A Closer Look: How Neighboring States Are Assessing The Value of Medicaid Expansion

August 22nd, 2012

Recently, MEPC’s blog covered changes to the state’s health care employment. Today’s post reflects efforts in two neighboring states –Arkansas and Alabama- to assess the broader economic effects of extending health insurance to more adults through Medicaid expansion.

Recently the Arkansas Department of Public Health released findings that that Medicaid expansion would save the state of Arkansas $372 million through 2021. After 2021, Arkansas projects that extending health insurance coverage to thousands of low-income adults will cost $3.5 million more than if Arkansas chose not to extend Medicaid coverage to more residents.

The graphic below reflects Arkansas projections of year-by-year cost savings through 2021 and the projected costs after 2021.

How did Arkansas Department of Public Health determine the cost savings associated with expanding Medicaid? The agency compared costs with three areas of potential savings including:

A reduction in the financial losses hospitals face when they care for uninsured patients. As more individuals become eligible for Medicaid, hospitals don’t lose as many resources because more adults have health insurance to help cover their costs.
As millions of dollars come into a state through Medicaid expansion, those dollars generate state tax revenue which goes into the state’s General Fund to offset some of the state’s cost of expanding Medicaid coverage. (Even after 2021, the federal government pays $9 for every $1 a state spends on making Medicaid more accessible).
Savings are also generated when families who previously spent a substantial portion of their income on medical bills receive health coverage.

Another of Mississippi’s neighboring states, Alabama, is also undergoing an effort to more closely examine the effects of extending Medicaid coverage to more of the state’s adults. Alabama’s interim director of Medicaid is preparing an economic impact study to assess the possible expansion’s contribution to Alabama’s broader economy.

The discussions in Arkansas and Alabama stress the importance of examining the wider economic benefits of expanding health insurance coverage through Medicaid in Mississippi as well, so Mississippi’s leaders have a comprehensive perspective on the state’s choice to extend coverage to more Mississippi families.

Author: Sarah Welker, Policy Analyst