The Medicaid question: To expand or not expand

For states that have decided not to expand the program for the poor and disabled, it's all a numbers game.

Florida’s Gov. Rick Scott is now urging his state to expand Medicaid under President Obama's health care overhaul, a significant policy shift after it was Scott who helped lead the charge against the new health care law.

But the question states like Florida aren't facing isn't just a political one -- it's economic as well.

Think about it: Washington picks up the tab on expanding Medicaid for the first three years, what’s not to love about that?

Starting next year, individuals and families who earn up to 133 percent of the federal poverty level -- about $25,000 for a family of three -- will become eligible for Medicaid. And the government will pick up 100 percent of the tab.

Again: What’s not to love?

“Well, first of all they don’t pick up 100 percent of the tab,” says Ed Haislmaier, a senior researcher fellow at the Heritage Foundation.

OK?

“The first three years the federal government pays 100 percent of the benefits costs, not the administrative costs,” he says.

But Haislmaier admits that’s small change. The big hit comes when the three years are up and the federal match starts to taper off to 90 percent.

“In Florida, by 2020, this is going to cost $832 million a year,” says Haislmaier.

Plus, the recession pushed more people into poverty and onto Medicaid and state budgets shrank. Expanding Medicaid now is just too expensive. Haislmaier says it doesn’t matter how sweet the offer from Washington.

“That’s like saying I’m going to give you a car and pay 90 percent. If you don’t have the other 10 percent, that’s not a great deal,” he says.

It’s true, states would have to cough up some dough: $5.5 billion over the next decade in the case of Florida.

Urban Institute economist John Holahan says it’s worth it. For every dollar Florida spends, it gets $12 back from the feds.

“There just aren’t that many ways to get that kind of a return, if you are a state official,” he says.

It all comes down to where the state officials want to spend taxpayer dollars, says Joan Alker of the Georgetown University Health Policy Institute. No matter what, she say, you can’t wish away the problem of the uninsured.

“This allows states to use taxpayer dollars in a smarter way by giving them primary and preventive care up front rather than waiting until they get sicker and wind up in the emergency room,” she says.

Alker says the reality in some states is elected leaders will have to spend political capital if they want to make financial sense.

About the author

Dan Gorenstein is the senior reporter for Marketplace’s Health Desk. You can follow him on Twitter @dmgorenstein.

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