Actual State Budget Impacts in Five States that Expanded Medicaid

Michigan, Montana, Louisiana, Colorado and Virginia have all expanded Medicaid.  In each of these states, local analysis has shown expanding Medicaid has either been a positive for the state’s general fund revenues or has not resulted in any additional cost to the state.  The reason is a combination of substantial state savings from Medicaid now largely paying for formerly state-covered health services and additional revenues as a result of expansion from increased economic activity and hospital/health plan contributions.

Four of these states have had several years of experience with Medicaid expansion. Virginia’s Medicaid expansion doesn’t start until January 1, 2019, but the substantial budget savings from expansion were firm enough to be a part of the state’s new budget and were reallocated to other state priorities.

Michigan – State costs of expansion were “fully covered” by savings and new revenue.

New England Journal of Medicine: “Economic Effects of Medicaid Expansion in Michigan,” (February 2017):

“This additional state tax revenue offsets nearly all of the state’s projected new spending for Medicaid expansion in 2017 and about 37% of these costs in 2021. After further accounting for the projected $235 million in annual state budget savings for mental health and other programs arising from Medicaid expansion and up to $200 million annually in state taxes and contributions from health plans and hospitals we found that the state costs of Medicaid expansion will be fully covered through 2021 (see table) and are very likely to be so in subsequent years as well.”

Montana – All state expansion costs were offset by state budget savings and new revenue.

Bureau of Business and Economic Research, University of Montana, (April 2018):

 “While the state pays a nominal amount for these benefits, the costs to the state budget are more than offset by the savings created by Medicaid expansion and by the revenues associated with increased economic activity.”

Virginia – 2018 expansion decision meant  $421 million in state budget savings that was allocated to other budget priorities like education..

Virginia’s budget estimated $421 million in state savings from their Medicaid expansion and allocated that extra funding to other state priorities.

The 2018 Virginia Governor’s estimate of Medicaid savings is available here. The Governor’s savings estimate also appeared in multiple media sources in 2018 like the Richmond Times-Dispatch.

Louisiana – First year of expansion saved $199 million for the state.

Medicaid Expansion Annual Report, 2017.

Colorado – Savings and new revenue meant expansion was accomplished at no cost to the state.

The Colorado Health Foundation estimated “no cost to the state’s General Fund” as a result of the state’s Medicaid expansion. March 2016.

The experience in these five states is representative. National overviews of state budget impact of Medicaid expansion decisions give a more in depth discussion of a simple reality – Medicaid expansion not only increases availability of affordable health insurance for state residents but also has neutral or positive effects on state budgets. For example see “Medicaid Expansion Continues to Benefit State Budget, Contrary to Critics’ Claims,”Do states regret expanding Medicaid?,” “Federal Funding Insulated State Budgets From Increased Spending Related to Medicaid Expansion,” “The Effects of Medicaid Expansion under the ACA: Updated Findings from a Literature Review, and States Expanding Medicaid See Significant Budget Savings and Revenue Gains.

Adam Searing is an Associate Professor at the Georgetown University McCourt School of Public Policy’s Center for Children and Families.