Study: States that reject Medicaid expansion lose money

Kelly Kennedy | USA TODAY

WASHINGTON — The 20 states choosing not to expand Medicaid will lose billions of dollars in federal funds, according to a new study released Thursday.

By 2022, Texas could lose $9.2 billion by not expanding Medicaid as allowed under the Affordable Care Act, while Florida could lose $5 billion over that period, the study conducted by The Commonwealth Fund shows. Commonwealth was founded in 1918 to improve health services for Americans.

Also during that period, the study showed, Georgia could lose $2.9 billion, while Virginia could lose $2.8 billion.

"There are no states where the taxpayers would actually gain by not expanding Medicaid," said Sherry Glied, lead author on the study. "Nobody wins."

Under the Affordable Care Act, states may expand their Medicaid programs to include anyone who falls beneath 138% of the federal poverty level, or about $32,500 for a family of four. But the 2012 Supreme Court decision that upheld the law also said states could choose not to expand Medicaid and not lose federal funding for their existing programs.

All 20 of the states choosing not to expand Medicaid have Republican governors. Many have said increasing Medicaid could add to the federal deficit. Others have long opposed the law since its passage in 2010.

Medicaid, however, is a federal program, Glied said, and residents of states that have not expanded the program are still paying taxes to support it. They're just not getting the extra benefits in their states.

"When you hear the states talk about it, they talk about raising state taxes for it," she said. "But that's not the case."

The extra federal money spent on Medicaid goes directly to local health care providers, such as hospitals or physicians, and helps the overall state economy, Glied said.

"There's new money flowing into the states," she said. "It's sort of like why states are eager to get defense contracts: It can be used to create jobs."

That is why some Republican governors, such as Jan Brewer of Arizona and John Kasich of Ohio, have pushed to have their states expand the program. They said they realized their residents would pay taxes to expand the program in other states but not receive the benefits.

Kasich bucked his state's Republican-controlled legislature to expand the program by using a little-used state board to authorize accepting the federal money to pay for it.

States that don't expand Medicaid are costing their residents who make less than 100% of the federal poverty level the subsidies they would receive to pay for health insurance bought through federal and state exchanges. That's because those people were expected to be covered by expanded Medicaid.

The report, "How States Stand to gain or Lose Federal Funds by Opting In or Out of the Medicaid Expansion," looked at net costs to taxpayers using data from the Urban Institute, a nonpartisan think tank that looks at social policy.

The federal government pays 100% of the the expansion through 2016, and then 90% of the program's costs after that. If all states were to expand, 21.3 million uninsured people would gain coverage. This, they say, means that doctors and hospitals would have fewer uncompensated costs; which would mean lower insurance costs for everybody else.

The Congressional Budget Office has estimated that the Affordable Care Act will reduce the federal deficit by $143 billion between 2010 and 2019, and programs like Medicaid expansion will be paid for with new taxes, such as for tanning salons and for people who make more than $250,000.

While Glied said she was not surprised by the overall findings of the report, she was impressed by the size of the program.

"How big the expansion is compared to other revenue was rather interesting," Glied said. "It's not as big as defense procurement, but it's pretty big. It's bigger than federal highway funds."

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