Medicaid Expansion Generates Significant Savings that Offset Cost

Medicaid Expansion Generates Significant Savings that Offset Cost

by Steve Spires

A new report by the Louisiana Budget Project looks at the significant savings that the state would realize if Louisiana were to accept billions of federal dollars that are available to extend Medicaid coverage to as many as 400,000 low-income adults beginning in 2014.

More than 1 in 4 working-age Louisiana adults lack health coverage, and the state currently spends hundreds of millions of dollars each year to finance care for the uninsured. The need for these uninsured dollars would decrease dramatically as low-income adults would become eligible for Medicaid coverage that’s mostly financed with federal dollars, saving Louisiana taxpayers more than $1.1 billion over 10 years.

When these savings are compared to the $1.2 billion, 10-year cost to the state of expanding Medicaid coverage, expansion comes close to being a break-even proposition—and that’s before other potential sources of state savings are considered.

The reason Medicaid expansion is such a great deal for the state budget is that the federal government will pay 100 percent of the cost for the first three years. The state will slowly chip in starting in 2017, but will never have to pay more than 10 percent of the expansion cost. Compare that to today, when Louisiana is responsible for about 40 percent of the cost of providing care to the uninsured.

Opponents of Medicaid expansion often cite higher state costs as a reason to reject this opportunity. But a full accounting of both the new costs and the new savings is necessary. Once the savings are considered, it is clear that Medicaid expansion is the right choice for Louisiana.

The state should move forward with Medicaid expansion now, as a failure to do so will mean leaving federal money on the table.

For a copy of the full report, read “Medicaid Expansion Generates Significant Savings that Offset Cost.”