This report finds that state governments are likely to spend $92-129 billion less from 2014 to 2019 with implementation of the Affordable Care Act (ACA), thanks to provisions designed to reduce the uninsured population and increase federal support for health care functions previously financed by states. Funded by the Robert Wood Johnson Foundation, Urban Institute researchers used their Health Insurance Policy Simulation Model to estimate federal and state spending and savings as more Americans gain access to affordable health care. They find:
- State spending on additional Medicaid enrollees will rise by $80 billion but be offset by $66 billion in new federal spending on existing Medicaid enrollees, resulting in $14 billion in net state Medicaid cost increases from 2014 to 2019.
- The elimination of Medicaid eligibility for certain adults with incomes above 138 percent of the federal poverty level will save states $69 billion.
- Spending on uncompensated care would fall 12.5 to 25 percent, saving the federal government $39 to $78 billion and states $26 to $52 billion.
- Expanding federal Medicaid coverage of the mentally ill will save states between $11 billion and $22 billion.
Overall, the federal government would spend $704 to $743 billion more under reform and states would spend $92 to $129 billion less. Even after 2019, when the federal government’s share of Medicaid costs declines to its permanent level, states will still come out ahead, realizing net savings in 2020 alone of $12 to $19 billion.
Report authors Matthew Buettgens, Stan Dorn and Caitlin Carroll note that costs and savings will differ significantly across states because of varied Medicaid eligibility rules, the characteristics of the currently uninsured, and other factors.