#Advantage: What’s the long term price tag of Medicaid expansion? (8/9/2014)

Welcome back to another edition of our “#Advantage” blog segment. This is where we answer the questions that we get at Twitter. As some of you know, our official Twitter hashtag is #Advantage and you can catch up with us here: http://www.twitter.com/advantage (or at @advantage).

This week we had a question from Jill Pederson (@Jill_Ped) up in Oregon. If you’ve followed healthcare reform closely, you’ll know that Medicaid programs were significantly expanded via the law. Expansion is based on FPL (or Federal Poverty Level). Here was Jill’s question:

@policyadvantage what's the long term price tag of Medicaid expansion?

— Jill Pedersen (@Jill_Ped) August 10, 2014

Let’s start with a short history: back in the summer of 2012 when the Supreme Court of the United States upheld the “individual mandate,” they also ruled that individual states have the option to either “opt in” or “opt out” of expanding Medicaid in their state. As of 2014, 27 states (including the District of Columbia) have expanded their Medicaid programs (here’s a great infographic from Families USA). That’s over half of the nation.

The question is: What’s the long term price tag of Medicaid expansion? Well if you know much about Medicaid, you’ll understand that it’s a joint state/federal program. So depending on the state you’re in, the price tag is going to vary. Sometimes considerably. Here are a couple of common factors that will affect the price-tag in the states:

• Utilization of the Medicaid program (ie: number of people eligible).
• Whether-or-not the state decided to expand Medicaid under the federal reform law.
• …plus others.

If you want to get really in-depth about it, here are the details from the Kaiser Family Foundation: Why does Medicaid Spending Vary Across States: A Chartbook of Factors Driving State Spending. The Kaiser Family Foundation utilizes the “Urban Institute’s Health Insurance Policy Simulation Model (HIPSM)” to provide national as well as state-by-state estimates of the impact of the ACA on federal and state Medicaid costs.

Here’s the answer to Jill’s question regarding the long-term price of Medicaid for individual states (based on HIPSM’s model): “The Medicaid expansion and other provisions of the ACA would lead state Medicaid spending to increase by $76 billion over 2013-2022 (an increase of less than 3%). Some states will reduce their own Medicaid spending as they transition already covered populations to the ACA expansion.” 

It’s the federal government that’s going to take on most of the bill regarding the expansion. The federal government will pick up 100% of the cost of covering people made newly eligible for Medicaid during the first three years (2014-2016), and no less than 90% on a permanent basis. According to the same HIPSM model:  “Federal Medicaid spending (from 2013-2022) would increase by $952 billion (a 26% increase).”

Here are four important points:

A) What do the proponents of the expansion say?: Those in favor say that it will reduce the amount of uninsured people, while reducing costs. Many formerly uninsured will be covered, and the general public will take on less of a burden when having to compensate for unpaid medical bills of the uninsured.

B) What do the opponents of the expansion say?: Those opposed say it’s too expensive, over-reaching, and unaffordable. In order to pay the bill (especially at the federal level), taxes will have to go up. Additionally, some are still skeptical about whether-or-not raising taxes will even be enough to pay the bill.

C) What’s going to happen?: That’s the billion dollar question. Obviously you can speculate, but you can’t predict the future. Optimistically you want to say it’s going work, but technically is still “TBA” (To Be Announced).

D) What IS happening?: Generally speaking, those states that have expanded Medicaid in 2014 are seeing some short-term success. The question though is long-term: will it be affordable and sustainable? Again, TBA.

Thanks for stopping by at our “#Advantage” blog segment dedicated to questions from our followers and others. We hope you found our information to be valuable.

We’ll continue to roll-out answers as questions come in. Don’t forget to hash “#Advantage” at Twitter, and visit our official tag here: www.twitter.com/advantage.

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