Report Projects 2.3 Million Fewer Uninsured if Medicaid Eligibility Were Expanded in 10 States

A report published by the Urban Institute estimates that if the 10 Medicaid nonexpansion states were to implement expansions in 2024, Medicaid enrollment would increase by 5 million people, and 2.3 million fewer individuals would be uninsured. The brief, which updates a series of yearly reports, explores the potential effects of Medicaid expansion on health coverage and costs using the Urban Institute’s Health Insurance Policy Simulation Model.

Since the implementation of the Affordable Care Act (ACA), Medicaid expansion has been the main driver of increased health coverage in the United States, and increasing evidence suggests the states that opted to expand Medicaid eligibility have seen reduced mortality, increased financial security of beneficiaries, and benefits to hospital finances, according to the report.

The ACA provides states the option to expand Medicaid eligibility criteria to encompass nonelderly people within 138% of the federal poverty level, but 10 states—Alabama, Florida, Georgia, Kansas, Mississippi, South Carolina, Tennessee, Texas, Wisconsin, and Wyoming—have not done so as of the brief’s publishing. The report estimates the potential effects on health costs and coverage if these 10 states were to implement Medicaid expansion in 2024 and assuming other factors would remain the same.

Medicaid Expansion Would Increase Enrollment, Coverage Significantly

If the 10 nonexpansion states were to implement Medicare expansion in 2024, the report estimates that enrollment in Medicaid would increase 31.8%, or by 5 million people. Wyoming, Florida, and Kansas would see the greatest increases under expansion at 56.1%, 36.7%, and 35.6%, respectively, assuming these states would see similar take-up rates to those seen in states that have expanded Medicaid already.

“Enrollment could be higher than projected in states with more effective outreach and application assistance,” the authors noted. “Conversely, it could be lower than projected if states impose premiums for Medicaid or additional restrictions such as work requirements.”

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Additionally, an estimated 2.3 million fewer people would be uninsured in current nonexpansion states if expansion were implemented. This 25% decline would affect Mississippi, Alabama, and South Carolina most substantially, with those states seeing 39.4%, 37%, and 32% reductions in uninsured rates, respectively. The smallest reduction would be seen in Wisconsin (8.1%), as adults with income up to 100% of the federal poverty level are already eligible for Medicaid in this state. Texas and Wyoming would be the only remaining states with uninsured rates higher than 10% under Medicare expansion

By age group, the biggest decline in the uninsured rate (32.4%) would occur in young adults aged 19 to 34 years if Medicaid were expanded in the remaining 10 nonexpansion states.

Regarding racial and ethnic groups, the highest gains in coverage under Medicare expansion would be among non-Hispanic Black individuals, at 43.2%. In non-Hispanic White individuals, the rate of uninsurance would fall by 29.2%.

“We estimate that the uninsured rate for non-Hispanic Whites and non-Hispanic Blacks would be close in the 10 nonexpansion states under Medicaid expansion, at about 5%,” the authors wrote. “Thus, Medicaid expansion would eliminate a longstanding inequality in health coverage in these states.”

With or without Medicaid expansion, the authors noted that the Hispanic community would still have the highest uninsured rate of any racial or ethnic group, largely because of restrictions on Medicaid eligibility for immigrants. Still, Medicaid expansion would see declines in uninsurance among Hispanic individuals.

The Costs of Medicaid Expansion

If the 10 remaining states were to expand Medicaid, federal government spending would increase by $24.3 billion (17.5%), which would be partially offset by $731 million in savings on uncompensated care. Kansas, Alabama, and Texas would see the largest spending increases, at 29.1%, 22.3%, and 21.4%, respectively. State spending would increase by $1.5 billion (3%), with this extra cost partially offset by $457 million in state and local government savings on uncompensated care.

“Under the American Rescue Plan (ARP), states that newly expand Medicaid will receive a 5-percentage point increase in their federal medical assistance percentage for 2 years. In other words, the federal government will pay more for nonexpansion Medicaid enrollees,” the authors wrote. “This temporary addition to federal spending is not included in our estimates because we wanted to give an accurate picture of long-term spending under Medicaid expansion.”

The authors also noted that Medicaid expansion has often led to net savings in state budgets due to savings on uncompensated care, higher federal matching rates for some beneficiaries, increased economic activity and tax revenue, state taxes on health care providers and coverage premiums, and a reduced demand for non-Medicaid state-funded programs for low-income uninsured people.

President Joe Biden’s fiscal year budget for 2024 proposes federally funded “Medicaid-like” coverage for individuals in states that did not expand Medicaid, the authors explained. Should the federal government provide individuals with Medicaid-like coverage, they expect there to be reductions in the number of uninsured on par with the reductions that would occur if Medicaid were expanded in the 10 nonexpansion states. However, this would be federally funded and entail individuals enrolling in Marketplace plans, not Medicare.

The authors estimate that this type of coverage would cost the federal government close to $8 billion more in 2024 compared with a scenario where all states expand Medicaid. In this case, states would spend an estimated $918 million less.

“In addition to all these benefits for those gaining coverage, Medicaid expansion improves hospital finances and creates jobs. Many expansion states have found that savings and new revenue because of Medicaid expansion outweigh the state’s share of the cost of new Medicaid enrollees,” the authors concluded. “The ARP added a further financial incentive for states newly expanding Medicaid by raising the share of the costs of currently eligible Medicaid enrollees paid for by the federal government for the first 2 years after expansion. Expanding Medicaid eligibility would thus provide substantial health and economic benefits at little or no cost to state governments.”

Reference

Buettgens M, Ramchandani U. 2.3 million people would gain health coverage in 2024 if 10 states were to expand Medicaid eligibility. Urban Institute. October 23, 2023. Accessed October 31, 2023. https://www.urban.org/research/publication/23-million-people-would-gain-health-coverage-2024-if-10-states-were-expand