on Medicare and Medicaid between 2010 and 2020 than CBO estimated in March 2010 (see chart).  We have similarly found that projected federal Medicaid spending will be $311 billion — or 9.2 percent — lower between 2010 and 2020 than what CBO previously projected even after excluding the effects of the Medicaid expansion (such as the Supreme Court decision that made the expansion a state option, which had the effect of lowering federal spending).

As a result, pressures to cut Medicaid and shift costs to states as a strategy to cut the deficit have dissipated.  For example, policymakers didn’t seriously target Medicaid as a source of savings in crafting either of the last two major federal budget agreements: the 2012 “fiscal cliff” budget deal and the December 2013 budget deal between Senate Budget Chair Patty Murray and House Budget Chair Paul Ryan that funded the government for the rest of the fiscal year.

In addition, as we have previously pointed out, the Obama Administration has said that it will oppose any cost-shifts to states that would deter states from taking up the Medicaid expansion.  That’s why it dropped from its own budget last year two Medicaid proposals it once supported that would shift costs to states.  As National Economic Council Director Gene Sperling stated last January, states should expand Medicaid “with the understanding that the rug will not be pulled out from underneath them” and that “[w]e are not willing to accept even the Medicaid savings that we had once put on the table … Medicaid savings, Medicaid cuts, for this administration, are not on the table.”

In fact, as we have noted, the only federal policymakers now pushing for major cuts to Medicaid that would significantly shift costs to states — like converting Medicaid to a block grant or setting per capita caps on federal Medicaid funding — are congressional health reform opponents who would gladly undermine a key element of the Affordable Care Act.  But their proposals face intense opposition and have no prospect of becoming law.


01 2014

More Evidence That Medicaid Expansion Makes Fiscal Sense for States

Armed with new data, Virginia’s Medicaid agency estimates that adopting health reform’s Medicaid expansion — which it originally estimated would cost the state $137 million through 2022 — would actually save the state more than $1 billion over that period.  That echoes what we’ve said all along:  expanding Medicaid is a good deal for states.

Opponents of the Medicaid expansion have often cited flawed studies that exaggerate its cost to states, such as by assuming that newly eligible Medicaid enrollees would be much sicker (and thus more expensive to cover) than current enrollees.  Analysis shows the opposite is true: non-disabled adults who newly enroll into Medicaid are more likely to be healthier than those who are already enrolled.

Virginia’s Department of Medical Assistance Services (DMAS) now agrees.  Looking at new data and other states’ experience with recent Medicaid expansions, DMAS found that uninsured adults who newly enroll into Medicaid would likely have the same, if not lower, costs than currently enrolled adults.

DMAS also significantly raised the estimate of how many uninsured people would newly qualify for Medicaid under an expansion.  This means Virginia would have to spend even less to reimburse hospitals for uncompensated care for the uninsured than under the earlier estimate, since more of the uninsured would have Medicaid.  And, the drop in Virginia’s uncompensated care costs through 2022 would more than offset Virginia’s cost of covering newly eligible Medicaid beneficiaries over that period (in part because the federal government will reimburse 100 percent of the cost of covering these new enrollees through 2016), producing a net saving for the state.

States that have not expanded Medicaid can’t keep ignoring the fact that expanding Medicaid has significant benefits for states.


01 2014

The Growing State Cost of Not Expanding Medicaid

Policymakers in some of the 25 states that haven’t expanded Medicaid as part of health reform (see map) are putting expansion at the top of this year’s legislative agenda.  The New Hampshire House passed an expansion bill on the first day of its session last week, for example, and Virginia Governor Terry McAuliffe advocated for expansion in his first address to lawmakers.  These policymakers are wise to prioritize the Medicaid expansion, as the costs of not expanding have begun to accrue:

  • States’ failure to expand has created a “coverage gap” containing nearly 5 million people.  People in this gap — which includes more than a quarter of the uninsured, non-elderly adults in these 25 states, according to a recent analysis by the Kaiser Commission on Medicaid and the Uninsured — are shut out of health reform’s coverage options.  Their income is too low to qualify for help buying private coverage through the new marketplaces and too high to qualify for Medicaid.
  • States that haven’t expanded are missing out on a very good financial deal.  The federal government will pick up 100 percent of the cost of covering newly eligible people through 2016 and no less than 90 percent of the cost after that.  So, the amount of federal money that states forgo by not expanding will continue to grow.
  • States that have expanded expect slower growth in state Medicaid costs than states that haven’t expanded.  This finding, from a recent Kaiser survey of states, reflects the fact that expansion states anticipate savings in state-funded services that they have provided to uninsured individuals who are now eligible for Medicaid.  Examples include mental health care, corrections-related health care, and uncompensated care.


01 2014