Medicaid expansion is saving states money

Medicaid expansion is saving states money

by Garrett Clawson


When the Louisiana Legislature debated – and rejected – the expansion of Medicaid in 2013 and 2014, nobody really knew for sure how the new system would work. But now, after more than two dozen states have expanded health coverage for low-income adults using federal dollars, we have proof that this approach helps patients and health-care providers while saving money in state budgets.

Unfortunately, this evidence was not enough to persuade the House and Senate health committees, which this week voted to reject the coverage expansion for the third year in a row. This decision means almost 300,000 low-income Louisiana adults will have to wait longer for access to affordable health care.


How do we know that states save money? Because Arkansas saved $31 million last year and is expected to nearly triple that figure to $89 million this year by expanding Medicaid. Kentucky saved $26 million in the last half of last year and will see savings grow to $83 million this fiscal year. The same is true elsewhere, from Michigan ($239 million) to Colorado ($160 million) and Oregon ($137 million).


It’s not hard to understand why this is happening. Medicaid expansion is financed entirely by federal dollars through 2016 (after that, states have to start paying a small cost share, but never more than 10 percent). But without Medicaid expansion, states foot a large part of the bill for treating the uninsured, who often turn up in emergency rooms when they need health care.


The Legislative Fiscal Office predicts Medicaid expansion would save the state $52 million next year, and up to $165 million over the next five years. Given the savings seen in Arkansas, Colorado, Kentucky and Michigan, that is likely a conservative estimate. This is money the state could use to help plug the $1.6 billion budget deficit.




Around the country, states are saving money by shifting dollars from inefficient charity care programs towards health coverage and consolidating outdated parts of the Medicaid program to take advantage of new federal funds, providing more reliable primary care for people with chronic health conditions like heart disease and diabetes. States are also using new funding to improve behavioral health care, which not only generates budget savings, but provides hope for families dealing with mental illness.


While expansion is helping states save millions, states with premium taxes are also boosting revenue as more people get covered. For example, Arkansas and New Mexico are generating $30 million each year due to expanded coverage.




Medicaid expansion is also a financial boost to hospitals, which benefits not just the newly insured but everyone who depends on their local hospital. The number of uninsured patients seen at hospitals in Arkansas and Colorado dropped by 30 percent within 90 days after those states expanded coverage. Major for-profit hospital chains have reported drops in uninsured patients ranging from 48 percent to 72 percent at their hospitals in expansion states, but drops of 14 percent or less in non-expansion states.


Because hospitals are now seeing patients covered by Medicaid who used to be uninsured, they are being compensated for care and saving money. The experience of other states makes it clear that expanding Medicaid saves states money, shores up hospitals and helps uninsured families find coverage.