As Some Holdout States Revisit Medicaid Expansion, New Data Show It Pays Off

Dr. Derrick Hamilton listens to Mary Blair's heartbeat during her appointment at the Breathitt County Family Health Center in 2014 in Jackson, Ky. Despite suffering from a past heart attack and diabetes, Blair got coverage through the Medicaid expansion under the Affordable Care Act. (Luke Sharrett/For The Washington Post via Getty Images)

Although the GOP-controlled Congress is pledging its continued interest — despite stalls and snags — to dismantle Obamacare, some “red state” legislatures are changing course and showing a newfound interest in embracing the health law’s Medicaid expansion.

And a study out Wednesday in Health Affairs adds to these discussions, percolating in places such as Kansas, Georgia, Virginia, North Carolina and Maine. Thirty-one states plus the District of Columbia already opted to pursue the expansion, which provided federal funding to broaden eligibility to include most low-income adults with incomes up to 138 percent of the federal poverty level (about $16,000 for an individual).

Researchers analyzed data from the National Association of State Budget Officers for fiscal years 2010 to 2015 to assess the fiscal effects of expansion’s first two years.

Their findings address arguments put forth by some GOP lawmakers, who say the expansion will add to the nation’s budget deficit and saddle states with additional coverage costs, forcing them to skimp on other budget priorities like education or transportation.

The researchers concluded that when states expanded eligibility for the low-income health insurance program they did see larger health care expenditures — but those costs were covered with federal funding. In addition, expansion states didn’t have to skimp on other policy priorities — such as environment, housing and other public health initiatives — to make ends meet.

“This is a potential big benefit, not only to people who get coverage, but to state economies,” said Benjamin Sommers, an associate professor of health policy and economics at Harvard University’s public health school, and the study’s first author.

This finding — that states expanding Medicaid didn’t encounter unforeseen budget problems — shouldn’t be surprising.

“Expansion is basically free” to the states, agreed Massachusetts Institute of Technology economist Jonathan Gruber, one of Obamacare’s architects who worked with Sommers to systematically compare the budgets of all 50 states to examine Medicaid expansion’s impact. “That’s the big insight,” he said. “There’s no sort of hidden downside.”

And that may be part of what’s fueling this renewed interest, said Edwin Park, vice president for health policy at the left-leaning Center for Budget and Policy Priorities. These states are seeing the federal windfall their neighbors received while trying to navigate public health concerns like opioid addiction, he said. They “are looking at how their neighbors or expansion states have done, and see the benefits,” Park said. “The primary argument against the expansion on the state level has been it’s going to break the bank. The research demonstrates that’s not the case.”

But a caveat: The data used in this analysis reflected only years during which the federal government picked up 100 percent of the tab for expanding Medicaid eligibility and therefore could overestimate the benefit to state budgets. That’s because in 2017 that federal support begins to taper off, and by 2020 states have to pay 10 percent of the expansion costs themselves.

That means policymakers should exert caution in reading too much into this study, said Tom Miller, a resident fellow at the conservative American Enterprise Institute. Because states will eventually shoulder more of the cost, he said, studies that assess its budgetary impact are preliminary at best. Plus, Miller said, other factors such as relative economic growth could have padded state budgets in the years studied — masking any unintended costs with a bigger Medicaid program. It’s unclear whether in times of downturn Medicaid would take a bigger bite out of state budgets.

“It’s just the beginning of this — it’s an early snapshot,” he said.

Sommers argued the limited data set means researchers should continue to track how state budgets compare between expansion and non-expansion states. But even when states do take on more of Medicaid’s cost, that may not pose such a burden, suggested Sara Rosenbaum, a professor of health law and policy at George Washington University. Expanding Medicaid brings in other potential economic benefits that this paper doesn’t account for — less uncompensated care in hospitals, for instance — that could offset the expenditures states ultimately take up.

A bigger concern, some experts say, is that — even without the Obamacare repeal — some GOP health proposals would change the federal government’s Medicaid funding mechanism from being an open-ended match to a block grant or per-capita cap in an effort to curb national spending. Those proposals would take away at least some of the federal dollars that have insulated state budgets.

“Ironically, all the arguments that have been made against expansion for years — like creating a hole in the state budget or breaking the bank — that’s exactly what a per-capita grant or block grant does,” Park said.

As more states take on the Medicaid debate, those consequences matter, both Sommers and Gruber said. And not just for state budgets — for consumers, too.

“The main lesson is there’s no sort of big hidden cost of expanding Medicaid. What you see is what you get,” Gruber said. “You get free health insurance for your citizens.”

Related Topics

Medicaid The Health Law