By Martha Heberlein
In a report issued last week, the Center on Budget and Policy Priorities examines recent state estimates on the cost of the Medicaid expansion on Mississippi, Nebraska, and Indiana (states where officials aren’t necessarily supportive of the whole idea).
According to Milliman, an actuarial/consulting firm that produced all three estimates, state spending in Medicaid will grow by 10% in Mississippi and Nebraska, and by more than 15% in Indiana between 2014 and 2019. These estimates are 10 to 12 times higher than the increase in spending suggested by both the CBO and the Urban Institute.
Why are these estimates so different? The Center points to three faulty assumptions that underlie the Milliman estimates:
- Unrealistically high participation rates, in some cases reaching 100%;
- Overstating the “crowd-out” effect Medicaid will have on people dropping employer-sponsored coverage; and
- Higher than average costs for new beneficiaries.
(You may remember that we’ve also blogged about these and some other key questions to ask about the assumptions behind state spending estimates.)
Another important issue not taken into account in these estimates is the savings that states may reap as a result of health reform, such as through a decline in uncompensated care. According to CBPP, Milliman said it did not include these savings because “the goal of the reports was to provide estimates of the states’ Medicaid budget exposure, rather than to conduct an assessment of the health reform law’s overall fiscal or economic impact on the states.” However, as CBPP points out, funding decisions aren’t made in isolation – if the expansion of Medicaid results in savings in other areas, they should certainly be considered as they will have an impact on the overall budget.
