States forgo federal dollars for Medicaid

January 1, 2014

There are 20 states choosing not to expand their Medicaid programs under the ACA.

States choosing not to expand their Medicaid programs under the Affordable Care Act (ACA) are forgoing billions of dollars in federal funds, while residents in their states are contributing to the cost of the expansions in other states, according to a new Commonwealth Fund study.

There are 20 states choosing not to expand their Medicaid programs under the ACA. After taking into account federal taxes paid by state residents, states with the highest net losses include Texas, which will see a net loss of $9.2 billion in 2022; Florida, which will lose $5 billion; Georgia, which will lose $2.9 billion, and Virginia, which will lose $2.8 billion.

The study, “How States Stand to Gain or Lose Federal Funds by Opting In or Out of the Medicaid Expansion,” is the first to calculate the net cost to taxpayers in states turning down the ACA’s Medicaid expansion.

“One of the features of Medicaid expansion is that it brings a lot of federal money to states and a lot of federal money that states forgo if they choose not to expand,” said study author Sherry Glied of New York University’s Wagner Graduate School of Public Service. “Even if a state choses not to participate, taxpayers will still pay for the expansion.”

Glied and Stephanie Ma, also of New York University’s Wagner Graduate School of Public Service, used data from the Urban Institute projecting Medicaid enrollment and spending under the law in the year 2022. They estimated the effects of states’ decisions about whether to accept the health reform law’s expansion of the Medicaid program to residents with incomes at or below 138% of the federal poverty level ($32,499 for a family of 4). The expansion, which became voluntary for states after the Supreme Court’s 2012 ruling, is mostly financed by the federal government, which pays 100% of the total costs through 2016. The federal contribution will decline from 100% to 90% by 2020, and stay at 90% after that.

Federal funds that pay for state Medicaid programs are raised through federal general revenue collection-taxes paid by residents in all states-whether or not they participate in the program.  Therefore, taxpayers in states not participating in the Medicaid expansion will bear a share of the overall cost, without benefitting from the program. 

In addition to improving access to care and providing financial protections for those who gain coverage, healthcare providers in states would benefit from reduced uncompensated care costs.

“It is to the financial advantage of the citizens for states to participate in Medicaid expansion,” Glied said. “It’s like health plans are defense contractors-this is federal money on table and it’s good for health plans in the state so that they can enroll more people.”

If all states expanded Medicaid under the law, as many as 21.3 million Americans would gain coverage by 2022, according to the authors.

In similar news, CMS released a new report that shows that because of the ACA, more people will be gaining access to coverage through their state Medicaid program and the Children’s Health Insurance Program (CHIP). More than 1.46 million people have been determined eligible to enroll in Medicaid or CHIP in the month of October through state Medicaid and CHIP agencies and through state-based marketplaces.

Meanwhile, Pennsylvania Governor Tom Corbett last month began the process of filing for federal approval of a proposal to use ACA Medicaid expansion money to help low-income families and individuals buy private insurance.