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October 18, 2013

Eye on Va. Budget: Not Expanding Medicaid Has Real Consequences

As the next two-year budget is developed, Governor McDonnell and legislators should keep in mind that some growth in state Medicaid costs could be eased if lawmakers expand Medicaid.

In Virginia, and the other states not moving forward with expansion, state Medicaid spending is forecast to go up 6.1 percent in 2014. But states that are expanding Medicaid are expected to see their spending increase by only 4.4 percent, according to a new report by the Kaiser Commission on Medicaid and the Uninsured.

This is due to the combination of two things. First, people who are currently eligible for Medicaid but haven’t enrolled are likely to come into the program, regardless of expansion, which increases state costs. Second, states that don’t expand will forgo savings from using federal money, in place of state funds, for services provided to poor, uninsured adults. Here’s how it works.

The number of people who enroll in Medicaid in all states will go up as people learn about the affordable health insurance options available to them. People who are unaware that they are already eligible for Medicaid will be encouraged to enroll, because of the significant outreach efforts now underway and the requirement to have health coverage in 2014. Virginia’s Medicaid office predicts that as many as 44,000 people who are eligible but not enrolled will enroll. The federal government will pick up half the costs of health care services provided to these newly enrolled people, and Virginia will pay the other half.

If Virginia expands Medicaid, the state will be able to save money on care it is now providing uninsured poor adults who will become eligible for Medicaid with the federal government paying the full tab, including mental health care, substance abuse treatment, and corrections-related health care. All told, net savings from Medicaid expansion would average about $135 million per year in the upcoming budget cycle. That’s because expanding Medicaid would allow the state to use federal funds instead of state dollars for these programs that already provide care to the uninsured in Virginia. If the state does not expand Medicaid, it can’t realize those savings.

As part of Medicaid expansion, nearly 400,000 uninsured Virginians, including many who are working in the state’s most important industries, will gain access to quality, affordable care. This will be completely paid for by the federal government through 2016, and after that, the federal government will pay for no less than 90 percent.

Expanding Medicaid in Virginia will help working adults get the coverage they need to stay healthy and productive. And it will ease state budget pressures as Virginia continues to emerge from the deepest recession in generations.

– Massey Whorley, Senior Policy Analyst

The Commonwealth Institute

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