Christina Romer To Governors: Health Reform Will Produce Net Savings Of $83 Billion For Your States

Governors are worried that the proposed expansion of Medicaid — the most efficient way to cover lower income Americans — would strain local budgets and force states to “either raise taxes or make further cuts to state budgets.”

But today, in a speech delivered today at the Center for American Progress, Christina Romer, the chairwoman of President Obama’s Council of Economic Advisers (CEA), stressed that the savings from health reform would outweigh the costs of Medicaid expansion:

Indeed, we believe our measured expenditures are a reasonable estimate of the actual savings, even taking into account that reform will not eliminate all uncompensated care. This is true because we are virtually certain that there is a substantial amount of state and local spending on care for the uninsured that we have not yet identified. Expanding our projections to all fifty states and the District of Columbia implies savings of roughly $116 billion to state and local governments between 2014 and 2019.

For example, CBO estimates that under the Senate Finance Committee proposal, states will spend about $33 billion on increased Medicaid and the Children’s Health Insurance Program (CHIP) over the same 2014–2019 period. Even taking account of this cost, there is therefore a net savings to state and local governments of some $83 billion over six years. When you consider that we are paying for all of the Federal expenditures with other savings and revenue increases, this is $83 billion of additional government saving.

In other words, expanding Medicaid is cheaper than paying for the same population in the emergency room. Recent CEA research of health care spending in 16 states found that those states are spending “at least $4.2 billion on care for the uninsured each year.” “We estimated that they are spending another $600 million on higher insurance premiums for state and local government employees because of the hidden tax uncompensated care adds to all private insurance premiums. All told, the states in our sample are spending at least $4.2 billion on care for the uninsured each year.”


“Health care reform that expands insurance coverage will greatly reduce these state and local expenditures for uncompensated care,” Romer predicted.