We’ve worked hard to try and make clear the many reasons health reform is a major win for Arkansas (see previous blog posts here, here and here).   Among policymakers and politicians, it’s hard to go long without hearing about the high cost of implementing reform at the state-level. Of particular concern is the cost of the state’s Medicaid program and its expansion to many more uninsured adults in 2014.  Besides saving money from having a healthier population, there are several reasons why this logic is false:

Have you seen our federal match rate???  One of the very few advantages of being a poor state is the federal matching rate we receive for Medicaid – typically about 73% of direct Medicaid costs.  We get almost $3 dollars (in some cases more) for every $1 the state kicks in.  Sounds good right?  It’s nothing compared to what we’ll get for the 200,000-plus newly-eligible folks under Medicaid.  For the adults who will become eligible in 2014 (and have access to affordable health insurance for likely the first time), the federal government will initially pay 100% (yes ALL) of the cost for these new folks for the first three years, declining to a whopping 90% by 2019. 

Source: Kaiser Commission on Medicaid and the Uninsured (2010).  Medicaid Coverage and Spending in Health Reform: National and State-by-State Results for Adults at or below 133% FPL.

As the table above shows, the most the state will need to pay for these new folks is 10%, while the feds kick in $9 for every $1 we spend.  A Kaiser Commission study estimates we’ll receive anywhere between $9.4 billion and $11.5 billion from this match between 2014 and 2019.  In contrast, the state will pay, at most, $761 million over the same time period.  Clearly the federal government, not the state, is picking up the vast majority of the tab.  And the feds footing the total bill for three years will certainly generate economic activity that results in revenue... 

Every dollar the state spends on Medicaid yields over $6 in the economy.  A recent report by the Walton College of Business stresses the economic impact of Medicaid spending in Arkansas. The report considers the relationship between Medicaid and the state economy, along with the opportunities that expansion will bring to the state (GDP increase in the healthcare sector, job opportunities, etc.).  It concluded that for every dollar the state spends on Medicaid, the expected output from that dollar is $6.31.  (You skeptics may say, “Sure, but all the impact is due to the federal government match.”   Even without the federal match, the yield would still be $1.60 for every $1 the state invests.)

Health reform will reduce the federal budget by $143 billion over the next decade.   Of course we need to be mindful of the national debt and government spending.  Thankfully, those who crafted health reform had this in mind.  According to the Congressional Budget Office, health reform will save the government money, when nearly all Americans have access to affordable insurance, among other things.   

More to come on the positive aspects of health care reform in Arkansas.  And if you haven’t seen it, check out our summary of the reform package here. 

(Thanks to our fabulous intern, Elizabeth Whittington, for pulling this information together!)