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Long-term Costs of Medicaid Expansions

By November 27, 2013Commentary

One of the two primary methods by which the reform law expanded coverage was relaxing Medicaid eligibility standards.  Medicaid is a program in which the federal and state governments share the cost  To buy the states off to support this expansion, the federal government agreed to pick up the expansion cost for some period of time.  Although the expansion is mandated in the law, the Supreme Court ruled that the federal government cannot force states to participate in any federal program, so not all states are participating.  The Health Systems Innovation Network looked at what the Medicaid expansion is going to do to state finances in the long run.  Part of the effect is that individuals who are currently eligible but not enrolled will enroll as they go to the exchanges to comply with the individual mandate.  An additional effect is that some low wage industries will drop insurance because their employees will be able to get Medicaid coverage.  These are not necessarily desirable effects, since Medicaid coverage will very likely limit the availability of providers and otherwise affect the care of those currently with commercial insurance.   (HSI Report)  The report goes through the state-by-state costs over ten years for the expansion in the states that have agreed to accept it and those still considering the expansion.  Even though the state share is only 10% by 2023, the annual costs are very substantial, particularly since most states have perilous financials as it is, and have looming pension and retiree health crises.  Medicaid is currently already the most problematic part of state budgets after retirement expenses.  In Arizona, for example, the expansion will add 1.65 million people to Medicaid and will cost the state an additional $900 million in 2023.  In Florida, there will be over 7 million more people on Medicaid and the extra annual cost in 2023 will be over $2 billion.  In Texas, there will also be over 7 million new enrollees with an annual cost of $2.3 billion.  This report helps people understand what they are getting into when they agree to the expansion.  And there is no guarantee that the federal government will be able to provide support at the current promised level, given issues with the federal deficit.

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