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Medicaid expansion will sock states: Moody's


By Melanie Evans
Posted: April 27, 2010 - 11:00 am ET
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The Medicaid expansion under health reform is expected to strain state budgets already distressed by the recession, despite delays for new eligibility rules and federal aid, Moody's Investors Service said in a newly released report. States that see the largest gains in Medicaid enrollment under health reform will likely see the greatest financial burden, Moody's said.

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Childless adults are eligible for the safety net insurance starting in 2014, the same year the income threshold to qualify for Medicaid will be raised to 133% of the federal poverty guideline. Thirty-nine states do not offer Medicaid to childless adults, according to the report.

Through 2016, the federal government will cover the entire cost of newly eligible Medicaid enrollees, but will reduce aid to 90% of costs by 2020. States with the most restrictive eligibility criteria prior to reform will see the largest funding gaps, proportionately, as federal aid scales back, Moody's said.

States must also cover all the cost of increased Medicaid enrollment by those who qualified prior to reform, Moody's noted. “Given the fiscal damage of the recession on state budgets, these additional costs may be difficult to absorb even a few years from now when implementation of the reform measures begin,” Moody's said.

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