Tuesday, February 15, 2011

The Affordable Care Act: Costs and Savings for States

The Patient Protection and Affordable Care Act (ACA) has many provisions that will affect State budgets. In a research report by the Urban Institute, Net Effects of The Affordable Care Act on State Budgets, the authors address the new costs and savings for states. The report asserts that between 2014-2019 states will increase Medicaid spending for low-income individuals by between $21.1 billion and $43.2 billion. However, during the same time period, the ACA will save states significantly by allowing them to shift higher-income adults from Medicaid into coverage where subsidies are funded entirely by the federal government; as well as to substitute newly available federal Medicaid dollars for prior state and local spending on uncompensated care and mental health services. Those provisions will save states between $83.8 billion and $153 billion. In total, these provisions will lead to net state and local gains of between $40.6 billion and $131.9 billion.

In their conclusion the report states that throughout Medicaid’s history smart and creative state officials have responded to changes in the federal law, which often have allowed for maximizing fiscal gains and minimize losses for their state. However, even without any state-level creativity, the straightforward implementation of the ACA’s coverage expansion is likely to yield state savings that greatly exceed net state costs resulting from increased coverage of low-income adults.

This report is a good resource for learning about the costs and savings that states will experience through the ACA. The report address the above mentioned factors in detail as well as provides information on potential savings under CHIP, the possibility to integrate Medicaid and Medicare funding and services for the duel eligible, and the changing cost of health insurance coverage for public employees and retirees.

For a Framework for Policy Success.