Q. I hear people saying Medicaid expansion is a great idea and that the federal government pays for it. But doesn’t the federal government only pay for a few years, and then the state is on the hook for the costs?
A: States will never be responsible for more than 10 percent of the cost of expansion. The federal government pays the full cost of expansion for three years, then their portion gradually drops to 90 percent by 2022, and stays there permanently. States that expand Medicaid are getting a great deal.
States that don’t expand Medicaid are going to be in a very tight spot, especially after the federal Disproportionate Share Hospital payments are mostly phased out by 2020 (because Medicaid expansion was intended to be universal, so there wasn’t supposed to be much uncompensated care to offset with DSH payments).
In states that aren’t expanding Medicaid, there’s still a large population of uninsured people. They will still need emergency care, and unfortunately will often need to use emergency rooms in order to treat chronic conditions that could be more efficiently managed (and at a much lower cost) by a primary care doc if the patients had insurance.
When these uninsured residents receive emergency care, everyone in the state, including the hospitals and the insured population, ends up footing the bill eventually.
Medicaid expansion is a much better plan than trying to manage a large uninsured population by relying on uncompensated care – especially since the federal government will always pay for at least 90 percent of the additional costs created by Medicaid expansion. The remaining red states are likely to eventually come around once they see how much money it’s costing them to resist Medicaid expansion.
As of November 2015, 30 states and the District of Columbia had expanded Medicaid. Five of them had done so since mid-2014. There are still 20 states that have not expanded Medicaid; some of them will consider it during the 2016 legislative session, but it will probably going to take several more years before Medicaid expansion is a reality nationwide.