Studies Address Costs and Benefits of Medicaid Expansion in Colorado

FOR IMMEDIATE RELEASE

Media Contact: Julian Kesner, Director of Communications
303-539-3147; [email protected]

DENVER, COLO.—The Colorado Trust today released a study it supported, which was conducted by the Colorado Health Institute (CHI), on the financial cost and reach of Medicaid expansion in Colorado. The primer, Medicaid Expansion in Colorado: Understanding the Costs & Benefits, offers information and analysis to help state leaders consider the opportunity to expand Medicaid eligibility, as made possible through the Affordable Care Act (ACA). The study’s findings show significant alignment with additional analyses that have been conducted by the Colorado Department of Health Care Policy and Financing (HCPF) and the Kaiser Commission on Medicaid and the Uninsured (Kaiser), even as each analysis was conducted independently and the models, assumptions and data sources varied somewhat. Believing it to be critical that both financial costs as well as health costs be considered, The Colorado Trust also points to separate, national research showing a demonstrated reduction in mortality associated with Medicaid expansion.

“Estimating the cost of Medicaid expansion is a complicated undertaking,” said Michele Lueck, President and CEO, Colorado Health Institute. “People who could potentially qualify under the expansion don’t necessarily enroll, and those who do enroll do so at different rates. Also, the way in which different populations use health care services adds another layer of complexity. Our team estimated both the number of people expected to enroll and the total costs associated with those people.”

“This analysis and the comparison to additional analyses provides a growing base of information to help Colorado lawmakers make an evidence-based decision about Medicaid expansion that is best for Colorado and its residents,” said Ned Calonge, MD, MPH, President and CEO, The Colorado Trust. “In addition to understanding the financial costs and savings associated with this decision, it is essential we also consider what Medicaid expansion would mean in terms of saving the lives of thousands of Coloradans. Studies have shown that having health insurance can decrease needless illness, suffering and even death.”

Calonge points to a July 2012 study published in the New England Medical Journal that reported a demonstrated reduction in mortality associated with Medicaid expansion in other states. The study found that for every 100,000 citizens in the population between the ages of 20 and 64, Medicaid expansion saves 19.6 lives every year. Applying this result to our population could result in saving the lives of at least 629 Coloradans every year. Compared with state mortality data, this savings would be greater than the number of Coloradans who die of breast cancer or colon cancer every year.

In terms of financial costs and savings, the ACA provides financial incentives for states to expand Medicaid eligibility to the nation’s poorest citizens. The federal government will pay all of the costs of expansion in 2014, 2015 and 2016. After 2016, the law specifies that the federal share will not drop below 90 percent. Expansion would provide coverage to more people between the ages of 19 and 65 with annual incomes below 133 percent of the federal poverty level (FPL), which effectively becomes 138 percent using a new income formula specified by the law. This is an annual income of $15,856 for an individual and $32,499 for a household of four at 138 percent FPL.

The Colorado Health Institute estimates that expanding Medicaid eligibility to Coloradans below 138 percent of FPL would make coverage available to 240,000 by 2022. Comparatively, HCPF estimates 271,000 and Kaiser estimates 297,000 Medicaid enrollees.

Additionally, CHI estimates the state’s cost of the expansion over the 10 years, between 2013 and 2022, would be $1.0 billion (with a federal share of $11.4 billion). Comparatively, HCPF estimates a total cost to Colorado of $1.4 billion (federal share of $12.3 billion), and Kaiser estimates a state cost of $858 million for those who are newly eligible plus $639 million for populations anticipated to enroll even without expansion for a total state cost of $1.5 billion (federal share of $11.6 billion). (The CHI and HCPF estimates also include newly eligible and currently eligible but not enrolled.)

While CHI was not asked to answer the question of savings or financing in its analysis, the primer notes that HCPF has estimated that expansion will save more than it costs. HCPF estimates the hospital provider fee created by the Colorado Health Care Affordability Act would help to pick up nearly $1.3 billion of the state cost, with the remaining $128 million being funded through the provider fee or other public funds. Additionally, managers of the state Medicaid program have identified $280 million in savings to be achieved by streamlining the delivery and payment of Medicaid services, making them more efficient and effective.

Similarly, Kaiser estimates that Colorado would save $277 million in uncompensated care during the 10-year period. States and communities currently finance about 30 percent of uncompensated care costs for the uninsured, according to the Kaiser report, which was prepared by The Urban Institute. Kaiser conservatively estimates that states and communities would recover a third of those costs. In addition, Kaiser expects that health care providers would receive more revenue if more people had access to health care. Hospitals nationwide would receive an additional $314 billion between 2013 and 2022, Kaiser estimates.

“We know there are economic benefits to be realized by lowering the level of uncompensated health care and by building a healthier workforce,” said Dr. Calonge. “Indeed, our 2011 study, The Economic Impact of Health Reform in Colorado, found that for every dollar we invest in health care spending in Colorado, an additional $2.44 in economic out-put occurs.” The Colorado Health Foundation also has commissioned a study that specifically considers the economic impact of Medicaid expansion.

The Colorado Trust’s primer, Medicaid Expansion in Colorado: Understanding the Costs & Benefits, is available online at www.coloradotrust.org. For additional information on the analysis, please contact the Colorado Health Institute, 303-831-4200.

# # #