Medicaid Costs And The New Health Law Governors are complaining about the new financial burdens that will be imposed on states by a major Medicaid expansion included in the new health law. But a new study by researchers from the Urban Institute finds that the vast majority of the costs will be borne by the federal government, and some states could even save money as a result.
NPR logo

Medicaid Costs And The New Health Law

  • Download
  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript
Medicaid Costs And The New Health Law

Medicaid Costs And The New Health Law

  • Download
  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript


You are listening to ALL THINGS CONSIDERED from NPR News.

The new health care law will extend coverage in part by expanding eligibility for the Medicaid program for the poor. And that doesn't sit well with many governors. In fact, these Medicaid requirements are a key element of a lawsuit filed by more than 20 states challenging the law's constitutionality.

But as NPR's Julie Rovner reports, a new study finds that states may be vastly overestimating how much the Medicaid expansion will cost them.

JULIE ROVNER: The responsibility for funding Medicaid has long been shared between the federal and state government. Rich states have traditionally split the cost 50/50. Poor states have paid as little as about 20 cents on the dollar for every Medicaid enrollee.

But in writing the health overhaul, federal lawmakers knew the states were in dire financial states, so they decided to fund most of the Medicaid expansions, explains Robin Rudowitz of the Kaiser Family Foundation.

Ms. ROBIN RUDOWITZ (Principal Policy Analyst, Kaiser Family Foundation): There's sole federal financing for those who are newly eligible from 2014 to 2016 and then the federal share phases down to 90 percent by 2020.

ROVNER: Amidst complaints from governors about the Medicaid expansions potentially busting state budgets, the Kaiser Family Foundation also commissioned a study by the Urban Institute.

Researcher John Holahan is the study's lead author. He says the governor's financial worries may be overstated.

Dr. JOHN HOLAHAN (Director, Health Policy Center, Urban Institute): The federal government will pay a very high share of new Medicaid spending in all states. The increases in state spending are pretty small compared to the increases in coverage and relative to what states would have spent if there had been no reform.

ROVNER: In fact, of the estimated $465 billion it will cost to expand Medicaid between 2014 and 2019, according to the study, the federal government will pay an average of 95.4 percent of those costs, and Holahan says that's probably an underestimate. With so many more people covered, states will be able to cut back on other money they now spend on things like free health care for people who don't have insurance.

Dr. HOLAHAN: I think that if we had been able to account for that that we would show that the savings to states for no longer having to bear as large a burden as they do now for uncompensated care will probably be greater than their new obligations for Medicaid spending.

ROVNER: In some cases, states might even come out ahead financially. So why aren't states happier about the new Medicaid expansions? Alan Weil of the National Academy for State Health Policy compares the state situations to finding a pair of $200 shoes on sale for $20.

Mr. ALAN WEIL (Executive Director, National Academy for State Health Policy): If you like the $200 pair of shoes, it's a great deal because you only have to pay 20. If you look in your wallet and you see a 10 and a couple of ones and you've got some change in the bottom of your pocket and you're not sure you can come up with the $20, it doesn't really matter what a good deal it is.

ROVNER: In other words, even if states don't have to come up with very much money, it still may be money they don't have. And Weil says it's not just money; many states are looking at the possibility of a 50 percent increase in their Medicaid populations.

Mr. WEIL: That raises serious concerns about provider and delivery system capacity - managed care plans, hospitals, physicians, primary care specialists - states already struggle in this area and they worry about whether or not they can meet the increased demand.

ROVNER: Then, of course, there is politics. Of the 20 states that are suing the federal government over the health care bill, 19 have Republican governors.

Julie Rovner, NPR News, Washington.

Copyright © 2010 NPR. All rights reserved. Visit our website terms of use and permissions pages at for further information.

NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.