Cost of opting out of Medicaid expansion

The Affordable Care Act, or Obamacare, originally sought to coerce states into expanding Medicaid to everyone who makes up to 133 percent of the federal poverty level. States that refused to go along with the expansion would have been denied federal Medicaid funding. However, in the Supreme Court ruling that upheld health reform, the justices also found that such coercion was unconstitutional. Now, the states can decide whether or not to enact the Medicaid expansion.

Alaska is one of seven states that is still deciding. Thirteen have opted out and Iowa is trying to create its own policy.

Most governors of the states that have either opted out of the expansion or are undecided, including Gov. Sean Parnell, have cited costs of expansion.

But a recent study by Rand Corp. published in the peer-reviewed journal Health Affairs calculates the impact of the states opting out of the Medicaid expansion, and finds that opting in is good fiscal policy:

With fourteen states opting out, we estimate that 3.6 million fewer people would be insured, federal transfer payments to those states could fall by $8.4 billion, and state spending on uncompensated care could increase by $1 billion in 2016, compared to what would be expected if all states participated in the expansion. These effects were only partially mitigated by alternative options we considered. We conclude that in terms of coverage, cost, and federal payments, states would do best to expand Medicaid.

Currently, about 125,000 Alaskans are without insurance. Because health care is so expensive here — more expensive than anywhere else in the country — many who are insured only have catastrophic coverage. Medicaid expansion in Alaska would cover roughly 32,000 Alaskans by 2014, the time when the Medicaid provision of the law would be enacted. The federal government will cover all of the costs of that expansion for the first five years. By 2020, the states will pick up about 10 percent of the costs.

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