Republican Report Inflates State Medicaid Costs Under Health Reform

March 1, 2011 at 4:22 pm

Republican members of Congress released a report today that grossly exaggerates the cost to states of the health reform law’s Medicaid expansion.

As I’ve explained, health reform’s Medicaid expansion is a good deal for states. Under the Affordable Care Act, Medicaid and the Children’s Health Insurance Program will cover an estimated 18 million more low-income adults and children than they do today, most of whom are now uninsured.  The federal government will pay 92 percent of the cost of this expansion through 2021.  The cost to states over this period will be $60 billion — just 2.6 percent more than what they would have spent on Medicaid without health reform.  (See graph.)

The Republican report claims that the actual cost will be $118 billion through 2023.  But it accomplishes this by cherry-picking worst-case scenarios from various studies that use different time frames and rely on flawed assumptions:

  • For 19 states, the report cites cost figures from an analysis that the Urban Institute conducted for the Kaiser Family Foundation.  What it doesn’t mention is that the Urban analysis produced two sets of estimates for each state — one assuming that the Medicaid participation rate would remain at about its current level, and another assuming that it would rise significantly.  Most credible analysts use the lower estimate, but the GOP report references only the higher one.
  • The report’s cost estimates for Indiana, Mississippi, and Nebraska come from misleading studies conducted by the consulting firm Milliman, Inc. that rely on flawed assumptions.  One estimate assumes that literally everyone who becomes eligible for Medicaid under health reform will sign up for it on Day 1 — something that has never happened in a means-tested public program.  Milliman’s estimates also generally assume, contrary to states’ actual experience with Medicaid expansions, that many people with private insurance will drop it and enroll in Medicaid once they become eligible.
  • The report’s cost estimates for several other states suffer from similar flaws and include costs not related to health reform.  For example, its Utah estimate comes from a state report that seems to assume enhanced federal funding will run out by 2014, forcing Utah to shoulder a larger portion of the expansion’s costs.  Its Florida estimate, also from a state report, not only assumes that 100 percent of newly eligible individuals will enroll but also includes the cost of raising Medicaid’s payment rates for primary care to Medicare levels after 2014 — a change the health reform law does not require.

The health reform law, by dramatically shrinking the ranks of the uninsured, will lighten the burden on states of providing health care to their uninsured residents.  Recent analysis by the Kaiser Commission on Medicaid and the Uninsured found that the various estimates of state Medicaid costs under health reform don’t adequately take these savings into account, which could be quite substantial. In fact, analysts from the Urban Institute have pointed out that the reductions in state costs in caring for the uninsured could more than offset the state costs of expanding Medicaid.

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More About January Angeles

January Angeles

January Angeles is a Policy Analyst at the Center on Budget and Policy Priorities, focusing on Medicaid and state health policy issues.

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2 Comments Add Yours ↓

Comments are listed in reverse chronological order.

  1. Sarah K. Weinberg, MD #

    As a member of Health Care for All – Washington and Physicians for a National Health Program, I have written articles about what’s in the Health Reform law. One of my main sources has been the Kaiser Family Foundation’s analysis of that law. I just re-checked their website. According to their reading of the law, Medicaid payment rates to primary care physicians rise to Medicare rates in 2013, and the additional cost is to be borne 100% by the federal government. There is nothing in the law about Medicaid payment rates in 2014 and after, but I can’t imagine that a reasonable person would assume that the law only intended the better reimbursement of primary care physicians to be for only one year. Certainly, no one assumes that the rest of the law, which is full of start dates and generally without stop dates, will cease to be in effect a year after its start. Of course, Congress in its wisdom can always reneg on the 100% federal coverage of the excess cost of paying Medicare rates. However, your statement at the end of the 3rd bullet above is misleading at best.

    This comment does not detract from the general tenor of your piece: the Republicans are grossly distorting everything they can about this law. “Figures don’t lie, but liars figure.”

    • CBPP #

      Thank you for your interest in this issue, Sarah. In response to your comment, the Affordable Care Act requires states to raise Medicaid payment for certain primary care services to Medicare rates for two years — 2013 and 2014. For these two years, the federal government pays the entire cost of these payment rate increases. Thereafter, states have the flexibility to maintain those payment levels or reduce them. Should states decide to keep Medicaid payments for certain primary care services at Medicare levels, states would be reimbursed at their regular federal match rate.

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