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POLICY INSIGHT
BEYOND THE NUMBERS

Setting the Record Straight About Medicaid Expansion’s Impact on Missouri’s Budget

Some Missouri lawmakers, citing unfounded concerns about cost, are trying to derail the July 1 implementation of a constitutional amendment passed by voters last summer that will expand Medicaid under the Affordable Care Act (ACA) and provide coverage to approximately 275,000 Missourians. Estimates have consistently shown expansion will produce net savings in Missouri’s budget, and the savings will be even higher under the American Rescue Plan’s significant new financial incentive for states that newly expand Medicaid.

Some critics of expansion in the state are arguing that voters didn’t understand how Medicaid expansion would be funded when they voted in favor of expansion last summer. In reality, the state provided the public with an estimate of expansion’s cost, as the law required. That estimate, produced by Washington University in St. Louis, found expansion would likely produce savings each year — and approximately $1 billion in 2026 alone. In other words, it will likely be cheaper for Missouri to run its Medicaid program with expansion than without.

These projections are in line with the experiences of other states that have expanded Medicaid. For example, expansion is associated with a 4 percent reduction in state spending on states’ traditional Medicaid programs, a Commonwealth Fund analysis found. And studies have shown expansion has produced net savings in many individual states, including Arkansas, Kentucky, Louisiana, Michigan, and Virginia.

Savings in these states are a function of Medicaid and state budget dynamics that are also present in Missouri. To begin, the federal government pays 90 percent of the cost of expansion coverage, so the upfront cost to Missouri will be exceptionally low. Some Missourians covered by Medicaid today, such as some people with disabilities, will move to the expansion group, where the federal government pays a higher percentage of the cost for their coverage. And demand for some services provided by Missouri’s Department of Mental Health, which are entirely paid for with state dollars, will fall as more people become insured and are able to get their care covered by Medicaid.

It’s expected that expansion will let Missouri spend less on its corrections system as Medicaid will cover some inpatient hospital stays for incarcerated people that today are paid for entirely with state funds. And Missouri funds part of the cost of its Medicaid program through a tax on providers, and the provider tax revenue will grow as more people enroll in the program and get care.

Governor Mike Parson’s budget proposal, released in January, was in line with estimates the state released before last summer’s vote by fully funding Medicaid expansion with offsetting savings covering most of the state cost.

Moreover, the governor released his budget before Congress passed the American Rescue Plan, which gives a substantial new financial incentive for states that newly expand Medicaid. Under the Rescue Plan, newly expanding states will receive a 5-percentage-point increase in their federal medical assistance percentage (or FMAP) for all non-expansion enrollees, who account for most of a state’s Medicaid enrollees and costs. For Missouri, this would mean more than $1 billion in additional federal funds over two years, we and others estimate.

Some Missouri lawmakers say that if the state doesn’t fund expansion, it can spend the money on other health care priorities, like care for seniors and people with disabilities. The idea that expansion takes money away from programs that help vulnerable populations is a familiar, but consistently debunked, talking point that expansion opponents use, as we recently explained.

Medicaid expansion often improves the services provided to seniors and people with disabilities. “In some cases, a state’s choice to adopt the ACA expansion is associated with state take-up of options to expand eligibility and services for seniors and people with disabilities,” according to a recent Kaiser Family Foundation report.

Additionally, under the Rescue Plan all states can receive, for one year starting this month, a 10-percentage-point bump in their FMAP for home- and community-based services (HCBS). To qualify, states must use the increased federal funds to supplement their current spending on HCBS and to enhance, expand, or strengthen their HCBS programs, which would likely also reduce HCBS waiting lists. This provision will give Missouri more than $228 million in additional federal funds over the coming year, the Kaiser Family Foundation estimates.

Setting budget debates aside, Medicaid expansion will have far-reaching benefits for Missourians. Expansion improves access to health care for those who gain coverage, with increased cancer screenings, primary care visits, and use of needed prescription drugs; it improves health outcomes, with enrollees reporting better overall health and lower positive screenings for depression; it helps narrow long-standing racial disparities in health coverage and access to care; and a 2019 study found that expansion saves lives and that it would have prevented 776 deaths among older Missourians over four years.

Among the uninsured Missourians who will gain Medicaid eligibility from expansion are 45,000 parents and 28,000 people with disabilities. And in the midst of the COVID-19 pandemic, expansion would give Medicaid eligibility to 34,000 uninsured Missourians working in essential and front-line industries like health care, food production, and at grocery stores.

By bringing billions of federal dollars back to the state, Medicaid expansion will boost Missouri’s economy. And evidence shows that the economic boost from expansion makes it less likely that rural hospitals will close, which is especially crucial in Missouri, where seven rural hospitals have closed since 2014.

Last summer, Missouri voters made it clear they believe Medicaid expansion is the right policy for the state. Missouri lawmakers should quickly appropriate the money for expansion so coverage can begin, as scheduled, on July 1.