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Myths about Medicaid

Get the facts about the health reform law, Medicaid and state budgets.

Today’s Wall Street Journal includes a story claiming that states will suffer through a deep fiscal crisis because of the Affordable Care Act. Unfortunately, the story relies on flawed studies and omits important information about some of the key benefits in the new law for states and their residents. Here are the facts:

Insuring More Americans Will Help Save Money for States: Under the new law, 32 million more Americans will have health insurance, thereby saving money normally spent on caring for the uninsured. And savings for states under the new law could be substantial. The Urban Institute has estimated that:

“…state and local governments would save approximately $70-80 billion over the 2014-2019 period by shifting this spending into federally matched Medicaid, clearly exceeding the new cost to states of the Medicaid expansion…”

And after detailing other potential savings, the same report concludes:

“In sum, states as a whole can probably achieve savings that significantly exceed their increased costs for low-income Medicaid adults.”

By insuring more Americans, the Affordable Care Act will substantially decrease the amount states spend to care for the uninsured, which in 2008 cost states $17.2 billion.  Overall, boosted federal Medicaid support to states will decrease the share of how much they spend to cover their Medicaid enrollees’ health care expenses by 4.5 percent.      

Administrative Costs Will Be Supported by the Federal Government: Today’s story wrongly claims that the new law “sticks states with a significant amount of the administrative costs” associated with their Medicaid programs. In fact, the Obama Administration recently proposed that the federal government cover 90 percent of the cost of updating state Medicaid systems to ensure these systems are as efficient as possible.

Even in These Tough Economic Times, States Continue to Make Improvements to their Medicaid Programs:  A recent Kaiser Family Foundation survey found that nearly all states are proactively improving their Medicaid programs to provide better care and make these programs more efficient. These improvements, combined with substantial resources from the federal government, for example, through the newly launched Innovation Center, will help ensure states do not have to cut spending in other crucial areas to support their Medicaid programs.

Today’s Story Relies on Flawed Studies: The article cites deeply flawed analyses on the impact of the Medicaid expansion on Mississippi, Indiana, and Nebraska. As the Center on Budget and Policy Priorities notes:

“These studies, however, conducted by the consulting firm Milliman, Inc., have serious flaws. They produce overstated estimates of the costs of the Medicaid expansion because they rely on a number of problematic assumptions…”

One of the assumptions these studies make is that 100 percent of those who are currently eligible for Medicaid, as well as 100 percent of those newly eligible will enroll in the program.  Neither the Congressional Budget Office, nor the Chief Actuary of the Centers for Medicare and Medicaid Services, made this assumption when they projected the Affordable Care Act’s impact on Medicaid enrollment because there is no evidence to support it.  Medicare, which offers coverage to all Americans over the age of 65 does not have 100 percent enrollment. The studies also tended to overestimate per-capita Medicaid beneficiary costs, as well as the number of people who would opt out of private health insurance for Medicaid. You can read the full report by the Center on Budget and Policy Priorities here.
Under the new law, millions of Americans who have been uninsured will have coverage, the worst insurance company abuses will be banned and states will save money they would have spent caring for the uninsured. That’s a good deal for millions of Americans and state budgets.

Stephanie Cutter is Assistant to the President for Special Projects