The price of Medicaid expansion opt-outs: $53.3 billion

October 26, 2012

The Supreme Court decided way back in June that the health law's expansion of Medicaid was optional rather than required. That decision, it appears, comes with a hefty price tag: $53.3 billion.

The National Association of Public Hospitals estimates that, in light of the decision, the United States will spend as much as $53.3 billion more on bills that go unpaid by the uninsured. Their analysis uses data from the Congressional Budget Office, which estimates that six million  to10 million fewer Americans will gain insurance through Medicaid after the Supreme Court decision.

"Congress certainly didn't foresee this level of uninsured and uncompensated care when it enacted the ACA," says NAPH president Bruce Seigel.

Keep in mind, this isn't necessarily $53.3 billion in new spending. It's more like a cost shift. Those who would have had their bills paid by the federal government (under Medicaid) could now have the costs covered by local governments and hospitals, which tend to foot the bill for many of the health care services that go unpaid.

The Congressional Budget Office estimates that, over the course of a decade, states opting out of the Medicaid expansion - and not drawing down funds from Washington - will save the federal government $84 billion.

It's also a cost shift to those with private insurance, as hospitals charge a bit more to clients with coverage to recoup their losses on the uninsured. One study estimated that cost shifting raises annual insurance premiums by as much as 1.7 percent, or $80 annually.

One more caveat worth noting: It's not at all clear how many states will, or won't, participate in the Medicaid expansion. Six states have so far said they will not participate, and five are leaning against it. This map from the Advisory Board Company shows where things stand right now.

(Source: The Advisory Board Company)

That map could, however, look a lot different on Nov. 7. If President Obama wins, there's nothing to stop a state from reversing course and deciding to accept the new federal dollars.

Many states are also looking at the possibility of doing a partial Medicaid expansion. Under that scenario, they would expand their Medicaid population to cover everyone under the federal poverty line (the full Medicaid expansion goes up to 133 percent of the poverty line.) Those above 100 percent could purchase private, subsidized coverage on the health insurance exchange. 

The allure of that option is pretty simple: States could run a smaller Medicaid population, reducing the administrative costs and challenge of the expansion. Those who earn above the poverty line would still have an option. They could gain federally-subsidized coverage that wouldn't cost the state one dime.

In Ohio, a Republican state that's on the fence about the Medicaid expansion, top industry executives say this is one option that's on the table. 

"The administration has been very clear they're open to the idea and want to provide health coverage to as many people as they can," says Miranda Motter, who runs the Ohio Association of Health Plans. "The big question is about where the dollars come from to cover that population. Those decisions will take place during our budget process next year."

What's missing, right now, is guidance from the federal government. States don't yet know whether this partial expansion is an option, since the Obama administration has not released any regulations on the matter. For states that are weighing the option, a decision that will determine how much actually gets spent on uncompensated care, it's largely a waiting game at the moment.

"There has yet to be conclusive guidance," says Richard Murdock, who directs the Michigan Association of Health Plans. "Legislators are willing to look at going up to 100 percent. We're looking for guidance from HHS on the Medicaid expansion area." 

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