Research and Commentary: Arizona Medicaid Expansion

Published June 12, 2013

As states begin debating whether to implement the Patient Protection and Affordable Care Act (PPACA), many, including Arizona, are still debating whether to expand their Medicaid programs. Arizona Gov. Jan Brewer, once an opponent of Medicaid expansion, recently declared a moratorium on all other legislation until a Medicaid plan is approved, supporting her threat by vetoing five unrelated bills.

If Arizona expands its Medicaid program to individuals at 100 to 138 percent of the federal poverty level, the federal government will pay 100 percent of the cost of newly entitled Medicaid recipients for the first three years beginning in January 2014. The federal government’s subsidy will ratchet down to 95 percent in 2017, 94 percent in 2018, 93 percent in 2019, and 90 percent in 2020 and beyond. Expansion supporters contend it would be unwise to reject this so-called “free money,” and they say expansion will offer insurance coverage for more of Arizona’s neediest residents.

Opponents, however, note expansion will cause larger Medicaid costs in Arizona without successfully improving the value of care. If expansion is executed, most states, including Arizona, will see costs surpass savings as the federal match rate falls. The Goldwater Institute estimates the cost to Arizona’s General Fund for the first year alone would be $154 million. These costs to the state occur because the federal subsidy of 100 percent applies only to the direct medical costs of the newly entitled enrollees, not the added administrative expenses. From there, state costs will continue to ascend, dwarfing any estimated savings.

In 2010, Arizona spent $9.4 billion on Medicaid. A study conducted by The Heritage Foundation and the Urban Institute found Medicaid expansion in Arizona would result in a rapid surge in spending beginning in 2017, quickly exceeding any modest savings from reductions in state expenditures to providers for uncompensated care. The expansion is estimated to cost Arizona taxpayers $417 million through 2022.

Instead of expanding a Medicaid program that already provides insufficient health care access to Arizonans and will guarantee larger costs to taxpayers, Arizona policymakers should focus on constructing alternate ways to increase health care access.

The following documents offer additional information about Medicaid expansion.


Arizona Medicaid Statistics 
The federal government’s Medicaid Web site offers insight into Arizona’s financial contributions to the health care entitlement program.

Policy Tip Sheet: Medicaid Expansion
Kendall Antekeier of The Heartland Institute explains why states should avoid Medicaid expansion and instead reform their fiscally unsustainable programs in ways that will offer better care at lower costs to taxpayers.

Ten Reasons to Decline Medicaid Expansion in Arizona 
Christina Corieri of The Goldwater Institute discusses the many defects in Medicaid expansion in Arizona and why policymakers should focus on alternative ways of expanding Arizonans’ health care access.

Total Medicaid Spending
The Kaiser Family Foundation shows how much each state contributed in total 2010 fiscal year Medicaid costs.

Obama and the Medicaid Expansion: How Does Your State Fare?
The Heritage Foundation documents the future cost implications of Medicaid expansion on a state-by-state basis.

Research & Commentary: States Should Avoid Medicaid Expansion
Kendall Antekeier of The Heartland Institute explains the U.S. Supreme Court ruling on Medicaid expansion and outlines the fiscal consequences of expansion. “States should think twice about giving up more control of their Medicaid programs only to further expand a system that is already fiscally unstable,” she writes.

Ten Principles of Health Care Policy
This pamphlet in The Heartland Institute’s Legislative Principles series describes the proper role of government in financing and delivering health care and provides reform suggestions to remedy current health care policy problems.

The End of Federalism: How Obamacare Will Impact States
This fact sheet from The Heritage Foundation outlines the consequences of expanding Medicaid programs to meet federal requirements.

Medicaid: To Expand or Not to Expand
Nicole Kaeding of Americans for Prosperity argues states should avoid expanding their Medicaid programs because doing so would support the flawed and expensive federal health care law, place a heavy financial burden upon the state, and expand an already broken system.


Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit Health Care News at, The Heartland Institute’s website at, and PolicyBot, Heartland’s free online research database at

If you have any questions about this issue or the Heartland website, contact John Nothdurft Heartland Institute’s director of government relations at [email protected] or 312/377-4000.