Medicaid Costs in the Eye of the Beholder

Today the Kaiser Family Foundation teamed up with Urban Institute and released state-by-state estimates of the costs to meet the Medicaid coverage expansion mandated for 2014.

The report modeled two scenarios. The “standard participation” scenario uses CBO data that estimates 57 percent of newly eligible uninsured persons will enroll in Medicaid with an overall $21 billion increase in state expenses in 2014-2019. Massachusetts is a big winner, saving $1.2 billion, while new expenses in Texas and California are estimated to approach $3 billion.

The “enhanced outreach” scenario assumes a more aggressive outreach and enrollment campaign by the federal and state governments. Under this scenario, 75 percent of the newly eligible uninsured enroll in Medicaid. State costs add up to $43 billion under this scenario. Massachusetts saves less and California’s added expenses over the six years top $6 billion. Both scenarios also assume currently eligible enrollees will increase, with a greater increase under the second scenario.

Despite the expenses states face, a very large share of the increased cost will be paid for through the federal share of the costs of Medicaid and as a result states’ share of the increased cost is relatively small according to the report. Further, the report suggests there is an offset in state expenses to current payments to support uncompensated care costs but does not estimate the impact.

Whether the costs states face for the new coverage mandate is small or large clearly depends on your perspective. A 90-10 federal state match for newly eligible enrollees after 2019, following a period of even more favorable match formulas, is undoubtedly a good deal for states. However, following an unprecedented period of negative revenue collections and many rounds of budget cuts, state leaders fear that even a small amount of increased Medicaid spending will necessarily crowd out other high priority state services.