State budget directors see Medicaid expansion costs, but not savings

August 2, 2012

Back in February -- before the Supreme Court had decided on the health-care law, let alone heard oral arguments -- the Government Accountability Office went out and surveyed state budget directors on how they felt about the law's Medicaid expansion.

Their results, published Wednesday, give some insight into why you're hearing so much push-back against that provision ever since the Supreme Court ruled it optional: State budget directors tend to view the Medicaid expansion as a huge cost that generates few savings.

The GAO sent out its survey to all 50 state budget directors; 42 responded (unfortunately, they don't specify which states sat it out). It asked them about how the Medicaid expansion would affect their budgets and the various savings and expenditures it could entail. Here's what the GAO found out:

There was near-universal agreement that states would end up spending more on the administrative costs of growing their Medicaid programs and upgrading their systems to handle an influx of patients. But few saw much in the way of a benefit. Just eight state budget directors thought  they would see savings from reductions in uncompensated cases.

Whether state budget directors' perception of the Medicaid expansion aligns with how it would actually play out isn't totally clear. Arkansas has done the most detailed analysis of the expansion that I've seen, and its results indicate that the state would save a lot of money from a reduction in uncompensated care -- as much as $372 million over a decade if it  participates in the expansion.

But this survey at least gives some insight into how state budget directors are thinking about the expansion  -- and it suggests that opinions are not exactly favorable.

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Ezra Klein | August 2, 2012