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AHCA: Medicaid Expansion Resister States Face $684B Hit

By Christopher Cheney  
   June 12, 2017

If the American Health Care Act (AHCA) becomes law, states that resisted expanding Medicaid under Obamacare will take a bigger financial blow than expansion states, Missouri Hospital Association research shows.

After spurning billions to expand Medicaid under the Patient Protection and Affordable Care Act (PPACA), nonexpansion states are at a financial disadvantage in repeal-and-replace legislation before Congress, a hospital association study says.

"The compensatory measures for nonexpansion states in the AHCA falls more than $680 billion short of providing true equity and fairness in the system for states that opted out of Medicaid expansion," concludes the study, which features state and federal Medicaid expenditure data.

The Missouri Hospital Association (MHA) published the study, "The American Health Care Act Fails to Restore Parity in Medicaid Spending for Nonexpansion States," on June 6.

The MHA research found the Republican Party's plan to repeal and replace Obamacare would perpetuate the Medicaid spending gap between expansion and nonexpansion states: "By 2025, [nonexpansion] states will have foregone an additional $683.9 billion in net federal outlays for Medicaid, compared to states that have opted to expand the program under the existing law. These estimates project that federal spending on Medicaid in expansion states by 2025 will be $1,936 per capita compared to $1,158 in nonexpansion states—a relative difference of 67%."

Nineteen states have not embraced Medicaid expansion.

'Extremely Disadvantaged Starting Point'

The MHA study, prepared by MHA Vice President of Research and Analytics Mat Reidhead, highlights three Medicaid-spending rollback mechanisms proposed under the AHCA:

  • Starting in 2020, the AHCA would phase out the 90% federal match rate for Medicaid expansion beneficiaries, a population of mainly low-income adults who were ineligible for Medicaid coverage before passage of the PPACA in 2010

  • The AHCA would require continuous enrollment for grandfathered beneficiaries of Medicaid's enhanced Federal Medical Assistance Percentage (FMAP). The Congressional Budget Office (CBO) estimates that more than 95% of Medicaid expansion beneficiaries would fall out of the program by 2025 under this element of the AHCA.

  • In 2020, the AHCA would establish a capped funding model for federal spending on Medicaid

"Altogether, the CBO estimates that the AHCA would reduce federal outlays for Medicaid by $834 billion between 2017 and 2026," the MHA study says.

The AHCA would cement a Medicaid-spending edge that expansion states gained under the PPACA, the study says. "States that have opted to expand Medicaid under the ACA are estimated to receive significantly larger shares of federal Medicaid spending under the AHCA. This is largely due to the extreme growth in Medicaid spending observed during the first two years of the program, and projected to continue until the major provisions of the AHCA are enacted in 2020."

On a per capita basis, the Medicaid-spending gap is a "relative difference of 110%," the study says.

"Net federal expenditures for full-expansion states increased 91% between 2013 and 2015, while partial-expansion (1115 waiver) states experienced 71% growth and nonexpansion states saw just a 13% increase. Combined, in 2015, Medicaid expansion states received $1,578 per capita in federal Medicaid spending compared to $753 per capita in nonexpansion states."

As passed in the US House last month, the AHCA fails to close this spending gap, the MHA study says. "Despite provisions of the AHCA to restore parity in Medicaid spending for nonexpansion states, this analysis suggests that they will not recover from their extremely disadvantaged starting point in 2020, when the major provisions of the AHCA are enacted."

Based on historical and projected Medicaid-expenditure data, nonexpansion states are facing more than a half-trillion-dollar hit under the AHCA, the study says. "Nonexpansion states will have collectively foregone $683.9 billion in federal Medicaid spending under the AHCA by 2025. This includes an actual difference of $96 billion observed during the first two years of Medicaid expansion, and a projected additional $588 billion between 2016 and 2025."


Christopher Cheney is the senior clinical care​ editor at HealthLeaders.

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