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Medicaid Expansion: Time For A Closer Look
Andrew Hyman and Heather Howard
Medicaid plays a critical role in protecting the health of our nation’s most vulnerable populations, but it leaves out many people, including poor childless adults. To insure more people and fill these gaps in the program, the Affordable Care Act (ACA) allows states to expand their Medicaid programs to cover all adults earning up to 138 percent of the federal poverty level and pays 100 percent of expansion costs during the first three years, decreasing to 90 percent by 2020. This expansion of the Medicaid program accounts for about 50 percent of the coverage gains made possible by the law.
The Supreme Court’s ruling on the law left to the states the decision of whether to pursue this expansion, and some states on both sides quickly declared their intentions. Most, however, chose to delay a decision. Politics has been an important consideration for many, but with the election behind us, it’s time for the states to give greater attention both to the complex fiscal implications and the impact on those potentially eligible for the program.
With this in mind, the State Health Reform Assistance Network, an initiative funded by the Robert Wood Johnson Foundation, developed an analytical tool to help state policymakers  assess the many variables involved in the decision and calculate the long-term fiscal impact on their state. While each state’s health care system, fiscal condition and demographics vary, the most important elements to consider do not. The State Network’s goal is to provide a reliable tool to help state leaders identify and evaluate all of the data that make up those elements.
It is true that the basic fiscal argument – that the overwhelming portion of expansion costs would be paid by the federal government – is not the whole story. As the spreadsheet shows, there are other opportunities for state fiscal relief; for example, states may be able to replace portions of state spending on substance abuse and mental health programs with federal Medicaid funds. In addition, covering more residents through Medicaid would lower the number of uninsured residents, which reduces the strain on doctors, emergency rooms and hospitals for providing uncompensated care. At the same time, however, even the modest increases in Medicaid spending that states would experience after three years are an issue policymakers will have to take into account in these tough economic times, which is why states need to do the kind of financial analysis that the tool supports.
While this tool allows states to gauge the financial impact of expanding their program, states’ paramount consideration must be the positive impact of covering the uninsured, something that does not necessarily show up on a state’s balance sheet. A study of uninsured low-income adults in Oregon  demonstrated how enrolling in Medicaid increased health care utilization, lowered out-of-pocket health care expenditures and medical debt, and resulted in better physical and mental health. Residents of all ages who are able to manage their health and prevent illnesses, strengthen their finances, and live healthier and happier lives have more opportunities to be financially productive and civically engaged.
The most significant breakthrough in the ACA is the set of policies designed to expand coverage to uninsured Americans. The irony of the Supreme Court’s ruling is that although it upheld the law, it left in doubt the Medicaid expansion, which is responsible for the coverage gains for the most vulnerable among us. States are wise to consider the fiscal implications of expanding Medicaid to cover this uninsured population, and we invite them to use reliable analytic tools, such as the one we constructed. However, we hope states will also consider the human toll in making their final decision.
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