As state legislatures enter 2013, many face the question of whether or not to expand Medicaid under the terms of the Patient Protection and Affordable Care Act. A study released by the Kaiser Family Foundation, a nonprofit organization that studies health care and healthcare policy, reports that states will not have to spend a lot of money to expand Medicaid coverage to include more people.
The study shows that individual state Medicaid spending would increase by only about .3% if a state chose to adopt the full expansion as outlined in the healthcare law. This is primarily due to the law’s provision that the federal government will be responsible for paying the vast majority of the expenses that states incur when expanding the Medicaid program.
The Kaiser study said that the federal government would see a Medicaid expense increase of about 12% if all states chose to adopt the expansion. This is because the federal government would have to pay for 100% of the expansion costs, at least during the first several years. By 2020, the federal government would be responsible for 90% of the costs while the states would have to fund the remaining 10%. This 90/10 distribution would remain in effect for as long as the states maintained the expanded Medicaid program.
Additionally, a handful of states could end up with smaller Medicaid budgets if they adopt the expansion, including New York. This is because New York, along with states such as Massachusetts, Iowa, Maine, and a small number of others, have already expanded Medicaid to cover those who would be covered under the healthcare law. Once those states begin seeing federal dollars for the expansion, it would amount to extra federal dollars.