If the states not expanding Medicaid under the Affordable Care Act (ACA) stay with their decision, those state governments will collectively spend $1 billion more on uncompensated care in 2016 than they would have had they expanded Medicaid, says a recent RAND Corporation study.
According to Carter Price, study author and associate mathematician at RAND, he and his fellow author, Christine Eibner, a senior economist at RAND, used RAND data to analyze how opting out of Medicaid expansion would affect coverage and spending, and whether other policy options, like a partial expansion of Medicaid, could cover as many people at a lower cost to individual states.
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At the time the study was written, 14 state governors were choosing to opt out of the expansion, which Price estimates would result in 3.6 million fewer people insured, federal transfer payments to those states could decrease by $8.4 billion, and state spending on uncompensated care could increase by $1 billion in 2016. These figures are in comparison to what would be expected if all states chose to participate in the expansion, added Price.
"Those 3.6 million people who are uninsured will still need to go to the doctor and use the healthcare system. Those state hospitals will be impacted because they will spend an additional billion dollars providing uncompensated care for them," said Carter. "States that do not expand Medicaid will not receive the full benefit of the savings that will result from providing less uncompensated care. They will still be subject to the taxes, fees and other revenue provisions of the Affordable Care Act, without reaping the benefit of the additional federal spending."
Price said states that expand Medicaid would spend less on the uninsured for the first few years after the Medicaid expansion. This could continue past 2020, when the state share of Medicaid costs flattens at 10 percent.
According to the study, the federal government will pay a much larger share of costs for the Medicaid expansion than it does for current Medicaid enrollees. It will cover 100 percent of the costs for expanding Medicaid beginning in 2014 through 2016, and then gradually decrease support to 90 percent of costs beginning in 2020. The federal government currently pays an average of 57 percent of the cost of Medicaid.
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"State policymakers should be aware that if they do not expand Medicaid, fewer people will have health insurance, and that will trigger higher state and local spending for uncompensated medical care," Price said. "Choosing to not expand Medicaid may turn out to be the more-costly path for state and local governments."
Price said the states included in his study are Alabama, Georgia, Idaho, Iowa, Louisiana, Maine, Mississippi, North Carolina, Oklahoma, Pennsylvania, South Carolina, South Dakota, Texas and Wisconsin. Although governors in additional states oppose expanding Medicaid, the 14 states in the study were the first whose governors said they would not expand Medicaid. At the time of the analysis, these were seen as the least likely to expand Medicaid, he said.
According to the Kaiser Family Foundation, as of July 1, of those 14 states, Iowa has since passed legislation authorizing the expansion and Pennsylvania is debating expanding.
The study suggests that changes could be made to the ACA to help some people targeted by the Medicaid expansion to get health insurance coverage through other means. Those options include a smaller expansion of Medicaid or changes in the new state insurance exchanges to allow more poor people to purchase private health insurance, said Price.
[See also: ACA gives states flexibility in creating insurance exchanges, says report]