Medicaid expansion a good deal for uninsured, state budgets


Federal Medicaid simplification and expansion, one part of federal health care reform, will ensure that nearly all low-income adults in Minnesota and across the country will have access to health insurance coverage. It’s a good deal for those needing health care who can’t afford it. And it’s a good deal for our state budget.

The federal legislation will simplify and expand Medicaid to cover nearly everyone under age 65 with incomes up to 133 percent of the federal poverty line (that’s yearly income below $14,400 for an individual) beginning in 2014. Thousands of Minnesotans would be covered, according to a new report from the Kaiser Family Foundation and the Urban Institute.

  • Nearly 133,000 previously uninsured Minnesota adults would be covered by Medicaid by 2019, significantly reducing the number of low-income adults without insurance. That number could rise to 212,000 if there is more aggressive outreach work to get people enrolled.
  • Between 2014 and 2019, there would be just a 1.2 percent increase in state Medicaid spending, or a total of $421 million from 2014 to 2019.
  • During that same five-year stretch, there would be an increase of $7.8 billion in federal dollars coming to Minnesota for health care.

Currently, the costs for covering individuals on Medicaid are split between the federal and state governments. In Minnesota, for example, the federal government normally pays 50 percent of Medicaid expenses (although the federal government is temporarily paying around 60 percent as part of the federal Recovery Act). Under the new health care reform legislation, the federal government would be responsible for about 95 percent of all new spending to cover individuals under 133 percent of poverty. State health care expenses for these low-income individuals, however, would barely increase.

The payoff for states would be significant. The increase in coverage means fewer people would be relying on state-funded programs and hospital emergency rooms for their health care, reducing state expenses and uncompensated care costs. According to a Washington Post article, states may experience enough savings to offset the small increases in state Medicaid costs. The Kaiser report estimates that by 2019 the number of uninsured adults under 133 percent of poverty would drop by 11 million, or 45 percent, nationwide. 

Although the Medicaid expansion doesn’t go into effect until 2014, some states, including Minnesota, have been given the chance to start early. During the recent legislative session, the Legislature approved a provision to take advantage of this early Medicaid option to cover childless adults under 75 percent of the federal poverty line (that’s yearly income below $8,123 for an individual), a group currently covered through the all state-funded General Assistance Medical Care (GAMC). The action would have cost Minnesota $188 million in additional state spending, but would have netted $1.4 billion in additional federal support. In addition, it would have offered individuals a better set of benefits and providers higher reimbursement rates than under the current GAMC program.

Governor Pawlenty vetoed the proposal. A small door was left open – a compromise agreement allows Governor Pawlenty or the next  governor to opt-in to Medicaid, with a deadline of January 15, 2011.

Minnesota should act quickly on this opportunity. According to the U.S. Census, for the past decade in Minnesota, employer-based health care insurance has been trending downward. As a result, more people have been turning to government health insurance or simply going without insurance. The federal Medicaid expansion will allow more people to access affordable care, save the health care system millions in uncompensated care costs and bring more than a billion in federal health care dollars to our state. Minnesota should take advantage of the opportunity to jump on board.