CBO Finds Health Reform's Medicaid Expansion Is an Even Better Deal for States
PDF of this report (2pp.)
By Edwin Park
April 22, 2014
Related
Correcting Seven Myths About Medicaid
Related Areas of Research
Health
Health Reform
Medicaid
State Budget and Tax
Budgets
Federal-State Issues
Congressional
Budget Office (CBO) estimates released last week show that health
reform's Medicaid expansion, which many opponents wrongly claim will
cripple state budgets, is an even better deal for states than
previously thought.[1] CBO has sharply lowered its estimates of the costs to states of adopting the Medicaid expansion. CBO now estimates that the federal government will, on average, pick up more than 95 percent of
the total cost of the Medicaid expansion and other health
reform-related costs in Medicaid and the Children's Health Insurance
Program (CHIP) over the next ten years (2015-2024).States
will spend only 1.6 percent more on Medicaid and CHIP due to health
reform than they would have spent without health reform (see Figure
1). That's about one-third less than CBO projected in February.[2] And the 1.6 percent figure is before counting the state savings
that the Medicaid expansion will produce in state expenditures for
services such as mental health and substance abuse treatment provided
to the uninsured.
CBO apparently lowered its projection
of the added state costs because it now expects fewer people who were
eligible for Medicaid before health reform ? but were
unenrolled ? to enroll in Medicaid as a result of health reform. The
federal government will pick up 100 percent of the costs of newly
eligible individuals under the Medicaid expansion for the first three
years and no less than 90 percent thereafter. In contrast, it will
cover an average of 57 percent of the costs of already eligible
people who newly enroll (i.e., it will contribute to the costs of
covering those people at the regular federal Medicaid matching rate).
Because CBO now expects states to experience smaller increases in
enrollment among those previously eligible than it previously
estimated, it expects states to incur lower costs over the next decade
than it previously assumed.
CBO's estimate of the impact of the Medicaid expansion and other health reform coverage provisions on state budgets is,
as noted above, only a partial estimate ? because it only reflects the
impact on state expenditures for Medicaid and CHIP. The CBO estimate
does not reflect the substantial savings that states and localities
taking the expansion will realize from no longer having to bear the
costs for various health services they were providing to large numbers
of people who were previously uninsured but now have Medicaid coverage.[3]
The Urban Institute has estimated that if all states took the Medicaid
expansion, states would save between $26 billion and $52 billion in
this area from 2014 through 2019,[5]
PDF of this report (2pp.)
By Edwin Park
April 22, 2014
Related
Correcting Seven Myths About Medicaid
Related Areas of Research
Health
Health Reform
Medicaid
State Budget and Tax
Budgets
Federal-State Issues
Budget Office (CBO) estimates released last week show that health
reform's Medicaid expansion, which many opponents wrongly claim will
cripple state budgets, is an even better deal for states than
previously thought.[1] CBO has sharply lowered its estimates of the costs to states of adopting the Medicaid expansion. CBO now estimates that the federal government will, on average, pick up more than 95 percent of
the total cost of the Medicaid expansion and other health
reform-related costs in Medicaid and the Children's Health Insurance
Program (CHIP) over the next ten years (2015-2024).States
will spend only 1.6 percent more on Medicaid and CHIP due to health
reform than they would have spent without health reform (see Figure
1). That's about one-third less than CBO projected in February.[2] And the 1.6 percent figure is before counting the state savings
that the Medicaid expansion will produce in state expenditures for
services such as mental health and substance abuse treatment provided
to the uninsured.
CBO apparently lowered its projection
of the added state costs because it now expects fewer people who were
eligible for Medicaid before health reform ? but were
unenrolled ? to enroll in Medicaid as a result of health reform. The
federal government will pick up 100 percent of the costs of newly
eligible individuals under the Medicaid expansion for the first three
years and no less than 90 percent thereafter. In contrast, it will
cover an average of 57 percent of the costs of already eligible
people who newly enroll (i.e., it will contribute to the costs of
covering those people at the regular federal Medicaid matching rate).
Because CBO now expects states to experience smaller increases in
enrollment among those previously eligible than it previously
estimated, it expects states to incur lower costs over the next decade
than it previously assumed.
CBO's estimate of the impact of the Medicaid expansion and other health reform coverage provisions on state budgets is,
as noted above, only a partial estimate ? because it only reflects the
impact on state expenditures for Medicaid and CHIP. The CBO estimate
does not reflect the substantial savings that states and localities
taking the expansion will realize from no longer having to bear the
costs for various health services they were providing to large numbers
of people who were previously uninsured but now have Medicaid coverage.[3]
The Urban Institute has estimated that if all states took the Medicaid
expansion, states would save between $26 billion and $52 billion in
this area from 2014 through 2019,[5]
