Republican governors who are threatening to opt out of the Medicaid expansion — which could deprive millions of insurance — have justified it by claiming that opting in could crush their state budgets. Their real motive may be ideological — they are striking a blow against Obama’s signature initiative and the welfare state in general — but the cost argument gives them a seemingly pragmatic rationale.
But what if opting in to the Medicaid expansion could actually save states money over the long term?
It’s very possible. The grounds for believing this can be found in an Urban Institute study that was conducted in 2011 but is newly relevant in light of the GOP governors’ threats.
The argument that opting in could devastate state budgets is grounded in the idea that while the federal government will cover the full cost for the first three years, by 2020 that number drops to 90 percent — and there’s no guarantee that the feds will continue footing the bill.
But that elides several important ways the Medicaid expansion could save money for states in other areas, the Urban Institute study concluded. First, the expansion could mean significant numbers of mental health patients now covered will soon be covered almost entirely by federal Medicaid funds. Second, the expansion could move many patients out of categories where states are currently paying a large matching share of Medicaid costs — such as pregnant women or people receiving long term home care — into Medicaid coverage that’s almost entirely paid for by the feds.
And third, the Affordable Care Act overall — partly because of the Medicaid expansion, and partly because of subsidies and exchanges — will cut down the number of uninsured in ways that could significantly reduce “uncompensated care” — i.e., care that patients don’t pay for, such as emergency services — thus reducing the amount of money states pay to hospitals to reimburse such care.
Here’s the study’s conclusion on how much the law could save for states now opting out of the expansion, or threatening to do so:
* Wisconsin could save as much as $3.7 billion from 2014-2019
* Iowa could save as much as $1.9 billion from 2014-2019
* South Carolina could save as much as $678 million from 2014-2019
* Indiana could save as much as $1.7 billion from 2014 to 2019
* Nevada could save as much as $443 million from 2014-2019
In other states that may opt out — such as Louisiana and Kansas — the study found that the expansion could costs states but also that they could see big savings, depending on various factors. Helping the argument for the expansion, the study erred on the side of caution in estimating state savings.
To be fair, these are imperfect numbers, because they estimate what the law overall — including subsidies and exchanges — would save these states. But the Medicaid expansion is central to these savings. And these estimates did not include all the savings
“Much of the state savings we project depend on the Medicaid expansion,” Stan Dorn, a senior fellow at the Urban Institute, tells me. “It’s essential to reducing uncompensated care; it’s a key piece shifting mental health costs from the state to the federal government; and it’s essential for other state savings as well.”
The Urban Institute will soon release an updated breakdown of what the expansion itself could save states. This is where the debate is heading next — and it could seriously undercut the pragmatic rationale these governors are offering, leaving only ideological motives behind.
UPDATE: It’s worth noting that this could prove to be a bipartisan problem. As Steve Kornacki notes, eight Democratic governors have not indicated whether they’ll opt in, either.