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Medicaid Expansion: A Colorado Decision

March 9, 2013

The much-anticipated Medicaid expansion bill was introduced in the Senate last Friday by Senator Irene Aguilar (D-Denver). The bill itself is simple: It would increase the income eligibility for Medicaid for parents, caretakers and adults without dependent children, with funding from the Hospital Provider Fee.

But the debate is likely to be more complicated.

The bill stems from last year’s Supreme Court Ruling on the Affordable Care Act. The Supreme Court ruled that while the law was constitutional, the federal government could not “coerce” states into expanding Medicaid by threatening to withhold funding. As a result, each state can decide whether to expand Medicaid eligibility to 133 percent of the federal poverty level, ($14,856 in annual income for an individual or $30,657 for a family of four). 

The federal government has tried to make expansion as appealing as possible. For states that opt in, the feds will cover 100 percent of the expansion for the first three years beginning in 2014. Federal match rates will then taper down through 2020, at which point states will be responsible for 10 percent of the costs moving forward. By comparison, Colorado’s current Medicaid program is funded with a 50-50 federal match. 

Governor Hickenlooper announced his commitment to the expansion in January. Since then, other states have announced their intention to expand – including some unexpected Republican governors such as Rick Scott of Florida, Jan Brewer of Arizona and John Kasich of Ohio. But even with the support of governors, many states are still moving forward with legislation on this issue, either out of political necessity or in order to reconcile current statutes with the new requirements under expansion. 

A series of studies have been published over the past few months that estimate the number of people who would gain coverage if Colorado expands, as well as the overall cost of expansion. As with any complicated cost-estimating exercise, each report has slightly different assumptions on items such as enrollment rate, projected use of medical services and the 10-year economic forecast. Overall, though, the numbers are fairly close. 

  • The Colorado Department of Health Care Policy and Financing estimates that the expansion will result in a total new enrollment of 271,000 Coloradans by 2022. HCPF estimates the state cost at $1.5 billion for this 10-year period and the federal cost at $11.6 billion. Governor Hickenlooper has outlined plans to save more than $280 million in Medicaid spending over the next10 years to help cover the cost of expansion.
  • A study by The Colorado Trust, conducted by the Colorado Health Institute, estimates 240,000 new enrollees by 2022, a state cost of $1 billion and a federal cost of $11.4 billion.
  • A study done for Kaiser by the Urban Institute estimates new enrollment of 297,000 by 2022 and puts the state cost at $1.5 billion and the federal cost at $11.6 billion.

Yet these numbers tell only part of the story. 

  • A study published by The Colorado Health Foundation, done by Charles Brown Consulting, shows that Medicaid Expansion would result in 22,388 more jobs within the state and would generate an additional $4.4 billion in economic activity by 2026.
  • The New England Medical Journal, reported last year that Medicaid expansion in a handful of states demonstrated a reduction in mortality, finding for every 100,000 citizens between the ages of 20 and 64, Medicaid expansion saves 19.6 lives every year. Applying this result to Colorado’s population, Medicaid expansion could be expected to save the lives of at least 629 Coloradans every year. 

We expect a lively debate in the coming weeks over this bill – not only on the costs and benefits of expansion but on the fundamental role of government in providing health coverage for this population.  Bill opponents have expressed several concerns about expansion, including questions about the federal government’s long-term commitment to the high federal match rate considering the fiscal deficit that the country currently faces. 

The bill has been assigned to the Senate Health Committee and is expected to be heard next Thursday, March 14.