Midwestern states split on crucial decision of whether to expand Medicaid programs


Stateline Midwest ~ March 2013

States in the Midwest appear to be split on whether to expand their Medicaid programs, and a leading national expert says it’s the most consequential decision for policymakers since states were first given the chance to opt into the state-federal partnership 48 years ago.

The topic of Medicaid expansion was explored at a special briefing held last month in South Dakota. 

The session was presented by CSG Midwest with support from a bipartisan group of South Dakota legislative leaders. Vern Smith, a health economist with Health Management Associates and a former Michigan Medicaid director, spoke to lawmakers about the option to expand the program under the federal Affordable Care Act.

Republican Gov. Dennis Daugaard has told lawmakers that he opposes the Medicaid expansion, at least in 2014. He’s said he is skeptical that the federal government would be able to keep its promise to cover 90 percent or more of the cost of expanding eligibility to 138 percent of the federal poverty level.
Smith began the February briefing by citing the major arguments of opponents of Medicaid expansion — namely that the expansion is too costly and risky.

Michael Cannon of the Cato Institute, for example, has written that the public insurance program is “rife with waste and fraud,” crowds out private insurers and discourages people from rising out of poverty.

But as Smith noted at the briefing in South Dakota, the expansion has many supporters as well, who cite the chance to reduce the rates of uninsured residents at a low cost (due to the high federal match) and also bring in more federal dollars to the state.

Along with South Dakota, the governors of Iowa and Wisconsin have announced they will not loosen eligibility requirements (see accompanying map for status of all Midwestern states).

States moving ahead with expansion expect to see savings in state-funded health programs. A 2011 Urban Institute report points out, for example, that states’ spending on uncompensated care will decrease because more people will have health coverage. And some states are already covering people in the expansion population — but now will receive a significantly higher federal match.

The Oklahoma Health Care Authority projects savings of $34 million to the Department of Mental Health, $11.2 million to the Department of Corrections and $2.4 million to the Department of Health.

In Michigan, Smith’s home state, a House fiscal analysis is projecting net savings of $1.1 billion over 10 years. The Senate analysis estimated general-fund savings of at least $200 million each year through 2017.

“Each state has a unique set of budget and health care interests to be weighed by state policymakers,” Smith told South Dakota lawmakers, “but this ultimately is a political decision for the governor and the Legislature.”