Why the Medicaid Expansion is a Ripoff for Most States

Published March 7, 2013

Medicare trustee Charles Blahous is out with his comprehensive report on Medicaid expansion. His conclusions should be another boost to the “be Arkansas” strategy. Here are his key findings: 

“When combined with the interactions of various ACA provisions, the Supreme Court’s decision created a strong disincentive for states to expand Medicaid coverage to childless adults with incomes above 100 percent of the FPL. By declining to cover this population under Medicaid, states can minimize their budgetary exposure while at the same time providing these individuals access to potentially more generous health insurance coverage through the ACA’s health exchanges. Subsidies for participation in these exchanges are only available to individuals with incomes between 100 and 400 percent of the FPL who are not eligible for Medicaid.”
“Under the ACA, states that choose to cover these individuals under Medicaid will have to pay 10 percent of the associated costs by 2020. If instead these individuals remain uninsured by Medicaid and receive their health insurance through exchanges, the full cost of their subsidy support will be provided by the federal government. It is likely individuals in the exchanges would receive better quality health insurance coverage than they would through Medicaid. For individuals in this income range, CBO estimates the annual value of the federal subsidy per exchange participant at about $9,000 by 2022, whereas the total value of Medicaid coverage would be well less than $7,000.”

More on the Arkansas deal here. Perhaps more useful for those of you who don’t want to slog through a lengthy PDF is this new report from the Heritage Foundation outlining the incentives for each state to expand or not expand Medicaid. It simply charts the Urban Institute assumptions out over the next decade, illustrating that the Medicaid expansion really amounts to an enormous bailout for the state of New York, and a raw deal for red states everywhere.