Medicaid Expansion Saves States Money, Increases Revenues

President Obama and the Democratic Congress included the Medicaid expansion in the Affordable Care Act to save lives. But the Medicaid expansion also provides economic and fiscal benefits. Monday I mentioned that Kentucky will create more jobs by expanding Medicaid than South Dakota will see from the Keystone XL and Dakota Access pipelines. Today I find two reports showing that expanding Medicaid is also saving states big money.

The Robert Wood Johnson Foundation studied eight states that have expanded Medicaid under the ACA. Far from the fiscal mess our Governor insists would ensue, those states are seeing healthier budgets:

In examining Medicaid expansion across eight states—Arkansas, Colorado, Kentucky, Michigan, New Mexico, Oregon, Washington and West Virginia—it is clear that states are realizing savings and revenue gains as a result of expansion.

  • Savings and revenues by the end of 2015 (just 1.5 years into expansion) are expected to exceed $1.8 billion across all eight states.
  • In Arkansas and Kentucky, savings and revenue gains are expected to offset costs of the expansion at least through SFY 2021

Findings from these eight states suggest that every expansion state should expect to:

  • Reduce state spending on programs for the uninsured;
  • See savings related to previously eligible Medicaid beneficiaries now eligible for the new adult group under expansion;
  • See revenue gains related to existing insurer or provider taxes [Deborah Bachrach, Patricia Boozang, and Dori Glanz, “States Expanding Medicaid See Significant Budget Savings and Revenue Gains,” Robert Wood Johnson Foundation issue brief, April 2015].

The Kaiser Family Foundation finds similar positive fiscal results for states:

  • States get instant savings by moving low-income people from the lower FMAP federal cost-share to the higher ACA federal cost-share.
  • States are saving money outside their Medicaid budgets on corrections and behavioral health.
  • States get more revenue from provider taxes, premium taxes, and taxes from the overall economic stimulus of the new federal funds.
  • Washington and Kentucky are both projecting that even after 2016, when participating states will have to pick up 10% of the cost of Medicaid expansion, Medicaid expansion will still produce net savings.
  • The net fiscal impact in Kentuckey equals 1.5% of its general fund spending; in Washington, 1.7%. For perspective, South Dakota is increasing its general fund spending in FY2016 by 2.5%. If we expanded Medicaid, the fiscal benefits of that single policy could cover over 60% of those spending increases.

The next time Governor Daugaard or your local legislators rationalize their resistance to Medicaid expansion as responsible budgeting, just hand them this article and wait for them to read it. And remind them that by playing politics and refusing the ACA Medicaid expansion, we’re giving up $2.1 billion in money for the state budget and $800 million in hospital reimbursement.

6 Responses to Medicaid Expansion Saves States Money, Increases Revenues

  1. Nick Nemec

    SD leaders don’t care if Medicaid expansion would be good for SD. They don’t like it because Obama and the Democrats are for it, it’s that simple.

  2. Nick Nemec

    And our big medical players are afraid to buck the political powers in Pierre. Sanford, Avera and RC Regional need to throw their weight around on this issue.

  3. Jeff Barth

    Nick is right. They can’t think of a reason to oppose it except that they do.
    BTW Avera and Sanford are pushing for it.

  4. bearcreekbat

    Jeff, as a County Commissioner you are in great position to address the County Poor Relief savings that will result from a Medicaid expansion. Can you tell us how much Minnehaha County spends each year for the medical needs of indigents? This information should be readily available through recorded County liens.

    Do you think that if supporters of a Medicaid expansion can publicize how property tax revenue is being needlessly spent for indigent medical services pursuant to the County Poor Relief laws because of the refusal to expand Medicaid, that such publicity could put pressure on our county commissioners, legislators and Governor to accept the federal Medicaid funds? And as a County Commissioner can you identify other County needs that could be funded by the local property taxes that would be saved by expanding Medicaid to cover indigents health care costs?

    Your answers to such questions could well lead to check and mate!

  5. Lars Aanning

    No state that has expanded Medicaid has complained…

  6. Indeed, Lars, I’m waiting for the empirical evidence of Medicaid expansion doing harm to any person or any state.