Medicaid expansion saves states millions, boosts payer revenues

By Annette M. Boyle

The 31 states and the District of Columbia that expanded Medicaid under the Affordable Care Act are saving millions, while revenues are up for insurers, according to a new report.

A Robert Wood Johnson Foundation issue brief found that Medicaid spending grew at half the rate in states that chose to expand eligibility compared to those that did not between 2014 and 2015. 

Much of the savings comes from a reduction in uncompensated care costs for hospitals, which the report estimated were $7.4 billion lower in 2014 than they would have been without expansion.

The reduction in uncompensated hospital costs may explain the report's finding that half as many rural hospitals were at risk of closure in the expansion states than in those that did not expand Medicaid eligibility as of September 2015.

The foundation drilled down on programs in 11 states to better understand the trends in savings and revenue growth. Three factors significantly affected the improved finances:

  • States saved money by accessing enhanced federal matching funds. States are typically responsible for 30 percent to 50 percent of the cost of "medically needy" individuals who receive waivers or qualify for special Medicaid eligibility categories. With expansion, many of these individuals qualify for full Medicaid coverage--and the states receive 100 percent federal funding for their care.

  • States replaced general state funds to support programs and services for the uninsured with federal Medicaid funds.

  • States experienced increased tax revenues as provider and health plan revenues increased.

If the remaining 19 states expanded eligibility, an additional 4 million individuals would gain coverage, according to the White House. In southern states, expansion would provide coverage for 61 percent of the uninsured.

In addition, the analysis found that healthcare jobs in expansions states grew at a 50 percent higher rate than in non-expansion states.

To learn more:
- here is the RWJF brief

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