New Incentive for States to Adopt the ACA Medicaid Expansion: Implications for State Spending

Expansion Eligibility and Cost Estimates for Non-Expansion States

We calculate the number of people potentially eligible for Medicaid based on KFF 2019 estimates of the number of uninsured people who could be eligible for Medicaid if their state expanded plus estimates of people enrolled in Marketplace coverage who could become Medicaid eligible if their state expanded. We estimate Marketplace enrollees who could shift to Medicaid based on 2019 Marketplace enrollment data from the Centers for Medicare and Medicaid Services (CMS) Open Enrollment Period Files, and KFF analysis of the Census Bureau’s 2019 American Community Survey (ACS). We use Marketplace data on enrollees with income below 150% FPL, adjusted to the share with income through 138% FPL using KFF ACS estimates of income of people with nongroup coverage. To project spending on expansion adults for these states, we use our projected estimate of per enrollee costs for non-expansion adults in these states (described below) and apply the median ratio of spending per expansion enrollee to spending per non-expansion adult using data for expansion states for which we had a full year of data in FY2019.

We did not calculate additional state costs from expanding Medicaid for Missouri and Oklahoma because these states were scheduled to implement expansion in July 2021 and thus do not face new state costs due to expansion under the policy; rather, these costs are already assumed in the state Medicaid budget. Although we calculated the increased federal fiscal relief for Missouri and Oklahoma, we did not include them in the figures or nationwide estimates. We do not calculate new state costs for expansion in Wisconsin because the state currently provides Medicaid eligibility to childless adults earning up to the poverty level under a state waiver, at the regular FMAP; thus, even with additional costs due to covering currently marketplace-eligible people, the state would likely see fiscal gain under expansion by moving waiver enrollees from the regular state match to the 90% expansion match.

FY 2020 through FY 2023 Spending and Enhanced FMAP

We first estimate baseline spending without the new enhanced match rate. Our methods for baseline spending draw on those used in a previous brief on FMAP changes, updated to use more recent data sources where possible. We estimated baseline spending by using data from the 2019 Medicaid Budget Expenditure System (MBES), the Congressional Budget Office (CBO), the CMS Office of the Actuary (OACT), and the Medicaid and CHIP Payment Access Commission (MACPAC). Medicaid spending and enrollment do not include CHIP expenditures and do not include spending or enrollment changes due to economic effects from the coronavirus pandemic.

We use 2019 MBES data for baseline enrollment and spending for the expansion group and traditional Medicaid groups. For more information on how we calculate enrollment and spending from the MBES, please see our brief on expansion spending and enrollment. We distributed the enrollment and spending among traditional Medicaid groups (children, disabled, aged, and non-expansion adults) using MACPAC’s MACStats reports (Exhibits 14 and 21) based on 2018 TMSIS data. Then, we inflated enrollment from FY 2020 through FY 2023 using growth rates for each eligibility group from the OACT 2018 Actuarial Report on the Financial Outlook for Medicaid. We also inflate spending per enrollee through FY 2023 using an average of growth rates from OACT and the CBO March 2020 Baseline estimates. We averaged spending per enrollee growth from the CBO and OACT because the two estimates had substantial differences in annual growth rates for some enrollment groups, especially for 2019-2020. Finally, we multiplied enrollment and per enrollee spending estimates for each enrollment group to calculate a total spending baseline in FY 2020 and FY 2023, and then applied the FMAP adjustments to the total spending by state and eligibility group.