Medicaid Expansion under ACA

One of the issues in the lawsuit twenty-six states (including Georgia) have brought to the overturn the Affordable Care Act is the expansion of Medicaid eligibility. The argument against this expansion seems to be that the expansion will cost state money. There is a counter argument that Georgia taxpayers are likely to be better off after the expansion.

Currently eligibility is determined by family income and other characteristics. For example in Georgia the Department of Community Health website has this information:

“You may be eligible for Medicaid if your income is low and you match one of the following descriptions:
• You think you are pregnant
• You are a child or teenager
• You are age 65 or older
• You are legally blind
• You have a disability
• You need a nursing home”

The income levels necessary to qualify for Medicaid depend upon which of those groups the individual is in.

Under the ACA beginning in 2014 all individuals in families whose income lies below 133% of the Federal Poverty Level is eligible for Medicaid. In Georgia it has been estimated that between a half a million and million more Georgian’s be enrolled in Medicaid as a result of the change in the law. The differences in the estimates results primarily from differences in the economic projections of family income growth over the next two years, but also from difference in the assumptions about the number of eligible individuals who will actually enroll in Medicaid.

In their lawsuit the states have argued that this expansion in Medicaid eligibility is an unconstitutional coercion of states by the Federal government. Lower courts have rejected this argument primarily because a state’s participation in Medicaid is voluntary: if states found the conditions for participation to be onerous they could opt out.

States haven’t opted out of the Medicaid program in spite of other expansions and rule changes, in large part because Medicaid is a good investment for them. In Georgia every dollar the state invests in Medicaid currently brings about two dollars of Federal money into the state. The Federal government will pay 100 percent of the costs for individuals newly eligible under the Affordable Care Acts expansion for the years 2014 through 2017. The state’s share of these costs rises gradually to 10 percent of the costs in 2022 and then remains constant thereafter. So for those newly eligible the state brings in nine dollars for every dollar invested by the state. Even after netting out Georgia taxpayers’ Federal taxes that represents a considerable amount of new money generating economic growth in Georgia.

Expansion of Medicaid eligibility has the direct effect of reducing the number of uninsured. The uninsured currently need and receive care, although they receive less care than insured individuals do, they receive it later in an episode of illness, and they more often receive it in inappropriate and more expensive settings.

A recent study examining the distribution of health care costs found that the Medicaid program makes the burden of those costs more proportional to family income by shifting from paying for the uninsured through a combination of payments by the uninsured; increased health insurance premiums; out of pocket payments by other health care consumers; and local taxes to Federal taxes.(Ketche, et. all 2011) Moreover, this burden is reduced if care is available earlier in an episode of illness and at the appropriate setting.

There are also the direct economic benefits of a healthier population. Reducing the burden of uncompensated care increases the capacity of Georgia’s health care providers. That has a direct impact on the care provided to all Georgians. A healthier workforce decreases employer’s labor costs and increases investment in Georgia.

The Medicaid program could certainly be improved in both design and operation. It is important to give both providers and enrollees the incentives and tools to create an efficient provision of care and a healthier population. Yet, the bottom line suggests that for Georgia the expansion of the Medicaid program under ACA is a good deal.

1: Ketsche, P. et. al.; Health Affairs, September 2011 vol. 30 no. 9 1637-1646

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