Savings in Medicaid Expansion Under ACA Outweigh Costs

Study Finds States Would Spend
Less for Uncompensated Care

If all 50 states fully expanded Medicaid under the Affordable Care Act, they would collectively save more money than they would spend, according to an analysis from the Kaiser Family Foundation released Monday.

States would spend a combined $8 billion through 2022 to fully expand the low-income insurance program (compared to expected spending with other ACA provisions but without the expansion), according to accounts for the small state match starting in 2017; the ACA specifies that states will never be responsible for more than 10 percent of the costs for the expansion population.

Over the same period, states would save a combined $18 billion because they would spend less on uncompensated care payments, which states pay to hospitals and other health care providers for the services they provide to people without insurance. That equals $10 billion in combined savings by 2022.

Governing reports that the $8 billion in incremental state costs (which includes state spending of the expansion population plus expected spending for currently eligible individuals who enroll to satisfy the individual mandate) is a 0.3 percent increase over what states would expect to spend without the expansion. The federal share, meanwhile, would increase by $800 billion, or 21 percent, if all states expand.

“There isn’t anything to conclude except this is pretty attractive and should be pretty hard for states to turn down,” John Holahan, director of the Urban Institute’s Health Policy Research Center, which oversaw the analysis, told Governing. Analysts generally anticipate that most states will eventually sign onto the expansion, despite any initial public posturing to the contrary. The White House has not yet set a process for states to formally declare their intentions.

An estimated 21.3 million people are expected to enroll by 2022 if all states expand, according to Kaiser, a 41 percent increase compared to projected enrollment without the expansion.

While states would experience collective savings, when the data is broken down by individual states, some have much more — or less — to gain, Governing said.

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