Healthcare reform fallout: Which states could lose financially?

States that have not already expanded Medicaid programs are worried about healthcare reform bringing new financial burdens.

Jason Reed/REUTERS
President Barack Obama signs the healthcare reform bill in the East Room of the White House Tuesday.

Under the new healthcare reform plan, 16 million more people are expected to join state Medicaid rolls. Recognizing the costs involved, lawmakers have tried to cushion the financial impact on states. But many governors believe the expansion of Medicaid will still be too costly for them.

Medicaid is a key part of the plan to expand healthcare coverage in America. From a financial standpoint, some states stand to benefit from the Medicaid provisions – and other states believe they stand to lose.

Eleven states, plus the District of Columbia, could come out as winners. They’re so-called expansion states, which already cover childless adults to some extent. They could gain because the federal government will absorb an increasing amount of their obligations.

The Monitor looked at them earlier Friday.

Now, here’s a look at some of the other states – those that have not already expanded Medicaid. In these places, the new provisions could produce additional financial burdens, according to their governors.

Some officials in such states worry that more people will sign up for the Medicaid plans than expected, thus increasing costs. And they complain that the federal government has “underfunded” programs before, forcing states to make up the difference.

“Governors have balanced-budget requirements, so it would have been shocking to hear them say, ‘Great, ask us to do more,’ ” says Stanley Collender, managing director of Qorvis Communications in Washington. “Governors are usually saying, ‘Don’t ask us to do anything. We can’t afford it.’

The 16 million additional people expected to join state Medicaid rolls will mostly be poor, childless adults. Through 2017, the federal government will provide a 100 percent subsidy to cover such people who live in states being forced to expand Medicaid.

But after 2017, Washington will decrease that subsidy, meaning that states will have to pick up some of the costs. By 2020, the federal subsidy will be about 90 percent.

Concerns in Virginia

One governor who’s worried about the costs is Bob McDonnell (R) of Virginia. The state, he estimates, will add 400,000 residents to its Medicaid rolls. And by 2022, it will cost the commonwealth an additional $1.1 billion, according to a projection from Virginia’s Department of Medical Assistance Services.

“We simply cannot afford this expansion,” Governor McDonnell said in a statement.

In Texas, tough standards now

Most of the states unhappy with the new plan currently have tough standards on Medicaid eligibility. Take Texas. As of January, the state had 2.1 million children who were covered by Medicaid, but only 126,000 parents were covered.

Meanwhile, Texas has some 1 million adults who are uninsured and have an income of less than 132 percent of the federal poverty level. They will be eligible for Medicaid under the new provisions.

It would cost an extra $3.7 billion annually to cover those people, estimates Gov. Rick Perry (R). If all 1 million residents enroll in Medicaid by 2020, the state will be responsible for an extra $370 million per year for healthcare, he calculates.

“As passed by the U.S. House, the bill will cost Texas taxpayers billions more, and drive our nation much deeper into debt,” said Governor Perry in a statement.

Some governors worry that Congress has underestimated the cost. That’s one of the complaints of Arizona Gov. Jan Brewer (R). Yet Arizona is actually an expansion state, meaning its Medicaid coverage already includes childless adults.

Arizona could incur billion-dollar Medicaid deficits in fiscal years 2012 and 2013.

“Based on our state’s own experience with underfunded government health care programs, Arizona can serve as a case in point for what will happen across our nation if your proposal is enacted,” Governor Brewer wrote in a letter to President Obama on March 10.

Mississippi governor: an 'unfunded mandate'

Gov. Haley Barbour (R) of Mississippi goes even further, calling the Medicaid expansion an “unfunded mandate.” He complains that the state will have to cut services and/or raise taxes to pay for its estimated $150 million annual commitment once the federal subsidy decreases.

Governor Barbour has urged state Attorney General Jim Hood to challenge the constitutionality of the federal legislation. Mr. Hood is still making a decision about joining the lawsuit that a dozen or so states have filed in federal court.

Some officials are worried not only about the number of people who are newly eligible for Medicaid, but also about the “welcome mat effect.” In this phenomenon, news about healthcare reform prompts more people who are already eligible for Medicaid to sign up.

“One of the reasons states have a concern is the more people they have out there but not enrolled ... the more potential for an increased state obligation,” says Anne Dunkelberg, associate director of the Center for Public Policy Priorities, a nonprofit in Austin, Texas, that works to improve the lives of low- and middle-income residents.

In the case of Texas, Ms. Dunkelberg estimates, some 600,000 to 700,000 children are eligible for Medicaid coverage but are not signed up.

“States do not get a special bonus for covering kids who they are supposed to be covering. So [Texas] could see an increased tab on ... Medicaid as early as 2014.”

Healthcare reform fallout:

Part 1: Which states are the winners?

Part 2: Which states could lose financially?

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