Senior Policy Analyst
Today, we sat down with one of our health policy analysts, January Angeles, to discuss how the new health reform law is a good deal for states.
[audio: http://www.cbpp.org/files/05-11-10-medicaid-expansion.mp3 | titles=Health Reform Is a Good Deal for States]
1. January, the new health reform law will extend health insurance to about 32 million people, in part through an expansion of the Medicaid program. Right now, the federal government and state governments share the cost of the program, with the federal government picking up a little more than half of the costs. Is that how the expansion will be funded?
No, it isn’t. And that’s good news for states. The federal government will pay for 96% of the cost of expanding Medicaid over the next ten years.
In fact, the Medicaid expansion will cover 16 million more low-income children and adults while raising state Medicaid spending by just a little over one percent, compared to what states were projected to spend without health reform over the next decade. That’s a great deal for states.
2. Some governors and other state officials claim that the Medicaid expansion will be a big financial burden. Are they wrong?
Yes, they’re wrong. Claims that health reform’s Medicaid expansion will bankrupt states are exaggerated and they’re often based on flawed analysis. For example, a study that Indiana commissioned estimated that Medicaid enrollment would jump by 495,000 people. But Census data show that the state has only 264,000 uninsured people who could qualify for Medicaid under the new law. A Florida analysis has similar flaws.
And, some states that have complained about the cost of the Medicaid expansion have ignored that the health reform law will help states save money in other ways.
3. What are these other ways that states can save money under the new health reform law?
Well, as you mentioned, the new law dramatically shrinks the number of the uninsured by 32 million. This will lessen the burden on states of providing health care to their uninsured residents.
4. Is care for uninsured residents a big cost for state and local governments?
Yes, it is. State and local governments spend more than $10 billion a year to care for the uninsured in hospitals alone, and around $15 billion a year to support mental health agencies that serve a lot of uninsured people. Those costs will drop considerably under health reform, and help offset part of the increase in state Medicaid spending.
5. How else will the law benefit states?
Reforms to the private insurance market will improve access to health insurance for people at all income levels. I’m referring to reforms that will prevent insurance companies from denying coverage to people with pre-existing conditions or dropping people when they get sick. All of the states’ newly insured residents will be more able to avoid preventable illnesses, resulting in a healthier workforce.
6. What’s the bottom line, January?
The bottom line is that the Medicaid expansion will allow states to cover millions of low-income residents who haven’t been able to afford coverage — and the federal government will pick up 96 percent of the tab. That’s a deal states should applaud.