Feds will pay much of Medicaid expansion costs for states, study finds

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May 27 2010

The Washington Post: "The federal government will bear virtually the entire cost of expanding Medicaid under the new health-care law, according to a comprehensive new study by the Kaiser Family Foundation that directly rebuts the loud protests of governors warning about its impact on their strapped state budgets. About half of the increase in health insurance coverage under the new law is expected to come from expanding Medicaid in 2014 to a new nationwide eligibility threshold of 133 percent of the poverty level -- $14,400 for a single adult or $29,300 for a family of four." The Post notes that a "disproportionate share" of the people likely to enroll in the expanded Medicaid will come from the South and West. Many of these states currently have "stringent eligibility rules" for childless low-income adults. (KHN is a project of the foundation.)

Many governors "have predicted fiscal calamity" will result, but "[u]nder the new law, the federal government will pick up 100 percent of the cost for all newly eligible people through 2016, a rate that will drop gradually to a 90 percent match in 2020 and beyond" (MacGillis, 5/26).

Reuters: "That means that under conservative estimates, Maine's Medicaid spending will decrease 1.5 percent and Colorado's will slip 0.5 percent, according to the study. Massachusetts and Vermont, which established their own health plans, will spend 2.1 percent and 0.6 percent less, respectively. … When healthcare reform was working its way through Congress in November, California's chief deputy director of health care programs said the state could not afford its current Medicaid program -- let alone an expansion. California will have the most new enrollees, at least 2.01 million people through 2019, according to the Kaiser study. Still, the most populous state will have to pay only 1.5 percent more for Medicaid, while federal spending there on the program will rise at least 23 percent. … Oregon will experience the largest jump in federal spending on Medicaid -- 51 percent. Meanwhile, Mississippi will have the biggest increase in state spending at 5 percent" (Lambert, 5/26).

Dallas Morning News Blog: "'For a relatively small investment of state dollars, states could see huge returns -- with federal dollars covering the bulk of the bill,' said Diane Rowland, who heads the Kaiser Family Foundation's Commission on Medicaid and the Uninsured, which sponsored the study. For example, compared with what would have happened to our state's Medicaid program if the federal law hadn't been passed, 'Texas could see an increase in enrollment [by impoverished adults] of 46 percent but an increase in state spending of about 3 percent,' said researchers John Holahan and Irene Headen of the Urban Institute, who did the study for the foundation. Federal spending in Texas, meanwhile, probably will increase by 39 percent over levels that could've been expected without the federal overhaul, they said" (Garrett, 5/26).

Louisville Courier-Journal: "Indiana's Medicaid costs could increase by as much as 5 percent because of the federal health care overhaul. ... That spending will result in a much bigger increase in the number of Hoosiers on Medicaid -- a jump of between 29 percent and 42 percent -- because the federal government is picking up most of the additional cost for the required expansion. … Still, the additional cost to Indiana could be between $478 million and $899 million between 2014 and 2019" (Groppe, 5/26).

The (Tennessee) Jackson Sun: "Five years into the recently passed health care reform law Tennessee could have nearly a half million more residents on Medicaid, according to a report released today. And the state could be paying an extra $1.5 billion for those services over five years, the Kaiser Family Foundation report estimates. ... The report estimated that under normal participation rates Tennessee would add 330,932 new enrollees as of 2019 at a cost of $716 million for the years 2014-2019. ... Nationwide, the analysis projects Medicaid enrollment would increase by 15.9 million at a total cost of $464 billion. The federal government would pay $443.5 billion of that total" (Theobald, 5/26).

This article was reprinted from khn.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.