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Which states would save money under ACA's Medicaid expansion?

Under ACA, state spending would increase by $68M without expansion

Topics: Health Policy, Market Trends, Strategy, Medicaid, Reimbursement, Finance, Uncompensated Care, Revenue Cycle

November 27, 2012

States will have to spend millions more on Medicaid over the next decade regardless of whether they decide to participate in the Affordable Care Act's (ACA) expansion, according to a report from the Kaiser Family Foundation (KFF). 

Under the ACA, the federal government will pay to expand Medicaid eligibility to people at or below 133% of the federal poverty line in 2014 in every U.S. state. Federal contributions to the expansion will drop to 95% in 2017 and remaining at 90% after 2020, according to the ACA. However, the Supreme Court's ruling on the law allowed states to opt out of the expansion.

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Report: Medicaid expansion is a good deal for states

To assess the financial impact of the expansion, KFF determined states' future Medicaid spending based on three scenarios: A baseline where the ACA does not exist, a scenario where the ACA exists but no states participate in the expansion, and a scenario where the ACA exists and all states participate in the expansion.

The report found that, if all states participate in the ACA expansion, states would spend an additional $76 billion on Medicaid over the next 10 years, the federal government would spend an additional $952 billion, and 21 million additional residents would enroll in the public insurance program.

The report also found that total uncompensated care costs would decline by about $183 million from 2013 to 2022. Since states and localities finance about 30% of uncompensated care costs, state and local spending on uncompensated care would decrease by $18 billion if all states expand Medicaid.

However, the report found that enrollment will rise even if no states participate in the expansion, in large part because the insurance exchanges and the individual mandate will encourage individuals who are currently eligible but not enrolled to join the program.

Altogether, KFF estimates that Medicaid enrollment will grow by 5.7 million beneficiaries over 10 years without expansion. As a result, states will spend $68 billion and the federal government will spend $152 billion over the next 10 years on Medicaid. 

The additional $8 billion incurred by nationwide expansion would be incurred when federal assistance for the Medicaid expansion begins to phase out. However, the report concludes that the savings on uncompensated care costs would compensate for the additional costs of the expansion. "We find the expansion would generate $10 billion in net savings from 2013-2002," the report says.

How the ACA expansion would impact each state's Medicaid spending

States with the smallest Medicaid programs would see their costs increase the most because they would undergo the largest expansions.

From 2013 to 2022, KFF expects that 10 states would see a decrease in state Medicaid spending because they already provide broad eligibility and would benefit from federal funding:

  • Connecticut;
  • Delaware;
  • Hawaii;
  • Iowa;
  • Maine;
  • Maryland;
  • Massachusetts;
  • New York;
  • Vermont; and
  • Wisconsin.

Meanwhile, KFF expects that a dozen states will see their Medicaid spending increase by 4% to 7% because their current eligibility standards are more restrictive than the minimum required by the ACA:

  • Alabama;
  • Arkansas;
  • Florida;
  • Georgia;
  • Kentucky;
  • Mississippi;
  • Nevada;
  • North Carolina;
  • Ohio;
  • South Carolina;
  • Utah; and
  • West Virginia.

Sources: Baker, "Healthwatch,"The Hill, 11/26; Kliff, “Wonkblog, Washington Post, 11/26; Galewitz, "Capsules," Kaiser Health News, 11/26; Alonso-Zaldivar, AP/U-T San Diego, 11/26; KFF report, 11/26

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