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Government and Politics

Medicaid expansion could pay for itself
A new study shows that expanding Medicaid coverage will increase costs and savings by roughly equal amounts

Karen Kasler
A new study by The Urban Institute and Ohio State University asks whether expanding Medicaid coverage will increase costs or budget savings... and the answer to both questions is yes.
Courtesy of Urban Institute
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In The Region:

A new report says Medicaid expansion could bring Ohio nearly $1.5 billion over the next 10 years.  

But Statehouse correspondent Karen Kasler reports, state officials are not convinced about the costs involved.

Karen Kasler - Medicaid expansion options

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The 'woodwork' effect
State officials haven’t yet decided whether to expand Medicaid under the Affordable Care Act. But Budget Director Tim Keen is concerned about the so-called “woodwork effect,” where people who are eligible for Medicaid but haven’t signed up do so in droves – and their costs won’t be covered by the new health care law. Keen says those will be borne "in the traditional sharing method where the state has to pay about a third of those costs.” 

Keen says the state may have to shift funding from other areas to cover those costs, and that means "there’s that much less money that is available for us to apply to other areas, including some of the tax cuts that the governor wants to put into this budget.”

The 'welcome mat' effect
But Cathy Levine with Ohio Consumers for Health Coverage calls it the “welcome-mat effect” and says it’s going to happen regardless. The difference, she says, is that if the state expands Medicaid, it will get new revenues from the feds and an increase in state collections to help with the costs.

Levine says the study demonstrates, "the money coming in for the newly eligible will generate new revenues from provider taxes, sales taxes, incomes taxes."  She expects so much revenue will come into the state that "it will help the state pay for the woodwork effect." And Levine says if she were the state budget director worried about the woodwork effect, "I would support the Medicaid expansion as the best way to pay" for it."

The study estimates that Medicaid expansion in Ohio would pay for itself by 2022, but the federal government’s share will eventually drop and the state would basically break even. Several groups have come out in favor of Medicaid expansion, including the Ohio State Medical Association and the Columbus Chamber of Commerce.   

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