By John Reichard, CQ HealthBeat Editor
April 23, 2014 -- Expanding Medicaid under the health law is a better financial proposition for states than previously thought, according to a think tank that projects the 10-year cost starting in 2015 will be 34 percent lower than an earlier estimate.
Revised Congressional Budget Office (CBO) health cost projections released last week show expanding Medicaid would raise state spending by $46 billion from 2015 through 2024, according to Edwin Park, an analyst with the Center for Budget and Policy Priorities. The baseline CBO issued in February pegged the cost at $70 billion over a decade.
The revised figure doesn't take into account other savings lessening expansion costs, Park said.
Cost projections have fallen because CBO now expects fewer people who were eligible for Medicaid before the health care overhaul but were unenrolled to sign up under the law, Park said.
CBO and other analysts say the law (PL 111-148, PL 111-152) will drive up Medicaid enrollment due to more aggressive public awareness campaigns and a growing belief among Americans that they are required to have insurance.
On average, the federal government pays 57 percent of the costs of enrolling individuals who were deemed eligible for Medicaid before the law was enacted.
"Because CBO now expects states to experience smaller increases in enrollment among those previously eligible ... it expects states to incur lower costs over the next decade than it previously assumed," Park said.
Park said CBO now estimates the federal government on average will pick up more than 95 percent of the total cost of the Medicaid expansion and other costs related to the health overhaul over the next 10 years. From 2014 to 2016, the federal government will cover all of the expansion costs for newly eligible enrollees, with the share then falling to 90 percent in 2020 and the years after.
But other research shows states will save money even as their long-term Medicaid costs rise with growing enrollment, Park said. A 2011 study by the Urban Institute noted the health law contained provisions that substitute federal spending for state outlays on such things as uncompensated care and mental health services, more than offsetting added Medicaid costs.
It's still unclear how or if the shift in CBO estimates will influence those states on the fence about expanding Medicaid. Twenty-six states have either expanded their programs or will do so, but Republican lawmakers are digging in against expansion in the remaining states for reasons that go beyond number crunching.
"There are many factors involved in the remaining state decisions about whether to expand Medicaid, political, philosophical, ideological, as well as fiscal," said Matt Salo, executive director of the National Association of Medicaid Directors. "A rosier outlook from CBO may encourage some, but I'm not sure it moves the needle much for most states that are currently in the 'no' column."