Study: Federal health care reform not too hard on states

A study by the Kaiser Family Foundation suggests that health care reform could be a bargain for states, bringing in billions of dollars in new federal funding to help cover people who cannot afford health insurance.

In addition to setting new rules for buying and selling private insurance, the Patient Protection and Affordable Care Act, signed by President Barack Obama in March, will make Medicaid available to childless adults and people with incomes up to 33 percent above the federal poverty line.

Critics are saying the “bargain” price is too high for some cash-strapped states. Under the study’s low participation scenario, Florida’s Medicaid spending would increase nearly two percent, or just over $1.2 billion a year. Those cost increases are part of the basis of the lawsuit filed by state Attorney General Bill McCollum challenging the constitutionality of health care reform (the full text of McCollum’s original filing is available below).

In a briefing on the study’s findings, Alan Weil, executive director of the National Academy for State Health Policy, likens the Medicaid expansions to a pair of $200 shoes on sale for $20.

“If you look in your wallet and you have a 10 and a couple of ones and you’ve got some change in the bottom of your pocket and you’re not sure you can come up with the $20, it doesn’t really matter what a good deal it is,” he says.

McCollum’s suit claims, in part, that the health reform act “requires that Florida vastly broaden its Medicaid eligibility standards to accommodate upwards of 50 percent more enrollees” and “requires Florida to spend billions of additional dollars” to pay for the additional Medicaid recipients and administrative costs associated with the act.

The suit complains:

This onerous encroachment occurs at a time when Florida faces having to make severe budget cuts to offset shortfalls in its already-strained budget, which the state constitution requires to be balanced each fiscal year (unlike the federal budget), and at a time when Florida’s Medicaid program already consumes more than a quarter of the State’s financial outlays.

The federal government will cover a larger portion of costs for people who become eligible for Medicaid under the new rules than it does under the current system, but some states will benefit more than others, the study shows. On average, states will kick in just under 5 percent of the costs of the Medicaid expansion, and the federal government will contribute the rest, under the study’s low participation scenario.

Under the same scenario, Florida will have to contribute slightly more than the national average — closer to 6 percent. In exchange, the study predicts a 44 percent decrease in the number of uninsured Floridians.

The numbers cover the years between 2014 and 2019, and are based on various assumptions and projections. In general, they probably underestimate the benefits to states, according to John Holahan director of the Health Policy Research Center at the Urban Institute, which contributed to the study, which can be read or downloaded in its entirety here:

Kaiser Study on Medicaid and the State Spending

Read or download McCollum’s original court filing in full:

McCollum Health Care Lawsuit (Orginal)

[Pic via commons.wikimedia.org]