By Carter C. Price, Special to CNN
Editor’s note: Carter C. Price is a mathematician at the nonprofit, nonpartisan RAND Corporation. The views expressed are the writer’s own.
Over the past several months, Governors Chris Christie of New Jersey, Rick Scott of Florida, and John Kasich of Ohio – all Republicans – have announced support for the Affordable Care Act’s (ACA) Medicaid expansion. They join 22 other states and the District of Columbia in expanding the health insurance program for low-income Americans.
But more than a dozen of their counterparts in other states have decided against implementing the expansion, and the fight goes on in several states including Florida and Ohio where Scott and Kasich face hurdles in getting expansion through their state legislatures. Many have said these decisions are based on fears that expansion will cost states money in the longer-term. Yet, recent RAND research suggests that the economic arguments against state implementation may be questionable, especially for some lower-income states.
In a recent report on the effect of health care reform on Arkansas, we estimated that, in addition to covering 400,000 more people (in a state with fewer than 3 million people), the law would produce substantial economic growth by increasing net federal spending in the state. Other states that have similarly low median incomes should expect comparable benefits.
The expansion of Medicaid eligibility to most people with incomes below 138 percent of the Federal Poverty Level – or about $15,000 for an individual and $30,000 for a family of four – will provide health insurance to tens of millions of uninsured people nationwide. Once these newly-insured people have health insurance, they can establish a stable medical home where doctors and nurses can provide more consistent and cost-effective care. At the same time, the health care providers who treat them will be paid for the services they deliver. These payments will result in income that will be spent in the local economy, taxed by state and local governments, and contribute to economic growth and job creation.
Prior to 2017, states will not be required to contribute any money for the Medicaid expansion. Even when the contribution rates hit their peak in 2020, states will be responsible for contributing just 10 percent of the costs.
Some governors contend that 10 percent is too much, but our analysis shows that a decision not to expand Medicaid overlooks some critical facts.
- While last year’s U.S. Supreme Court ruling on the ACA gave states a choice regarding participation in Medicaid expansion, they were not given the power to opt out of other provisions of the law. This means all states, including those that opt-out of Medicaid expansion, will be subject to the more costly provisions of the law, such as the individual mandate, Medicare cuts, and tax increases. These provisions will take money out of states regardless of their decision on Medicaid.
- Medicaid expansion’s impact on state economies goes well beyond the 10 percent states will eventually be required to contribute. Additional spending on Medicaid beginning in 2017 will generate economic growth and tax revenues from money spent in the broader economy by the health care industry and its workers.
- Without Medicaid expansion, costs from caring for the uninsured may lead to higher prices for those who do pay for treatment and for states. States currently spend tens of billions of dollars each year on uncompensated care costs for the uninsured.
So while a governor or legislator may disagree with Medicaid expansion for philosophical reasons, the claims that the expansion will be a burden on states’ economies seem misguided given the full range of projected economic impacts on the states. The fact is that not expanding Medicaid will hurt state economies.
This is even true for states that do not have lower-than-average incomes. For example, recent work we conducted on Pennsylvania found that money from expanding Medicaid would create jobs and lead to increased economic growth. While Pennsylvania will incur additional costs associated with the expansion of Medicaid, these costs will be partially offset by increased tax revenues.
Thus, the Medicaid expansion appears to not only make sense from a coverage perspective, but also a bottom-line perspective. While states will be asked to pay more after 2016, these cost increases are small when compared to the potential for economic growth, job creation, and enhanced public health brought on by Medicaid expansion.