CHICAGO — States that have opted not to expand Medicaid under the new federal health care law could lose out on $66 billion in economic activity over the next three years and $88 billion in direct federal aid through 2016, the White House Council of Economic Advisors says in new report.
In addition to the loss of federal aid that would boost their economies, states that have chosen not to expand Medicaid could see a less healthy and productive workforce and related decrease in demand for goods and services over the long term, the council said in the paper, "Missed Opportunities: The Consequences of State Decisions Not To Expand Medicaid."
"[T]he consequences of states' decisions are far-reaching, with implications for the health and well-being of their citizens, their economies, and the economy of the nation as a whole," the council said.
Ratings agencies have also warned that the decision to opt out could generate credit pressures.
So far, 26 states and the District of Columbia have agreed to expand their Medicaid programs, a joint state-federal program that provides insurance to low-income residents, as allowed under the new Affordable Care Act. The expansion allows all individuals with incomes below 133% of the federal poverty line to enroll in the program.
Twenty-four states, most with Republican leadership opposed to the new law, have opted not to expand. Among other criticisms, opponents say they distrust federal promises to cover expansion costs.
The federal government has agreed to pay all costs of expansion for the first three years, with the states' contributions climbing to 10% by 2020.
States that are opting out are forgoing $88 billion in direct federal support over the next two years, money that would provide direct and indirect boosts to their economies, according to the council.
"Healthier workers who are less financially stressed and in better mental health may be more likely to participate in the workforce or have higher productivity on the job, economic benefits that could be important over the long run," the council said.
Also, the federal funding will mean some state or locally owned health care providers with high uncompensated care costs will also see some relief, the council said. State and local governments are likely to realize a significant portion of the savings from current uncompensated care costs, the council said.
States that have already expanded will see an additional federal funds of $84 billion through 2016 and an additional $62 billion through 2017, the report said.
If all states expanded Medicaid, an additional 10 million people would have insurance by 2016, with 5.7 million of those individuals coming from the 24 non-participating states.
The council relied on data compiled by the Congressional Budget Office and the Urban Institute's Health Insurance Policy Simulation Model, which provides state-by-state estimates of the impact of expansion.
