The Medicaid Expansion is Just Good Economics

Michael HiltzikMichael Hiltzik reads the Kaiser Family Foundation reports so we don’t have to, A New Sign That Opting Out of Medicaid Expansion Will Cost States Money. And as the title indicates this one is a doozy. But it ain’t surprising. It turns out that those states who have not accepted the Medicaid expansion are seeing their total state expenditures go up much faster next year than this year. But in states that did expand Medicaid, the rate of increase will go down.

Let me unpack this. Medicaid exists in every state in the union. Just under normal circumstances, there are more people born and so total enrollment expands. What’s more, medical inflation is still higher than overall inflation. (Obamacare is helping to slow that.) So these two factors cause state Medicaid costs to increase each year. But there is also an increase in the number of eligible people who are participating in the program. This has caused the overall increase of state spending from year to year to go down from 6.6% in 2014 to 4.4% in 2015. So the state expenditures in the states that expanded Medicaid are still growing, but the rate is decreasing.

In the states that did not expand Medicaid, the situation is much worse. The state spending from year to year has gone up from 6.1% in 2014 to 6.8% in 2015. And this is despite the fact that these states are not, you know, expanding Medicaid to the working poor. They are putting increasing pressure on their state budgets and all they get for it is that warm feeling that that they are sticking it to Obama.

Here are Figures 2 and 3 from the report combined by me to make for clearer viewing:

Medicaid Expansion Comparison

In addition to this, states will be saving money on things like providing care in prisons and in programs to reimburse hospitals for unpaid care. Hiltzik lays it out:

These findings mock the claims of expansion obstructionists — all Republicans — that they’re being fiscally responsible by opting out of the Medicaid expansion. Since the federal government is picking up the tab, taxpayers in those states aren’t evading the costs — they’re just paying via their federal taxes for Medicaid in states other than their own.

One thing Hiltzik doesn’t go into is the pure economics of this (although he has in the past). This is just a question of the federal government giving the states free money. To a first approximation, the states are just getting back money that their people have already paid in taxes. So this whole Republican hissy fit makes no sense. In addition to reducing the costs of the government, it is also a stimulus program for the state economy. The extra money going into the state will create jobs.

The truth is, what the Republicans are doing is totally bizarre. It is something that goes against any idea of rational actors. These Republican state legislators and governors are directly hurting themselves, the people they represent, and their state. And it is all done for what? To send a message to the federal government? As Hiltzik noted, “The last holdouts look increasingly foolish.” And that’s saying something, given how foolish they already looked.

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About Frank Moraes

Frank Moraes is a freelance writer and editor online and in print. He is educated as a scientist with a PhD in Atmospheric Physics. He has worked in climate science, remote sensing, throughout the computer industry, and as a college physics instructor. Find out more at About Frank Moraes.

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