Fox News Misleads On Cost Of Medicaid Expansion For States

Fox News overstated the costs of Medicaid expansion for states by ignoring research and evidence showing that expanding Medicaid actually saves money for many states because of the high share of the cost being picked up by the federal government in the Affordable Care Act (ACA) and the reductions in money spent by states on uncompensated care.

SCOTUS Gave States Ability To Refuse Medicaid Expansion

Supreme Court Gave States Ability To Choose To Reject Medicaid Expansion. The New York Times reported that due to the Supreme Court decision on the Affordable Care Act (ACA) that made the Medicaid expansion optional for states, millions of people would be left without affordable insurance in states that decide to not expand the program:

The law was written to require all Americans to have health coverage. For lower and middle-income earners, there are subsidies on the new health exchanges to help them afford insurance. An expanded Medicaid program was intended to cover the poorest. In all, about 30 million uninsured Americans were to have become eligible for financial help.

But the Supreme Court's ruling on the health care law last year, while upholding it, allowed states to choose whether to expand Medicaid. Those that opted not to leave about eight million uninsured people who live in poverty ($19,530 for a family of three) without any assistance at all. [The New York Times10/2/13]

Twenty-Five States Have Expanded Medicaid Programs. Twenty-five states and the District of Columbia have opted to expand Medicaid programs under the ACA. A November 12 CBS News report shows that 444,000 people have signed up for Medicaid across 10 states:

Often dismissed, Medicaid has signed up 444,000 people in 10 states in the six weeks since open enrollment began, according to Avalere Health, a market analysis firm that compiled data from those states. Twenty-five states are expanding their Medicaid programs, but data for all of them was not available. [CBS News, 11/12/13]

Fox News Claims Medicaid Expansion Is Unaffordable For States

Fox's Stuart Varney: “There Is Run Away Costs With This New Entitlement Program.” On the November 13 edition of Fox & Friends, Fox Business host Stuart Varney ignored the cost saving effects of the Medicaid expansion, and claimed “we don't have the money” to pay for this program:

VARNEY: How can you call it a success, when basically you've introduced a huge new entitlement program, with runaway costs, which you cannot afford, and when you cannot already reform the entitlement programs you've already got. Because that's what this is. Four hundred and forty thousand people signed up for Medicaid, they bypassed the non-functioning exchanges. Signed up for Medicaid in just six weeks, in just 10 states. Altogether, 9 million extra people will sign up for Medicaid when this is all done, and that's got to be paid for. Initially, it's paid for by Washington, national, federal taxpayers. Eventually, some of the costs will pass to the states. But essentially, this is a gigantic new entitlement program with runaway costs, I don't call that a success.


There is runaway cost with this new entitlement program, we don't have the money. It's not being funded by Obamacare. Who's going to pay? When the bill finally comes in, how big will that be? We don't know. [Fox News, Fox & Friends, 11/13/13]

Federal Government Shoulders Overwhelming Majority Of Medicaid Expansion Costs

CBPP: Federal Government Covers 100 Percent Of Expenses for Medicaid Expansion For Two Years, Eventually Covers 90 Percent. As the Center on Budget and Policy Priorities explains, states will eventually only pay a minor percentage of the costs to expand Medicaid programs:

Medicaid is administered as a partnership jointly funded by the federal government and states, with the federal government contributing anywhere from 50 percent to 74 percent of expenses (overall federal share of all states' Medicaid spending is 57 percent). The Medicaid expansion under the ACA has a much more generous federal match rate, starting at 100 percent in 2014 and gradually declining starting in 2017 until it reaches 90 percent for 2022 and beyond. [Center on Budget and Policy Priorities, 10/22/13, emphasis added]

CBPP: State Costs For Medicaid Expansion Is A Small Fraction Of Already Projected Medicaid Spending. The CBPP also shows costs to expand Medicaid coverage for the states will account for only a 2.8 percent increase in spending on Medicaid between 2014 and 2022 that is “already projected for the same time period.” CBPP shows:

According to CBO, between 2014 and 2022, the federal government will pay $931 billion of the cost of the Medicaid expansion, while states will pay roughly $73 billion, or 7 percent.  This $73 billion equals a 2.8percent increase above the $2.6 trillion that states were projected to spend on Medicaid over the same timeframe in the absence of health reform.

The CBPP included the following image to highlight the small increase in Medicaid spending this represents:

[Center on Budget and Policy Priorities, 7/25/12]

Medicaid Expansion Could Lower Costs For Many States By Reducing State Spending On Uncompensated Care For Uninsured

CBPP: Medicaid Expansion “Will Reduce State Costs Related To The Uninsured.” A report by the CBPP explained that state costs related to providing medical care to the uninsured will be reduced by the Medicaid expansion:

To assess the fiscal impact on states of the Medicaid expansion, one must look at more than just the effects on Medicaid spending, because expanding Medicaid will reduce state and local costs for health services provided to people who are uninsured now but will be covered by Medicaid as of 2014.

  • By sharply reducing the number of people without health insurance, the Medicaid expansion will reduce state and local costs for hospital care for the uninsured.  In 2008, state and local governments shouldered $10.6 billion, or nearly 20 percent, of the cost of caring for uninsured people in hospitals, according to Urban Institute research.
  • The Medicaid expansion will also push down state costs in providing mental health services to the uninsured.  State and local governments provided 44 percent of the funding for state mental health agencies in 2009, amounting to $17 billion.

Thus, a portion of CBO's estimated $73 billion in additional state Medicaid spending under the new law will be offset by state savings in other areas, as poor uninsured people become eligible for Medicaid and the federal government begins paying most of the costs of providing care to people for whom states have been bearing significant costs until now.  Put another way, part of a state's new costs under the Medicaid expansion will actually substitute for existing state spending on the uninsured.

The savings that states realize from this large reduction in the number of the uninsured should grow over time. [Center on Budget and Policy Priorities, 7/25/12]

NY Times: Study Shows Health Insurance Reform Will Improve Budget Situation For Many States. According to a July 2012 New York Times Economix blog post, an Urban Institute study “ran the numbers for all 50 states and the District of Columbia. It estimates that 21 to 45 states would save money by taking the Medicaid expansion.” The study showed that “state governments are likely to spend $92-129 billion less from 2014 to 2019 with implementation of the Affordable Care Act, thanks to provisions reducing the uninsured population and increasing federal support for health care previously financed by states.” The study also showed that states “will still come out ahead” when the federal government's share of the costs decreases. [The New York Times, Economix, 7/5/12; Urban Institute, 7/13/11]

Kaiser Family Foundation: Medicaid Expansion Would Decrease Cost Of Uncompensated Care. A November 2012 study by the Kaiser Family Foundation found that if all states adopted the Medicaid expansion, the decrease in spending on uncompensated care could “generate $10 billion in new savings from 2013-2022”:

State decisions about whether to implement the Medicaid expansion will be shaped in part by the costs to states. A key factor in assessing these costs is the incremental state cost and new federal funding tied to implementing the ACA Medicaid expansion. If all states implemented the expansion, this incremental state cost would be $8 billion, increasing state Medicaid spending by 0.3%, but the increase in federal spending would be $800 billion, or 21%.


If all states adopted the Medicaid expansion, total uncompensated care would decline by approximately $183 billion from 2013-2022 compared to the ACA if no states expanded Medicaid. States and localities finance about 30% of uncompensated care costs for the uninsured, and we assume that states and localities will achieve only 33% of the savings on their share of this funding. Under that conservative assumption, state and local spending on uncompensated care would decline by $18 billion--in effect, 10% of the expansion's total reduction in uncompensated care. Combining this state and local savings with the expansion's $8 billion increase in total state Medicaid costs, we find the expansion would generate $10 billion in net state savings from 2013-2022. [Kaiser Family Foundation, Kaiser Commission on Medicaid and the Uninsured, November 2012]