NCPA - National Center for Policy Analysis

Medicaid Expansion Will Bankrupt the States

October 25, 2010

According to various estimates, there are 10 million to 13 million uninsured people who are already eligible for Medicaid but not enrolled.  When the individual mandate to obtain health coverage takes effect in 2014, many of the uninsured will be swept up in outreach efforts.  Although the cost of enrolling newly eligible individuals will be paid by the federal government, the cost of covering those previously eligible for Medicaid must be paid for under the current federal matching formula.  Many states will find the cost of their Medicaid programs higher as a result, says Devon Herrick, a senior fellow with the National Center for Policy Analysis. 

  • For example, a decade after the law's implementation, Texas Medicaid rolls are predicted to rise by 2.4 million people. 
  • Of these, only 1.5 million enrollees will be newly eligible. 
  • About 824,000 individuals will be those previously eligible but not enrolled; the federal government will contribute a much smaller share of the cost of these previously eligible enrollees compared to newly eligible enrollees.

Low provider reimbursement rates make it more difficult for Medicaid enrollees to find physicians willing to treat them compared to privately insured individuals.  States will bear much of the cost of keeping Medicaid provider fees at a level necessary to ensure enough physicians are willing to participate in the program, says Herrick.  

  • States with historically low reimbursement rates, such as New York and New Jersey, will be hardest hit.
  • In Texas, which is near the national average, the cost of maintaining higher Medicaid reimbursements will start at $500 million in 2016, rising to $1 billion annually by 2023.

Many of the newly insured under Medicaid will likely be those who previously had private coverage.  Indeed, research dating back to the 1990s consistently confirms that when Medicaid eligibility is expanded, 50 percent to 75 percent of the newly enrolled are those who have dropped private coverage.

Source: Devon Herrick, "Medicaid Expansion Will Bankrupt the States," National Center for Policy Analysis, October 25, 2010.

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