The High Cost Of Medicaid Non-Expansion
By Christine Kern, contributing writer
The 24 states that opted out of expansion are now feeling pangs of financial regret.
Twenty-four states chose not to expand Medicaid under the ACA, and they – and their hospitals – are now losing enormous sums of money as a result. The decline in their numbers of uninsured is equally abysmal in comparison with states that did expand.
A new report from the Urban Institute’s Health Policy Center demonstrates just how much is being left on the table and the resulting human costs.
The report shows expansion of Medicare would have cost the 24 non-participant states a grand total of $31.6 billion over 10 year, or just $3.16 billion per year. Yet, to avoid the outlay of funding, these states are losing out on $423.6 billion in federal funds between 2013 and 2022” which will lessen economic activity and job growth,” according to the report. Texas alone would have spent $5.67 billion with a $65.6 billion return, while Florida would have seen a $5.37 billion outlay and would have received $66.1 billion in federal funding.
So how are the states losing money by not expanding Medicaid? First, states generally fund mental healthcare for poor, uninsured adults, but with Medicaid expansion states can enroll many of these individuals in Medicaid and shift a significant portion of the resultant mental health costs to the federal Medicaid budgets. States also lose out in increased state and local general revenue to the extent that increased federal Medicaid funds boost economic activity. Many states also tax provider or insurer revenue, so expansion could create greater returns.
In the 24 states that have not expanded Medicaid, 6.7 million residents are projected to remain uninsured in 2016 as a result. Hospitals in those 24 states are also feeling the pinch, losing a 31 percent increase in Medicaid funding that was intended to offset cuts to Medicare and Medicaid reimbursement rates. Over 10 years that cost to hospitals is $167.8 billion, or $34.3 billion lost to Texas hospitals alone, and $22.6 billion in Florida, $12.8 billion in Georgia, $11.3 billion in North Carolina, and $10.6 billion in Pennsylvania.
Yet another aspect of the financial costs comes in the numbers of uninsured. “Between September 2013 and June 2014, the proportion of non-elderly uninsured adults in non-expansion states fell from 20 percent to 18.3 percent, compared with a drop from 16.2 to 10.1 percent in states that expanded Medicaid,” says the report. “Put differently, the number of uninsured declined by 9 percent in non-expanding states and 38 percent in states that expanded Medicaid.” Put in human and economic terms, the rejected Medicaid federal funds would have created 172,400 jobs in 2015 alone, according to the Council of Economic Advisors.
Interestingly, according to available data in the 24 non-expanding states, an estimated $44.9 billion in tax breaks and other subsidies was spent to attract private businesses. That is 14 times more money than the average amount that states would have spent to finance Medicaid expansion.