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WASHINGTON — The nation’s Republican governors are raising a new complaint against the 2010 national health overhaul: They say it would drive up their Medicaid costs dramatically at a time they’re already slashing their budgets to cope with debt.
There’s no question that the health care law will force states to expand their Medicaid services, but how that ultimately will affect states’ costs is a matter of considerable dispute.
The 2010 law requires that state Medicaid programs in 2014 begin covering all non-elderly people who earn up to 133 percent of the federal poverty level, which would comprise people with incomes of up to $29,400 for a family of four this year.
By 2019, that expansion is expected to add 16 million people to Medicaid, which now provides health coverage for about 60 million low-income Americans. Childless adults and parents who previously earned too much to qualify for the program will make up the bulk of the new enrollees.
Currently, the federal government pays about 57 percent of Medicaid costs on average, while states pay the rest. Under the new law, the federal government will pay the entire cost of the new enrollees for the first three years, after which it will scale down gradually to 90 percent in 2020 and thereafter.
Republican governors say that’s an entitlement program expansion they simply can’t afford. As states try to close $125 billion in budget shortfalls for the next fiscal year, both Republican and Democratic governors say that any new spending is problematic. Twenty-six GOP governors have joined a lawsuit challenging the health care overhaul, which they deride as “Obamacare,” as an abuse of federal power.
A report released recently by Sen. Orrin Hatch, R-Utah, and Rep. Fred Upton, R-Mich., says the health care act’s Medicaid expansion will cost states $118 billion over 12 years. That’s nearly twice the amount — $60 billion — that the Congressional Budget Office has estimated for a 10-year period.
The CBO estimates that the law would cut the federal budget deficit by $143 billion from 2010 to 2019 and by $1.3 trillion over the following decade, through a combination of new revenue sources and spending reductions.
Which numbers are more credible, the CBO’s or the GOP’s?
Democrats and independent researchers challenged the GOP report, saying it didn’t use a standard methodology to estimate each state’s costs. It also failed to account for savings that the Medicaid expansion is likely to produce, such as a reduction in state payments for medical care for the uninsured. Republicans defended the report, saying the estimates were conservative and the methodology sound.
The Urban Institute, a think tank, projected that from 2014 to 2019, the law will save states and localities $43 billion to $85 billion on uncompensated medical care for the uninsured, and $20 billion to $40 billion on their mental health services.
“If the Democrats … want to argue that the Medicaid expansion included in Obamacare is not going to put a severe financial burden on states, I’m sure you will find the majority of governors disagree,” said Julia Lawless, a spokeswoman for Hatch.
Henry J. Aaron, a senior fellow for economic studies at the Brookings Institution, said the CBO’s cost estimates for the new law were still the gold standard because of the agency’s well-established reputation for skepticism on claims of legislative cost savings.
But the seismic changes brought on by the law probably will produce some unintended costs, Aaron said, so the GOP estimates shouldn’t be discounted.
“I think it would be a mistake to dismiss without significance the estimates of skeptics who think things will be more expensive than CBO estimates,” Aaron said. “Just as it would be a mistake to dismiss the estimates of those who believe the costs will be lower and the savings higher.”
Medicaid is the third-largest domestic program, behind Social Security and Medicare. Last year, it accounted for 8 percent of federal spending, compared with 20 percent for Social Security and 15 percent for Medicare.
On average, states spend about 16 percent of their general fund budgets on Medicaid. That’s second only to elementary and secondary education, which eats up an average of 45 percent of most state budgets.
The 2010 law requires that state Medicaid programs in 2014 begin covering all non-elderly people who earn up to 133 percent of the federal poverty level, which would comprise people with incomes of up to $29,400 for a family of four this year.