Medicaid Expansion a Real Budget-Buster

Cato scholar Jagadeesh Gokhale has a new study on the effect the Affordable Care Act will have on the Medicaid budgets in populous states. He explains:

Unless it is repealed, the Patient Protection and Affordable Care Act of 2010 (PPACA) promises to increase state government obligations for Med­icaid by expanding Medicaid eligibility and in­troducing an individual health insurance man­date for all U.S. citizens and legal permanent residents.

But PPACA provides states with no additional federal financial support for new enrollees among those eligible for Medicaid under the old laws. That makes increased state Medicaid spending from higher enrollments by “old-eligibles” virtually certain as they enroll in Medicaid in response to the individual mandate to purchase health insurance.


  • California and Florida’s Medicaid expenditures fund­ed by general revenue will nearly double by 2020 (from $19.4 billion in 2008 to $35.2 billion in California; and from $6.3 bil­lion in 2008 to $12.6 billion in Florida).
  • Medicaid expenditures in New York State are projected to grow from $23.8 bil­lion to $32.9 billion during the same period.
  • In Texas, Medicaid costs paid by general revenues will rise even faster – from $8.5 billion to $18 billion by 2020.

Comments (6)

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  1. Stephen C. says:

    Think of the politics of this. Federal politicians get to promise benefits that state and local politicians have to pay for.

  2. Bret says:

    This ought to be a wake up call in the state capitals.

  3. Devon Herrick says:

    Proponents of Medicaid expansion argue that the federal government will pay most of the cost (90% to 95%). However, Jagadeesh Gokhale illustrates that in populous states, the funds from states’ general revenue needed to pay for costs associated with Medicaid expansion will about double. Another worry is whether the federal government can afford to continue paying 90% to 95% after 2019.

  4. Bruce says:

    A budget buster for sure.

  5. Jim J says:

    Medicaid is a tremendously beneficent program to help the indigent. The benefits are very rich, modeled after high priced private insurance. Further, there is usually no deductible or copay. Most of us could not afford a health insurance plan that has no deductible or copay. This issue only compounds the increase in cost casued by expanding enrollment.

  6. Boni says:

    Windy Before snniigg on to the plan at school, get a few quotes to see what’s available on your own (that is, with an individual policy). That way, it won’t matter whether you’re a student, full time or part time, or even taking some time off, etc. (it won’t depend on you remaining a student to keep the coverage). Once you have a few sample rates (see below for some links to get prices) you’ll then be better able to compare the school’s offering to what you can get elsewhere see which is the better plan for you. Here’s a few additional tips:1. Don’t buy more coverage than you think you’re likely to use. Plans with lots of really great benefits (low deductible, doctor drug copays, routine checkup benefits, etc.) are really nice, but all that will raise the cost. Are you looking for health insurance or health care financing? The point of insurance is to help you pay for something you can’t handle yourself, like an expensive surgery ($50,000+) or radiation/chemotherapy, etc., etc. (Does your auto insurance pay for routine service, like oil changes, new tires, or a brake job?)2. Even if you buy a plan with a big deductible ($2,500 5,000) you’ll still find plenty of plans that will still include doctor drug copays.3. You may want to contact a local broker near you who specializes in health insurance (see below).4. Remember: your monthly premium is a fixed cost you’ll have to pay, while the actual health insurance benefits are items you’ll face ONLY if you have some health care. Keep your fixed costs down by considering a higher deductible plan.5. Finally, stick with the brand name companies, like Blue Cross, Aetna, Humana, etc There are a lot of plans around that look good, but when crunch time comes for the big claim, there’s no such thing as a free lunch. Don’t gamble with something that might be this critical.Hope this helps a bit!