Study Says Medicaid Expansion Would Cost State
A possible Medicaid expansion in Mississippi will provide short-term gains, but may cost the state more in the long term, an analysis conducted by the University Research Center finds.
The study estimates the costs to the State of expanding Medicaid enrollment under the provisions of the Affordable Care Act and compares these to General Fund revenue generated through the influx of Federal dollars into the State’s economy. While the study examined three participation scenarios, the high participation (95 percent) scenario is determined to be the most likely to occur.
In the first three years of the analysis, the State experiences a net gain from Medicaid expansion as the State’s portion of the costs are limited to additional administrative costs and economic benefits are enjoyed by the additional expenditures in health care. In 2017, when the Federal match begins to decline, the benefits are essentially offset by the costs.
“While the study shows that Medicaid does not “pay for itself,” much of the costs are offset by additions to General Fund through tax revenue generated by the influx of federal expenditures,” said Dr. Darrin Webb, State Economist. “Policy makers will have to determine if the long-run health benefits of Medicaid expansion outweigh these remaining costs.”
In 2018 and beyond, the State’s costs exceed the additions to the General Fund. For example, in the year 2025, it is expected that the state will spend $152 million for Medicaid expansion. The influx of Federal dollars however will generate $63 million in General Fund revenue, yielding a net burden to the State of $96 million. By 2025, the state will have spent $556 million on Medicaid expansion between 2014 and 2025, under the high participation scenario. Under the low participation scenario (75 percent) the cumulative costs are estimated to be $497 million. Net state fiscal burden is not significantly impacted by the participation rate.
The study is available on the URC website: http://www.mississippi.edu/urc/downloads/medicaid-oct-16.pdf.