Hold-Out States Will Expand Medicaid – Just Ask History

Richard

The original Medicaid program was passed in ’65, going into effect in ’66 – and only 26 states joined the program in that first year. By 1970 all but Alaska and Arizona had joined; Alaska held out until ’72, Arizona until ‘82

As with any large social program, Medicaid was born into political controversy. Yet as the program’s date of passage fell into the past, the framing of the debate shifted – from national politics to state politics and economics. Ultimately allstates chose not only to participate in Medicaid, but to expand their programs well beyond the federal minimums – at an average marginal cost of $0.43 per $1.00 of Medicaid spend

As the current Administration winds down, the Medicaid expansion debate again moves from national politics to state political economics. States can expand their programs at a marginal cost of $0.10 per $1.00 of Medicaid spend – good economics for even the most reluctant Keynesian. On average, states can expand to eligibility to 100FPL by raising their total state budgets by only 0.2%, or to 138FPL by raising total state budgets by 0.4%

We expect most ‘non-expansion’ states to expand to at least 100FPL in or around 2016; this raises enrollment by 6%, and total Medicaid spending by 4%. Full expansion to 138FPL would raise enrollment by 11%, and total Medicaid spending by 7%

Medicaid HMOs (e.g. CNC, MOH, WCG) are the primary beneficiaries of further expansion; of these CNC is by far the most exposed to the non-expansion states, and would benefit most from growth in these states’ programs

Hospitals (e.g. CYH, HCA, LPNT, UHS, THC) also are beneficiaries of further Medicaid expansion, mainly because of reduced costs for uncompensated care; of these HCA has the greatest share of its beds (86%) in states that have not yet expanded, and presumably would benefit most

For our full research notes, please visit our published research site

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