In a little-noticed finding in last week’s Congressional Budget Office (CBO) report on health reform, CBO sharply lowered its estimates of how much the Medicaid expansion will cost states. We’ve noted repeatedly that the federal government will cover the large bulk of the expansion’s cost. As our new report explains, these new figures make it even clearer that the expansion is a great deal for states.
CBO now estimates that the federal government will, on average, pick up more than 95 percent of the total cost of the Medicaid expansion and other health reform-related costs in Medicaid and the Children’s Health Insurance Program (CHIP) over the next ten years (2015-2024).
States will spend only 1.6 percent more on Medicaid and CHIP due to health reform than they would have spent without health reform (see chart). That’s about one-third less than CBO projected in February.
Moreover, the 1.6 percent figure doesn’t reflect states’ savings in providing health care for the uninsured, many of whom will now have Medicaid coverage. The Urban Institute has estimated that if all states took the Medicaid expansion, states would save between $26 billion and $52 billion from 2014 through 2019 in reduced spending on hospital care and other services provided to the uninsured.