Governors See the Benefits of Medicaid Expansion

Governors See the Benefits of Medicaid Expansion

In the two years since health reform's major coverage provisions took effect, a clear divide has opened between states that have expanded Medicaid and those that have not. Expansion states have experienced greater gains in insurance coverage, net budget savings that are expected to grow over time, and a drop in the amount of uncompensated care hospitals are providing.

These are likely among the reasons why, in recent weeks, the Republican governors of Alabama and South Dakota have softened their opposition to Medicaid expansion, expressing a willingness to push for expansion during their states' respective upcoming legislative sessions. And this Saturday, Louisiana residents will choose a new governor from two candidates who both support expansion in some form.

The data from the 30 states (plus the District of Columbia) that have expanded Medicaid to non-elderly adults with incomes below 138 percent of the poverty line show expansion has produced:

Large gains in health coverage. An Urban Institute survey finds uninsurance among non-elderly adults has been cut in half in expansion states (from 14.9 percent to 7.3 percent) since the end of 2013. By comparison, non-expansion states have experienced a 30 percent drop, from 21.7 percent to 15.3 percent.

More use of preventive services. A state report in Kentucky found that tens of thousands of the residents who gained Medicaid coverage there received preventive dental services and cholesterol, diabetes, and cancer screenings in 2014. And despite critics' fears that there wouldn't be enough doctors to care for the new enrollees, a University of Michigan study found appointment availability for Medicaid beneficiaries in that state actually increased after expansion.

State budget savings. The federal government is paying the entire cost of the expansion through 2016, and no less than 90 percent of the cost in subsequent years. Expansion states have been able to move people who received health services through targeted Medicaid programs, such as those providing family-planning services and care for certain women with breast and cervical cancers, at the state's regular matching rate into the new eligibility group for which the federal government is now paying the entire cost. And as more people have gained health coverage, spending on uninsured, low-income people that states fund entirely, such as funding for hospitals to offset their uncompensated-care costs and behavioral health services, has fallen.

The combination of these factors has produced net budget savings in many states. For example, through June 2015, expansion had saved Kentucky nearly $110 million and Arkansas nearly $120 million. In these and other states, expansion is expected to be a net saver even when states begin paying a modest amount of the cost in 2017.

Less uncompensated care. A recent Department of Health and Human Services report estimated that hospital uncompensated-care costs fell by $7.4 billion in 2014, due in part to health reform's coverage expansions, with a greater share of this drop in states that expanded Medicaid.

Low-income uninsured adults have nowhere to turn for coverage in states that haven't expanded. More than 3 million uninsured adults are caught in a "coverage gap" in these states, with incomes too high for Medicaid but too low to qualify for federal subsidies to buy marketplace coverage. Medicaid eligibility for adults in these states remains extremely limited — the cutoff is typically an income above 44 percent of poverty for parents (about $8,800 a year for a family of three), and there's no coverage available for adults without dependent children.

The evidence is clear: Policymakers can best address their low-income residents' health needs by expanding Medicaid.

Jesse Cross-Call is a health-policy analyst at the Center on Budget and Policy Priorities.

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