Medicaid Expansion Could Save Michigan Almost $1 Billion

The Lansing State Journal flagged a new report from a Michigan-based health policy group that found accepting Obamacare’s expansion of the Medicaid program could save the state $983 million in the first decade of operation. In particular, the additional federal dollars to fund mental health services for low-income residents and medical care for inmates will help offset the costs of expanding the program to additional low-income beneficiaries:

“We think it’s a very good deal for the state,” said Marianne Udow-Phillips, the center’s director and former head of the state Department of Human Services under then-Gov. Jennifer Granholm. “We hope this informs the dialogue, so lawmakers can make a better decision.” […]

Udow-Phillips said the bottom line is that hundreds of thousands of Michigan residents will continue to receive insufficient health care if Medicaid is not expanded. In 2010, there were 1.1 million in Michigan without health coverage, and a Medicaid expansion would reduce that number to 290,000 by 2020, according to the report.

If all the states participate in Obamacare’s Medicaid expansion, it is projected to provide health care coverage for 17 million low-income Americans who are currently uninsured. However, nearly 4 million of those uninsured Americans live in states whose governors have already explicitly refused the expansion. Michigan itself has not yet decided whether to participate.

It’s worth mentioning that the savings states will see in the first decade will be greater than savings in future decades. That’s because the federal government covers all the costs of the Medicaid expansion for the first two years, then winds down to 95 percent in 2017, 94 percent in 2018, 93 percent in 2019, and finally 90 percent in 2020. In future decades, states will cover 10 percent for the full ten years. But even then, if the new report’s math is extended to future decades, Michigan would save over $300 million. The Urban Institute estimated last year that the total savings for all state budgets would be between $92 and $129 billion in the first five years if they all participate in the expansion.

Back in July, the state of Arkansas also determined the Medicaid expansion would benefit its budget over the first decade, to the tune of about $350 million. That was right in line with the Urban Institute’s state-specific estimate for Arkansas. And Texas also recently downgraded its extremely pessimistic prediction of $27 billion in state costs from the expansion to a much less pessimistic $16 billion.