NCPA - National Center for Policy Analysis

Health Reform Law's Effect on Medicaid Spending

April 11, 2011

The Patient Protection and Affordable Care Act of 2010 (PPACA) promises to increase state government obligations for Medicaid by expanding Medicaid eligibility and introducing an individual health insurance mandate for all U.S. citizens and legal permanent residents.  A study by Jagadeesh Gokhale, a Cato Institute senior fellow, estimates and compares potential increases in Medicaid expenditures from the PPACA by the five most populous states: California, Florida, Illinois, New York and Texas:

  • State Medicaid spending is projected to increase considerably even without the PPACA in California, Florida and Texas, with smaller increases in Illinois and New York.
  • With the PPACA, projected spending is actually reduced for California, while spending increases are positive and large for Florida and Texas.
  • Both Illinois and New York have the potential for considerably higher enrollments and increased expenditures.
  • When the PPACA's effects on enrollment in Medicaid are included, Medicaid will impose large financial burdens on all five states.

The estimates presented in the study may be conservative because the effect of future shifts from private coverage to Medicaid, post-PPACA, is not fully incorporated, says Gokhale.

Source: Jagadeesh Gokhale, "The New Health Care Law's Effect on State Medicaid Spending: A Study of the Five Most Populous States," Cato Institute, April 6, 2011.

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