Medicaid Expansion Less Costly Than Expected
May 12, 2014
Katie Sullivan, MA
Many state legislators remain wary of the costs associated with expanding their Medicaid programs under the Affordable Care Act (ACA). However, a new report from the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) that details the budgetary effects of the ACA said differently. CBO and JCT staff determined that the costs associated with expanding their Medicaid programs would be nearly one-third less than expected.

“Relative to their previous projections, CBO and JCT now estimate that the ACA’s coverage provisions will result in lower net costs to the federal government: The agencies now project a net cost of $36 billion for 2014, $5 billion less than the previous projection for the year; and $1383 billion for the 2015-2024 period, $104 billion less than the previous projection,” read the report.

The CBO originally predicted that there would be an influx of people emerging from the “woodwork” to sign up for Medicaid coverage. The woodwork effect describes what happens when people who were eligible for Medicaid before the ACA, but were unaware that they qualified for coverage, sign up for Medicaid benefits. States save on their budgetary expenses because they pay a much higher share of costs for those patients who were previously eligible for Medicaid. 

Another study also determined that newer Medicaid patients tend to be healthier than those who are already enrolled in the program. Steven Hill, an economist with the Agency for Healthcare Research and Quality, said they are often less depressed and not as overweight.

“I think some people were concerned that the people who will be newly eligible might be very unhealthy,” he said. “But that's not what we found. And so they may need even less care than current enrollees.”

Around the Web

Medicaid's New Patients: Healthier, and Maybe Cheaper [Marketplace]

Adults In The Income Range For The Affordable Care Act’s Medicaid Expansion Are Healthier Than Pre-ACA Enrollees [Health Affairs]