Kaiser: Federal gov't can bear brunt of Medicaid costs under reform

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The federal government could pay most of the new Medicaid costs in all states through the program's expansion under the Patient Protection and Affordable Care Act (PPACA), according to a report from healthcare organization Henry J. Kaiser Family Foundation.

The PPACA expands Medicaid to nearly all individuals under age 65 with incomes up to 133 percent of the federal poverty line, extending coverage to large numbers of the uninsured population in the U.S. The Kaiser Family Foundation, based in Menlo Park, Calif., analyzed participation rate scenarios applied uniformly across states.

The Standard Participation Scenario attempted to approximate participation rates used by the Congressional Budget Office (CBO) to estimate the national impact of the Medicaid expansion. “In the scenario, federal spending would increase by $443.5 billion and state spending would increase by $21.1 billion between 2014-2019,” stated the report. “Thus, about 95 percent of all new spending would be by the federal government.”

Medicaid expansions will significantly increase coverage and reduce the number of uninsured citizens under this scenario, according to the report. Enrollment is projected to increase by 15.9 by 2019, resulting in a reduction of uninsured adults under 133 percent of poverty by 11.2 million (45 percent).

“Increases in state spending are small compared to increases in coverage and federal revenues and relative to what states would have spent if reform had not been enacted,” stated the report. “Nationally, enrollment is expected to increase by 27.4 percent compared to baseline 2014-2019. This increase in enrollment far exceeds increases in state spending relative to baseline of 1.4 percent.”

Federal spending is projected to increase 22.1 percent under the Standard Participation Scenario.

According to the Kaiser Family Foundation, the impact of Medicaid expansions under health reform will vary across states based on current levels of coverage and current match rates for states. "States with low coverage level and high uninsured rates will see the largest increases in coverage and federal funding," stated the report. "Higher levels of coverage will allow states to reduce payments they make to support uncompensated care costs."

The organization anticipated the following:

  • The Medicaid expansion will result in large reductions in the uninsured across states, but especially in states that have higher levels of the uninsured today.
  • The actual federal share of the costs of the Medicaid expansion varies based on state coverage levels today, but it is always very high.
  • Compared to projected enrollment without health reform, increases in new enrollment and coverage will far exceed new state costs but these increases vary based on current levels of coverage across states.

“The impact of health reform will vary across states based on coverage levels in states today, state decisions about implementation and, ultimately, the number of individuals who sign up for coverage,” the report concluded. "Some states may not aggressively implement health reform and they might not see significant reductions in the uninsured, while other states will have higher levels of participation because of effective outreach and enrollment strategies and see greater reductions in the number of the uninsured.”