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How Medicaid Expansion Is Helping Cut U.S. Healthcare Expenses by $2.6 Trillion

The Robert Wood Johnson Foundation recently reported that Medicaid expansion outlined under the Affordable Care Act, in tandem with lower Medicare and private health spending projections, will lower U.S. healthcare spending by $2.6 trillion between 2014 and 2019.

Considering that annual U.S. healthcare spending is currently around $3 trillion, Medicaid expansion promises enormous savings for state governments and their citizens.

 

Medicaid Makes States Stronger

 

Adopting Medicaid expansion benefits states in two distinct ways.

First, the bolstered Medicaid program provides insurance to those who were previously difficult to insure and now covers millions of working people. More federal money allows states to care for individuals who struggled to find proper coverage under the old system, including working people, pregnant women, and inmates. Additionally, it covers those who suffer from mental illnesses, disabilities, HIV/AIDS, and breast and cervical cancer.

What’s more, Medicaid expansion creates new jobs and broadens states’ tax bases. Federal dollars strengthen states’ economies by providing subsidies that help create budget space for the salaries of healthcare workers, administrative workers, and other positions. Healthcare dollars are reinvested into communities, rural hospitals thrive, and states collect additional revenues.

 

How Expansion Saves Taxpayer Money

 

In states that have embraced it, Medicaid expansion has saved taxpayers millions in healthcare costs.

When an uninsured person visits the ER, hospitals provide uncompensated emergency care. These services add up to millions of dollars each year, not to mention the hidden costs incurred by the lack of preventative care. To keep them afloat, state governments’ charity care funds reimburse hospitals for these visits.

States that have adopted Medicaid expansion, however, have substantially fewer uninsured citizens than non-expanded states, and, as such, require less money from the state for charity care. In 2015, the year after Arkansas expanded Medicaid, it saved an impressive $17.2 million on uncompensated care costs.

Rural areas that struggle to provide care for the uninsured benefit from expansion even more than their urban counterparts. Medicaid expansion bridges the gap for working individuals who would otherwise earn too much to qualify for government assistance but cannot afford care from private providers.

 

Which States Are Saving the Most?

 

Interestingly enough, three states that are reaping huge savings from Medicaid expansion are all led by Republican governors who once opposed expansion:

  • Kentucky: Kentucky’s initial prediction that just 200,000 people would join Medicaid’s rolls following its 2014 expansion fell far short of the reality. At last count, 388,000 Kentuckians have signed up, partially thanks to the lack of restrictive enrollment periods. Expansion has had a positive effect on the state’s economy. Since the rollout, the Bluegrass State has seen a net gain of nearly $1 billion, which will only grow as more people enroll in the program.

  • New Jersey: While detractors argued in 2013 that expansion would cost New Jersey $1.2 billion to implement, the results have been quite the opposite. Gov. Chris Christie has pointed out that expansion has already helped the state save money. Charity care in New Jersey is slated to decrease by $150 million in 2016, allowing the state to spend an additional $60 million training new doctors — triple its current amount spent on graduate medical education.

  • Arkansas: Already notable for reducing its charity care costs by $17.2 million in 2015, Arkansas isn’t just saving money; it’s also improving access to care. Thanks to Medicaid expansion, the uninsured rate of low-income Arkansas residents halved from 40 percent to just 19 percent from 2013 to 2014. For fiscal year 2015, the state’s cumulative savings clocked in at nearly $120 million. In addition, the state calculated $34.4 million in new revenues in 2014-2015 from taxes on providers and health plans, growing its budget by $150 million in 18 months.

Despite the partisan rhetoric surrounding Medicaid, states on both sides of the aisle are seeing the benefits and importance of embracing expansion. To improve access to care, reduce spending, and grow revenues, state legislatures across the nation must move to adopt Medicaid expansion.

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