States that expanded Medicaid saved revenue, report shows

The 31 states and District of Columbia that have expanded Medicaid  are saving millions -- and in some cases, tens of millions -- compared to states that have not adopted the federal program, according to a report released Tuesday by the Robert Wood Johnson Foundation.

The report was prepared by Manatt Health, a consulting firm with the law offices of Manatt, Phelps & Phillips in Washington, D.C.

In January, Manatt Attorney Cindy Mann said hospitals in expansion states fare better financially than providers in states without the Affordable Care Act initiative. Specifically, hospitals in expansion states have less uncompensated care due to a rise in the number of patients covered, said Mann, who formerly directed the Medicaid program for the Centers for Medicare and Medicaid Services.

The newly-released report confirmed that hospitals' uncompensated care costs are estimated to have been $7.4 billion, or 21 percent less in 2014 than they would have been in the absence of Medicaid expansion.

[Also: Medicaid expansion states better off financially, former CMS director Cindy Mann says]

In 2014, expansion states saw a reduction in uncompensated care costs of 26 percent, compared to a 16 percent reduction in non-expansion states, the report said. 

As of September 2015, the percentage of rural hospitals at risk of closure is about twice as high in non-expansion states in comparison to expansion states, it said.

The report identifies several sources of savings and new revenue for expansion states: less state spending on programs for the uninsured; more federal dollars coming to the state for newly eligible Medicaid enrollees -- including funds to cover typically expensive beneficiaries such as pregnant women and high-need populations; and increased revenue from existing insurer and provider taxes.

Most of the 19 states that have not expanded Medicaid have  Republican governors or legislatures controlled by the GOP.  Some policymakers in those states have said they don't want taxpayers to foot the 10 percent of the cost after federal funds for expansion are reduced to 90 percent.

[Also: South Dakota's governor says Medicaid expansion a no-go now]

However, report researchers say budget savings should offset the cost of expanding Medicaid through 2021.

"As some states continue to debate whether or not to expand, they need only look as far as their neighbors for evidence of the economic benefits that result," "said John Lumpkin, MD, senior vice president at the Robert Wood Johnson Foundation.

States that have expanded Medicaid generate savings and revenue which can be used to finance other state spending priorities or offset much, if not all, of the state costs of expansion, according to the report.

[Also: Iowa governor, CMS expand Medicaid coverage through waiver agreement]

For instance, the report said: California saved $250 million in spending on its low income health program in 2015; Colorado saved $96 million in spending in 2015 on childless adults newly eligible for Medicaid; Kentucky saved $21 million on mental health services in 2015; Maryland saved nearly $14 million on uncompensated hospital care in 2015; Michigan saved $19 million on prison health services in 2015; and Pennsylvania saved nearly $108 million in state spending in 2015 because of expansion.

Between 2014 and 2015, Medicaid spending in expansion states grew by half as much as spending in non-expansion states, 3.4 percent compared to 6.9 percent, the report said.

The report is an update to an April 2015 Robert Wood Johnson Foundation State Health Reform Assistance Network issue brief on the impact of Medicaid expansion, examining the budget effects of expansion in a sample of 11 states from all regions of the country, as well as in the District of Columbia.

Twitter: @SusanJMorse