New Report Shows Medicaid Expansion is Good for State Budgets

In our health reform series, we detailed how the Medicaid expansion in 2014 will extend coverage to more than 330,000 uninsured Washingtonians. When the U.S. Supreme Court ruled that it was optional for states to expand Medicaid to low-income adults, critics quickly emerged claiming that the expansion would be cost prohibitive for states. A report released today by the Center on Budget and Policy Priorities shows that the opposite is true:  the Medicaid expansion is extremely financially favorable for states.

Here’s why:

• The federal government will pick up 93 percent of expansion costs over 2014-2022 (see graph below). For the first three years, 100 percent of the costs will be assumed by the federal government for those newly eligible. Support will gradually decline to 90 percent in 2020 and thereafter.
• Additional costs to the state represent a 2.8 percent increase in what would have been spent on Medicaid from 2014 to 2022 without health reform. This estimate takes into account participation among those who are currently eligible for Medicaid but not enrolled. These enrollees would be covered at the standard matching rate of 50 percent, rather than the 93 percent average federal match for those newly eligible. Critics have cited participation among this group as a financial burden to states. As the estimates show, this is simply not the case.
• Further savings will be realized by states. By sharply reducing the number of people without health insurance, the Medicaid expansion will ease cost pressures on states from uncompensated hospital care, mental health care, and other health care services.

Read the entire report for more information.