New CBO Report Shows Medicaid Expansion Is A Better Deal For The States Than Previously Predicted

The trend continues. We have seen predictions regarding costs and benefits of the Affordable Care Act and then receive further data which shows that Obamacare is working even better than expected. The latest news comes from a new Congressional Budget Office report on Medicaid expansion.

Congressional Budget Office (CBO) estimates released last week show that health reform’s Medicaid expansion, which many opponents wrongly claim will cripple state budgets, is an even better deal for states than previously thought.[1]  CBO has sharply lowered its estimates of the costs to states of adopting the Medicaid expansion.

  • 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 Figure 1).  That’s about one-third less than CBO projected in February.[2]  And the 1.6 percent figure is before counting the state savings that the Medicaid expansion will produce in state expenditures for services such as mental health and substance abuse treatment provided to the uninsured.

The federal government pays 100 percent of the cost of Medicaid expansion for the first three years with this gradually dropping to 90 percent in 2020. Republican governors opposing Medicaid expansion have claimed that ultimately paying 90 percent will strain their budgets while supporters argue that using this money to care for the uninsured will help the economies in these states and save money in other areas by having the currently uninsured receive coverage.

Republicans have also argued that one result of offering the expanded Medicaid program is that people eligible for the original program but who have not applied will apply for Medicaid as a result of the publicity surrounding the expanded Medicaid program. This would cost the states more as the federal government will continue to match funds for those who qualify for the original Medicaid program at current levels which average 57 percent. This tells a lot about how these Republicans think, seeing it as beneficial for the poor to not receive benefits they qualify for. The CBO has decreased its estimates as to cost to the states as fewer people who qualified for Medicaid but remain unenrolled are now enrolling than projected.

Despite the significant benefits from the expanded Medicaid programs, some Republican states remain determined to block the program. Bills have recently passed in Georgia and Kansas to make sure that they do not wind up with a Democrat getting elected governor and deciding to accept the federal funds to expand Medicaid. This changes the law so that approval would be needed by the state legislature and a governor could not expand Medicaid without their vote.