16 Million New Medicaid Enrollees Will Strain States

While the federal government will pay much of the costs related to the Patient Protection and Affordable Care Act (PPACA), states will still find their share unaffordable. 

That’s the analysis reported by Devon Herrick, a senior fellow with the National Center for Policy Analysis.

The Patient Protection and Affordable Care Act (PPACA) is expected to add up to 16 million more Medicaid enrollees and will significantly expand eligibility for families with incomes up to 133 percent of the federal poverty level. The PPACA requires states to streamline their enrollment process – making it easier for eligible populations to enroll and retain Medicaid coverage.

Initially, the federal government will pay 100 percent of the cost of the newly eligible, newly enrolled populations and 95 percent of costs through 2019. However, there are hidden costs that will strain state budgets.

According to various estimates, there are 10 million to 13 million uninsured people who are already eligible for Medicaid – but not enrolled. When the individual mandate to obtain health coverage takes effect in 2014, many of the uninsured are likely to be swept up in outreach efforts, Herrick reports.

Although the cost of enrolling newly eligible individuals will be paid by the federal government, the cost of covering those previously eligible for Medicaid must be paid for under the current federal matching formula. Many states will find the cost of their Medicaid programs higher as a result. 

For example, a decade after the PPACA’s implementation, Texas Medicaid rolls are predicted by the Texas Department of Health and Human Services to rise by 2.4 million people.  Of these, only 1.5 million enrollees will be newly eligible. About 824,000 individuals will be those previously eligible but not enrolled. The federal government will contribute a much smaller share of the cost of these previously eligible enrollees compared to newly eligible enrollees.

On the average, reimbursements for Medicaid providers are only about 59 percent of what a private insurer would pay for the same service, but it varies from state-to-state.   The reports notes that New York pays primary care physicians only about 29 percent of what private insurers pay for primary care.

Many of the newly insured under Medicaid will likely be those who previously had private coverage. Research dating back to the 1990s consistently confirms that when Medicaid eligibility is expanded, 50 percent to 75 percent of the newly enrolled are those who have dropped private coverage. In addition, a 2007 analysis by MIT economist Jonathan Gruber, found, on average, about 60 percent of newly enrolled children in State Children’s Health Insurance Program were previously covered privately. Thus, it is reasonable to conclude that much of the increase in Medicaid rolls will be individuals who were previously privately insured, meaning the number of uninsured will not fall as expected.

“Everyone wants something for nothing forgetting that someone ultimately has to pay the cost,” explains Jesse Slome, executive director of the American Association for Long-Term Care Insurance.  “In two decades we will have two classes of citizens.  Those with the means to pay will have choice and con

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