Assessing the Fiscal Impact of Medicaid Expansion Following the American Rescue Plan Act of 2021

Prepared for the Robert Wood Johnson Foundation’s State Health and Value Strategies program

The Affordable Care Act (ACA) led to major advances in health insurance coverage in the United States. From 2013 to 2019, the uninsured rate fell from approximately 17 percent to 11 percent. A central pillar of the ACA’s coverage reforms is the Medicaid expansion, which provides states with the option to cover adults with incomes under 138 percent of the federal poverty level (FPL). A substantial body of evidence indicates that adopting the Medicaid expansion delivers myriad benefits to states and Medicaid enrollees—including reductions in the uninsured rate, improvements in health care access and outcomes, improved financial security among low-income individuals, and increased economic activity and state tax revenue—at a modest cost to states.

Currently, 12 states have not yet taken up the ACA Medicaid expansion, leaving approximately 2.2 million adults in the so-called “coverage gap” without an affordable source of coverage. Objections to expansion in these states have often focused on state costs as the primary reason for not going forward, with some taking the position that covering 10 percent of the cost of expansion (with the federal government covering the remaining 90 percent) is a challenge.

While the fiscal benefits of Medicaid expansion to states are strong and well documented, the recent enactment of the American Rescue Plan Act of 2021 (ARP) makes the fiscal case even stronger by providing states that implement expansion after the enactment of ARP with a significant increase in Medicaid funding.

In an issue brief for the Robert Wood Johnson Foundation’s State Health and Value Strategies program, Manatt Health describes the ARP matching rate provision and identifies key factors that will impact how much funding states should expect to receive. We also present estimates of the fiscal impact of the ARP matching rate provision for each state based on publicly available data, comparing the available new federal dollars to the cost of expansion.

Click here to download the full issue brief.

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