Medicaid Expansion and Federal Spending

States who choose to expand Medicaid eligibility under the Patient Protection and Affordability Care Act (ACA) will likely see large increases in coverage and federal spending, while seeing only small increases in state spending, according to a report from The Kaiser Commission on Medicaid and the Uninsured.

The report, which was released in May 2010, details the possible effects the Medicaid expansion could have on coverage, the number of uninsured, and spending from both a national- and state-level perspective.

Under the ACA, Medicaid eligibility would be expanded to nearly all individuals <65 years of age who have incomes up to 133% of the federal poverty level. In June, the Supreme Court ruled that the government could not require states to expand their Medicaid eligibility, giving states the option to decide whether or not they wanted to expand the program's eligibility and take advantage of additional government funding.

In the Kaiser Commission on Medicaid and the Uninsured report, researchers investigated the national implications of expanding eligibility requirements and the possible impacts the expansion could have on each state using 2 possible participation scenarios. The first scenario, the standard participation scenario, assumed participation rates of 57% for those who would be newly eligible for coverage under the ACA and anticipated little additional participation from those who are already currently eligible for Medicaid. The second scenario, or the enhanced outreach scenario, assumed more aggressive outreach efforts and estimated 75% participation among those newly eligible for coverage under the ACA while assuming higher participation rates among those already eligible for Medicaid coverage.

The report assumed all states would implement the Medicaid expansion and assessed the impact it would have from 2014 to 2019.

Using the standard participation scenario, researchers found that Medicaid enrollment could increase by 15.9 million by 2019 and could decrease the number of uninsured adults under 133% of the federal poverty level by 11.2 million.

By 2019, they also estimated that federal spending would increase by $443.5 billion, while state spending would rise by $21.1 billion. Nationally, state spending would be expected to increase over the baseline by 1.4% from 2014 to 2019, while federal spending would increase by 22.1% during the same time frame.

Researchers also evaluated the effects of the expansion on a per-state basis, however, in the report, they divided the states into 3 categories to report their findings:  (1) states with low Medicaid eligibility currently; (2) states with broader coverage currently for parents, but no Medicaid coverage for childless adults; and (3) states covering parents and childless adults through Medicaid.

Using these parameters, they found that states with low coverage currently will see the largest reductions in the number of uninsured, while those with lower uninsured rates will see smaller reductions. In addition, states that currently have low coverage rates could have the majority of the costs of new enrollment covered by the federal government because most of the new enrollment would be participants who would qualify for the high newly eligible match rate through the ACA.

They also noted that the large increases states could see in their Medicaid enrollment would far exceed the increases they would see in state spending.

Under the enhanced outreach scenario, researchers estimated that national enrollment in Medicaid could increase by 22.8 million by 2019 and would decrease the number of uninsured adults under 133% of the federal poverty level by 17.5 million. As with the previous scenario, states with lower rates of coverage currently would see the largest reductions to the uninsured population and those who have higher coverage rates would see the smallest reduction in the uninsured of the 3 groups.

Using this scenario, federal spending could increase on a national level by $532 billion, while state spending could increase by $43 billion.

The report concluded by saying that because each state's participation rates will vary, it is impossible to predict the exact impact the expansion would have on each state.