Medicaid Expansion Cheaper Than Expected: CBO
Policy + Politics

Medicaid Expansion Cheaper Than Expected: CBO

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With the debate still raging in some states over whether to accept the expansion of Medicaid to cover the working poor, an analysis of CBO data by the Center for Budget and Policy Priorities found that the new law is an even better deal for states than first expected. 

Under the Affordable Care Act, states have the option to expand Medicaid to cover people earning too much to qualify for traditional Medicaid coverage, but too little to qualify for subsidies to purchase insurance on state exchanges. In states that choose to expand the program, the federal government will cover 100 percent of the cost through the first three years after the implementation of the ACA, and 90 percent in the years after. 

Related: Obamacare Battle in Virginia Mirrors National Fight

However, according to CBPP’s Edwin Park, the deal actually looks a lot sweeter once you dig into the CBO’s new numbers.

“CBO now estimates that the federal government will, on average, pick up more than 95 percent of the total cost of the Medicaid expansion and other health reform-related costs in Medicaid and the Children’s Health Insurance Program (CHIP) over the next ten years (2015-2024),” he writes.

The difference appears to be an adjustment to the CBO’s estimate of how many people who were already qualified for traditional Medicaid would join the program after the ACA rollout. This would have been a sort of collateral effect of the publicity surrounding ACA, and would have resulted in higher costs for the states, as individuals already qualified would only have about 57 percent of their costs covered by the federal government. 

However, the CBO has reduced its estimates of that effect, writes Park, meaning that in states that accepted the Medicaid expansion, the overall increase in state Medicaid spending as a result of the ACA will be fairly small.

Related: U.S. Reports 3 Million Medicaid Enrollments Under Obamacare

“States will spend Medicaid Expansiononly 1.6 percent more on Medicaid and CHIP due to health reform than they would have spent without health reform,” he writes. That’s about one-third less than CBO projected in February.  And the 1.6 percent figure is before counting the state savings that the Medicaid expansion will produce in state expenditures for services such as mental health and substance abuse treatment provided to the uninsured.”

The new analysis may help guide the debate in states still arguing over whether or not to accept Medicaid expansion. In Virginia, for example, state legislators are in a deadlock that threatens to force a government shutdown, as Democrats have tied Medicaid expansion to the state’s budget legislation, and Republicans are flatly refusing to allow it to come to a vote.

Related: ACA-Friendly States Are Insuring More People

The arguments against expansion are generally two-fold. Opponents say that it is an expense that states cannot afford, and that they doubt that the Federal Government will keep its promise to pay 90 percent of the cost in the future. The new analysis of the CBO numbers won’t settle all the arguments, but it certainly provides some ammunition against the cost argument.

Other studies have pointed out that when benefits beyond the federal subsidy are considered – such as no longer having to pay for emergency care for the uninsured, and the reduced social services burden due to better health of low-income citizens – Medicaid expansion is generally seen as a financial windfall for most states.

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