States risk $8.4B by snubbing Medicaid expansion
Because of their mistrust of Obamacare, Texas, Georgia and others could lose huge amounts of federal funding.
Obamacare gives states and their lawmakers the right to reject the health care insurance overhaul's expansion of Medicaid benefits. But a new study is laying out the cost of doing that: a potential loss of $8.4 billion in federal funding.
By refusing to expand Medicaid coverage, states would leave about 3.6 million people who would have been covered under the Affordable Care Act with no health insurance, potentially adding to the states' costs, a study from the nonprofit Rand Corp. notes.
"Our analysis shows it's in the best economic interests of states to expand Medicaid under the terms of the federal Affordable Care Act," said Carter Price, the lead author of the study and a mathematician at the research organization.
The fact is, Obamacare remains contentious not only with individual Americans but with local governments.
As of late May, 13 states had said they wouldn't participate in the Medicaid expansion, ranging from Alabama to Maine, according to the Advisory Board. An additional six states, including Virginia and Utah, were leaning in that direction.
The federal government has pledged to cover 100% of the costs for expanding Medicaid through 2016, then scale back to 90% by 2020. Currently, the government covers 57% of Medicaid's costs, Rand notes.
The reasons for digging in their heels against the expansion? Some state lawmakers say the plan will result in a huge financial strain. Plus, many don't trust the federal government's pledge of financial assistance.
"I think that is something our state cannot afford," Georgia Gov. Nathan Deal said last year. "And even though the federal government promises to pay 100% for the first three years and 90% thereafter, I think it is probably unrealistic to expect that promise to be fulfilled in the long term."
But those states might not be looking at the bigger picture, Rand suggests. Obamacare will reduce state and local spending by as much as $18.1 billion because of increased health care coverage, the study says.
"Choosing to not expand Medicaid may turn out to be the more-costly path for state and local governments," Price said.
As MSN Money wrote in April, a state's decision to forgo Medicaid expansion could have a ripple effect on employers with 50 or more full-time workers because they're required to provide insurance under the overhaul. Companies that don't will face per-employee annual penalties of $2,000.
To get around that, companies such as Regal Entertainment Group (RGC) are cutting hours for workers rather than provide insurance under the overhaul.
Follow Aimee Picchi on Twitter at @aimeepicchi.
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