Reform Update: Medicaid expansion or not, states will see higher enrollment, spending in 2014, study finds

States planning to expand income eligibility for their Medicaid programs next year as well as those not planning to expand eligibility can expect higher enrollment and spending growth than in 2013, according to the findings of a new report. But states choosing not to expand Medicaid under the healthcare reform law are projected to experience a higher rate of spending growth than those that are expanding their programs.

A survey of Medicaid offices across all 50 states and the District of Columbia conducted by the Kaiser Family Foundation (PDF) projects that Medicaid enrollment growth will average 8.8% across all states for fiscal 2014, compared with 2.5% in fiscal 2013. A large factor behind the increase is the implementation of the Medicaid expansion to single adults earning up to 138% of the federal poverty level under the Patient Protection and Affordable Care Act. That is also expected to boost participation among those already eligible for the program in states that have opted not to expand. These Americans may not have known they were Medicaid eligible. That phenomenon is known as the woodwork effect.

A total of 25 states including the District of Columbia are planning to move forward with Medicaid expansion beginning next year, which will provide health coverage for all adults earning up to $15,896 for an individual in 2013. Twenty-six states have rejected expanding Medicaid, though several, such as Ohio, Tennessee and Pennsylvania have discussed alternatives ways of expanding coverage to low-income residents. Among states planning to expand Medicaid, enrollment is projected to grow by 11.8%, compared with 5.3% in states not moving forward with expansion.

The study projected that total Medicaid spending growth across all states will average 10.3% in 2014, compared with 3.8% in 2013. In states expanding coverage, total spending is expected to increase on average by 13%, compared with 6.8% in non-expansion states. In the ACA expansion states, however, the federal government will pay 100% of the costs through 2016, reducing its portion to no less than 90% afterward.

The states' share of Medicaid spending is expected to increase by 5.1% across all states in 2014, due largely to increased participation by those currently eligible for the program, according to the report. The rate of spending growth was lower, however, in the expansion states, at 4.4%, compared with 6.1% in the states rejecting the expansion. That difference is due to federal contribution for the expansion population.

Nine states saw declines in Medicaid enrollment in 2013, with the average rate of enrollment growth across all 50 states falling to 2.5%, the lowest rate of growth since 2008. For 2014, Louisiana, Maine and Wisconsin were the only states to project decreased Medicaid enrollment, according to the study. All three states have enacted eligibility restrictions with the intent of reducing the number of people who can qualify to receive benefits.

In Maine, Republican Gov. Paul LePage, a longtime critic of ACA, vetoed a bill in June to expand Medicaid on the premise that the federal government could not be relied upon to carry out its promise to cover the costs. The veto came after a decision in March to reduce the income threshold for parents receiving Medicaid coverage from 200% of the federal poverty level to 133%.

In Wisconsin, Republican Gov. Scott Walker, along with the GOP-led legislature, rejected an ACA-related Medicaid expansion and instead changed income eligibility requirements from 200% of the poverty level to 100%. That disqualified an estimated 92,000 residents. Wisconsin officials anticipate that most of the people losing coverage will receive federally subsidized coverage through the state health insurance exchange.

In Louisiana, Republican Gov. Bobby Jindal has refused to expand Medicaid, turning down an estimated $16 billion in federal funding over the 10 years despite the fact the state has one of the highest percentages of people living in poverty in the country (20%) and a high rate of chronic health conditions. It is estimated as many as 345,000 Louisiana residents with incomes under 100% of poverty will fall into the gap of not qualifying for Medicaid or federally subsidized private coverage through the state insurance exchange.

In a recent interview with the San Francisco Chronicle, Texas Republican Gov. Rick Perry continued his criticism of the ACA and its expansion of Medicaid, which he said would be “really bad for the next generation of Americans.”

In comments made last week while on a tour of California to promote business growth, Perry said Medicaid was a broken system and that plans to expand it were equivalent to “putting another thousand people on the Titanic.”

Perry has refused to accept federal funding to expand Medicaid in Texas, which has the country's highest percentage of uninsured, at about 25% of the non-elderly population. And he and other state Republican officials have resisted other parts of the law. Meanwhile, many local elected officials and hospital leaders in Texas are working hard to sign up low-income residents for federally subsidized coverage in the federally run insurance exchange there.

Follow Steven Ross Johnson on Twitter: @MHSjohnson