Medicaid Expansion will Bankrupt States

The Patient Protection and Affordable Care Act (PPACA) is expected to add up to 16 million more Medicaid enrollees and expand eligibility for families. Although the federal government will pay 100 percent of the cost of the newly eligible, newly enrolled populations and 95 percent of the costs through 2019, hidden costs will strain already tight state budgets.


The National Center for Policy Analysis outlines four major problems with the PPACA.

  • The Cost of Enrolling the Already Eligible
    With 10 million to 13 million uninsured people already eligible for Medicaid, the cost of covering these new enrollees must be paid for under the current federal matching formula. Many States will find the cost of their Medicaid programs significantly higher.
  • Low Medicaid Provider Payments
    Low provider reimbursement rates make it more difficult for Medicaid enrollees to find physicians willing to treat them compared to privately insured individuals. States will bear much of the cost of keeping Medicaid provider fees at a level necessary to ensure enough physicians are willing to participate in the program
  • Lower Payment to Safety Net Hospitals
    Disproportionate share hospital (DSH) payments are used to compensate hospitals that treat a disproportionate share of indigent and uninsured patients. The PPACA reduces DSH payments by about one-quarter through 2020. Beginning in 2018, annual reductions are about $5 billion per year.
  • Crowd Out of Private Insurance
    It is reasonable to predict that much of the increase in Medicaid rolls will be individuals who were previously privately insured, meaning the number of uninsured will not fall as expected.

Devon Herrick, a senior fellow with the National Center for Political Analysis concludes that although the federal government will pay much of the costs, states will still find their share unaffordable.


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