Note to NC: States that expanded Medicaid have no regrets

Kaiser Foundation

Now that Congressional efforts to repeal or replace the Affordable Care Act (ACA) have abated, North Carolina and the other 17 states that have not expanded Medicaid can consider whether to do so going forward. The ACA’s established funding will pay for 90 percent of the costs of expanding Medicaid to cover people in households with incomes at or below 138 percent of the federal poverty level. Previously, these 18 states declined to expand, in part because of concerns about their ability to predict and afford their 10 percent share of the costs.

With the ACA in its fifth year of full expansion, we now have an established track record in the expanding states to help estimate what the actual costs of expansion will be to the states and how those costs have compared to states’ projections. The strong balance of objective evidence indicates that actual costs to states so far from expanding Medicaid are negligible or minor, and that states across the political spectrum do not regret their decisions to expand Medicaid.

Are opposition claims accurate?

Claims that the costs of Medicaid expansion have far exceeded expectations are overstated, misleading, and substantially inaccurate, based on a review of the credible evidence, from either academic or government sources. The primary basis of these claims is that many expansion states have enrolled more people than they initially expected. However, because the federal government pays for most of their costs, this increased enrollment has not translated into large percentage increases in states’ Medicaid budgets.

To the contrary, the leading peer-reviewed, academic study on this question documented, based on comprehensive data from the National Association of State Budget Officers, that, by 2015, “there were no significant increases in spending from state funds as a result of the expansion.” Although states will start to incur some costs in years following 2015 as their 10 percent funding requirement is phased in, those costs are likely to remain modest, despite increased enrollment.

There are reasons to question the accuracy or objectivity of the contrary evidence presented by some expansion opponents. Perhaps the leading source is the ultra-conservative “Foundation for Government Accountability,” which campaigns aggressively against Medicaid expansion across the country.

Contradicting this source’s claim that “each and every state that opted into ObamaCare expansion is facing a surge in Medicaid enrollment far higher than ever anticipated,” officials or agencies from Indiana, North Dakota, and Ohio have flatly stated (and documented) that expansion enrollment, or overall enrollment, has either fallen short of, or not substantially exceeded, expectations.

Expanding states stick with their decision

Going beyond disputes about what the economic record shows, we can also look to the felt experience in states that have expanded – whether blue, red or “purple.” Contradicting claims that expansion states now regret their decisions, Republican governors in at least five expansion states (AR, AZ, MI, NV, OH) have voiced their continuing support for expansion, and several opposed recent Congressional efforts to repeal expansion. Likewise, Republican-led legislative bodies in several states (AR, ND, NH) have ratified or reauthorized their state’s initial expansion. And, none of the states that had legislative “triggers,” allowing them to roll back or reconsider expansion if projected costs turn out to be seriously wrong, have felt the need to pull plug on expansion.

Also unknown at first was the extent of the ACA’s “woodwork” or “welcome mat” effect, by which previously eligible people decided to enroll based on publicity around the ACA and the greater ease of enrollment through its navigation programs and on-line platforms. By now, the woodwork/welcome mat effect has largely run its course, so cost increases that expanding states initially felt due to this effect have already been absorbed in the budgets of non-expanding states.

Although it is unlikely that Medicaid expansion will turn out to be entirely free to states, based on the considerable experience to date, the probable costs appear to be quite low in comparison with the economic and public health benefits of expansion.

Mark Hall is a law professor and director of the Health Law and Policy Program at Wake Forest University. He wrote this analysis as part of The Leonard D. Schaeffer Initiative for Innovation in Health Policy. This report was edited for length. The full report is available here.