New Research Highlights Fiscal Implications of Medicaid Expansion

Recent research has demonstrated the degree to which the Affordable Care Act (ACA) has been instrumental in decreasing the uninsured rate across all states.  This research also, however, draws attention to the substantial difference in coverage gains between states that have expanded their Medicaid programs under the ACA, and those that have not.  And decisions on whether to expand Medicaid can have a profound impact not only on coverage in a state, but can also carry with them significant financial implications.  This has become increasingly clear with the most recent issue brief prepared for the State Network by Manatt Health Solutions.

This issue brief, prepared by Deborah Bachrach, Patricia Boozang, and Mindy Lipson at Manatt Health Solutions, is the third in a series of reports which examine the fiscal implications of a state’s decision to expand Medicaid.  The first report in the series focused on the budget impact of expansion in two states, Kentucky and Arkansas, finding that they have seen significant budget savings after just the first year of expansion.  The second report analyzed data from eight states, finding $1.8 billion in budget savings by the end of 2015 as a result of expansion.  This report investigated savings and increased revenue in expansion states in three areas: state savings from accessing enhanced federal matching funds, state savings from replacing general funds with Medicaid funds, and revenue gains from expansion.

The third and latest report continues this trend, specifically analyzing reductions in uncompensated care costs in expansion states.  Manatt finds substantially greater declines in uncompensated care in states that expanded Medicaid than those that have not.  The report also looks at impending reductions in federal support for Medicaid Disproportionate Share (DSH) payments and waiver pools made available to support hospital uncompensated care costs prior to the Medicaid expansion authorized and funded under the ACA.  This continuing research from Manatt highlights that in addition to the coverage gains associated with Medicaid expansion, the decision to expand can also have significant, positive financial implications for states.