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State credit ratings don't hinge on Medicaid expansion: Moody's


By Melanie Evans
Posted: August 21, 2012 - 5:30 pm ET
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Moody's Investors Service said its analysts likely won't change state credit ratings based on whether states do or don't expand Medicaid under the Patient Protection and Affordable Care Act.

States gained the option to reject Medicaid expansion under the Affordable Care Act after the U.S. Supreme Court decision in June removed the law's proposed penalty for states that opted out.

In a newly released report, Moody's analysts said its ratings would be affected by how states manage costs of enrollment growth and healthcare inflation, and the results of the federal deficit debate, which has included Medicaid proposals “that would negatively affect states.”

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“Looking toward long-term solutions to help reduce the federal deficit, many proposals include changes to Medicaid that would negatively affect states' finances. States will have greater exposure to these potential risks if they opt in to the program expansion,” the report said.

States have successfully held Medicaid spending growth in check, Moody's said. Growth in the cost per Medicaid enrollee has lagged behind U.S. health spending growth. States have also seen a relatively stable percentage of their total budgets allocated to Medicaid during the past 15 years, Moody's said.

Analysts said they do not expect that to change. “Going forward, we expect states to continue to demonstrate willingness to implement Medicaid cost controls within the constraints of the program.”

Overall, the cost to states to expand Medicaid appears “relatively modest” compared with current spending, Moody’s said, citing CMS estimates that $47 billion of the estimated $2.5 trillion in Medicaid spending though 2020 will be a result of expanded eligibility. Projections for 2020 and beyond of 3% to 4% higher spending would be manageable, if the economy grows normally, Moody’s said.


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