States With Expanded Medicaid Programs Seem Happier With The New Health Care Law

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The Washington Post has an interesting overview of how the generosity of states’ existing Medicaid program is affecting their response to the new health care law. Of course everything will depend on how many people actually sign-up for Medicaid and whether the federal government will maintain its funding commitments, but generally speaking, states that have wider eligibility rules will receive more federal Medicaid dollars than those with narrower provisions:

Starting in 2014, anyone making up to 133 percent of the federal poverty line — now $14,400 for a single person and $29,300 for a family of four — will qualify for Medicaid under the new law.

The requirement will affect states differently depending on the generosity of their existing Medicaid program. Virginia enrolls only the blind, disabled, some needy children and deeply indigent parents who make up to 24 percent of the poverty line. State officials have estimated that boosting coverage to the required level means as many as 426,000 people might become part of the program, which includes about 837,000 Virginians.

The change will result in fewer new Medicaid patients in Maryland, which extends some form of coverage to most residents making up to 116 percent of the poverty level. It will have to provide more robust benefits to about 112,000 residents, but state officials estimate that Maryland will have to extend entirely new benefits to only 21,000 — less than one-twelfth the number Virginia faces.

But both states might be engaged in wishful thinking when it comes to residents who are newly eligible for Medicaid. Maryland’s estimate assumes that far fewer than the number eligible will join the program — which matches experience. Virginia’s estimate assumes about 270,000 newcomers to Medicaid, the most conservative of several enrollment models.

This is all very interesting to think about and one wonders if states will actively encourage the eligible expanded population to enroll in the program. Theoretically, states have an incentive to enroll less people and consequently spend less state dollars on Medicaid. Over time, the federal matching fund will decrease and states will have to cover a higher percentage of the cost for the expanded population and so they could be encouraged to launch a massive campaign beginning in 2014, when the federal matching rate is at its highest. Since most applicants stay in Medicaid temporarily, the long term costs of the expanded population may be of lesser concern.

The article goes on to note that the “savings” from the expanded Medicaid provision (in terms of less state spending on uncompensated care) are “fuzzy” and for now states will be busy performing a cost benefit analysis for the new spending requirements. But as we move forward, some states will grow accustomed to spending more money on health care and these kinds of expenditures won’t be seen as too controversial. Or, alternatively, the federal government will step in and provide some extra funds to prevent states from limiting eligibility.