Expanding Georgia’s massive Medicaid health care program would cost the state roughly $2.5 billion over a decade, while providing half a million poor, uninsured Georgians with coverage, a new study estimates.
Under a Medicaid expansion — a pillar of the Affordable Care Act — the federal government would pay 100 percent of the costs for newly eligible enrollees the first few years, though that would later fall to 90 percent. The result: more than $33 billion in new federal money would flood into Georgia over a 10-year period, according to the study released Monday by the nonprofit Kaiser Family Foundation.
“The economics of this are very strongly in favor of adopting the expansion,” said John Holahan, study co-author and director of health policy research at the Urban Institute.
The study is the latest analysis of the cost of expanding Medicaid under the health law — a decision state leaders across the country are debating as they continue to struggle with huge budget shortfalls.
Gov. Nathan Deal has said Georgia can’t afford to expand the program, which is already facing a shortfall of hundreds of millions of dollars, even with the substantial federal help. Deal’s budget office pegs the cost of Obamacare and a Medicaid expansion to the state at $3.7 billion through 2022.
Deal has also expressed concern that the federal government — already facing a $16.3 trillion deficit — won’t hold up its end of the bargain.
Advocates of entitlement programs have long lowballed future costs to taxpayers, Deal spokesman Brian Robinson said.
“Regardless of whether the new costs are $2.5 billion, $4.5 billion or $6.5 billion, the state of Georgia doesn’t have the money to pay for it without a huge tax increase, crowding out all other spending or both,” Robinson said.
Proponents of expansion argue the state’s estimates don’t include potential savings that could result by lowering the state’s costs of caring for uninsured patients and keeping people healthier and out of the hospital. About one in five Georgians doesn’t have insurance.
Nationwide, state Medicaid spending would rise by $76 billion from 2013 to 2022, an increase of less than 3 percent, if all 50 states expanded the program, the Kaiser study concludes. The federal government would shell out an additional $952 billion.
The health law calls for states to expand their Medicaid programs in 2014 to Americans with incomes up to 133 percent of the federal povery level, or $31,000 for a family of four. But the U.S. Supreme Court’s June ruling on the law made the expansion optional. States can opt to expand in the future.
Holahan noted that states that don’t expand will still see increased Medicaid costs as a result of other provisions of the law, such as the simplification of the enrollment process.
Expanding Medicaid will likely be more costly for states in the South, such as Georgia, that have more restrictive programs. Meanwhile, some states that have already expanded coverage, such as New York and Maryland, may see savings because of more federal dollars for groups they already cover, according to the study.
In Georgia, Kaiser estimates the cost of expanding Medicaid would equal less than 1 percent of the state’s general fund spending.
“For a modest increase in spending, we get a pretty dramatic increase in coverage,” said Tim Sweeney, a health care policy analyst at the Georgia Budget and Policy Institute.
Georgia could save $726 million in uncompensated care by expanding Medicaid, according to the Kaiser report.
Consumers ultimately bear the cost of caring for the uninsured in higher insurance premiums, Sweeney said. He added that it’s more cost effective and efficient to provide people with coverage where they can get preventive treatment and other services to keep them healthier than for them to go without coverage and ultimately end up in the emergency department, the most expensive setting for care.
Medicaid, however, is already crowding out other services the state would like to provide, such as road improvements, and there is no guarantee the federal government will be able to afford the expansion, said Ron Bachman, a senior fellow at the Georgia Public Policy Foundation, an Atlanta-based think tank focused on market-oriented proposals.
“Someone thinks it’s free money when it’s not,” he said. “If we go bankrupt, there’s no way to bail out the United States.”
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