Guidance on Analyzing and Estimating the Cost of Expanding Medicaid

by Rebecca Farley on August 24, 2012

This memo from the Center on Budget and Policy Priorities reviews the key elements that would comprise a reasonable estimate of the state cost of expanding Medicaid. The memo outlines appropriate assumptions states should make when estimating participation rates and the cost of coverage, appropriate costs to include (and exclude), and potential savings that would reduce state spending in other areas of the budget and offset the costs of the Medicaid expansion. Among the recommendations in several key areas:

Expected enrollment (don’t assume that 100% of people who are eligible will enroll; it never happens. 67-75% of newly eligible individuals is a safer number, with even less for people who were previously eligible)

  • Expected enrollment: Don’t assume that 100% of people who are eligible will enroll; this scenario is unlikely. 67-75% of newly eligible individuals is a safer number, with even less for people who were previously eligible.
  • Cost of coverage: Don’t use disabled coverage amounts as the baseline; family coverage is more realistic for developing cost estimates. Don’t include costs not directly related to the Medicaid expansion (e.g., enhanced primary care rates or administrative costs for administering exchanges). Identify potential offsets in other parts of the state budget (e.g., decrease in uncompensated care spending, new MH/SUD coverage, preventive care newly covered by Medicaid)

This information can be used by advocates to critically evaluate estimates produced by your state, and/or to help you develop your own state-specific estimates.

 

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