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Medicaid Expansion is Good for State Budgets

Recent research provides further evidence that Medicaid expansion can be implemented either cost-neutrally or while achieving cost savings for states.

Two recently published studies have examined the impact on state budgets in states that have expanded Medicaid.  Both conclude that Medicaid expansion did not result in forcing legislatures to cut priorities like education, public safety, and transportation, nor have they had to raise taxes. 

In a paper published by the Commonwealth Fund in May of this year, author Bryce Ward examined the experiences of states that had previously expanded Medicaid. Looking at the differences among programs and projections for future costs, Ward concluded:

“It is not necessary to cut other spending or raise revenue… to balance their budgets. Thus, the net cost of Medicaid expansion to states is different from the “sticker price.” In some cases, the net cost is negative.”         

A similar study of Michigan’s expansion showed similar findings:

“We find that Medicaid expansion in Michigan yields clear fiscal benefits for the state, in the form of savings on other non-Medicaid health programs and increases in revenue from provider taxes and broad-based sales and income taxes through at least 2021. These benefits exceed the state’s costs in every year.”

In the Journal of Health Politics, Policy and Law, the authors of the Michigan study concluded:

“While these results are specific to Michigan’s budget and economy, our methods could in principle be applied in any state where policy makers seek rigorous evidence on the fiscal impact of Medicaid expansion.”

These studies are consistent with previous academic works that have looked at the experience of states across the nation that have expanded Medicaid and found similar results. 

In a 2017 analysis published in Health Affairs, Economists Benjamin D. Sommers and Jonathan Gruber examined data from the National Association of State Budget Officers (NASBO) and concluded:

“We found that the first two fiscal years of the ACA’s Medicaid expansion led to large increases in federal spending on Medicaid, but expansion states did not experience any significant increase in state-funded expenditures, and there is no evidence that expansion crowded out funding for other state priorities.”

A report done by the Health Management Associates, the consulting firm is the former employer of the current administrator for CMS, looked at data from Arkansas, Indiana and Ohio came to similar conclusions.  One of the “lessons learned” in the paper was:

“States considering Expansion now should take advantage of data from early expanders in the region to support more accurate projections on take-up, costs, etc., and to refute myths about Expansion taking funds away from education and other state priorities.”

These studies are consistent with analysis done previously by the Missouri Budget Project and others that looked at Missouri specific data and have come to similar conclusions.

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