ACA Will Have Varied Effect On State Healthcare Expenditures

Posted: April 05, 2011 by Robert Elmquist

The Affordable Care Act (ACA) is likely to decrease the proportion of uninsured patients in small and large states alike, but government healthcare costs in all states will not necessarily rise as a result of healthcare reform, according to a series of state-specific research reports from the RAND Corporation.

Sponsored by the Council of State Governments, RAND’s research was intended to outline the impact of major ACA provisions on individual states, including estimates of where patients will obtain insurance and how it will change state spending. The company attempted to pinpoint the anticipated increased costs and coverage in five diverse states once reform has been fully implemented in 2016. A model was used in the process as a means of predicting how health coverage expansion policies will affect state residents who obtain or change sources of health insurance, the types of plans in which they will enroll, and changes in private and public sector spending.

In all of the states studied – California, Connecticut, Illinois, Montana and Texas – the proportion of uninsured residents was predicted as declining significantly under healthcare reform. Conversely, the reports peg government costs as trending upward in four of the states because of increased spending on Medicaid; Connecticut is the sole exception because some low-income residents previously covered under the state’s own insurance plan will now be covered under Medicaid, with the federal government paying a large portion of their costs.

Additionally, study results indicate, many elderly non-residents will buy coverage through insurance exchanges. In most cases, the majority of new Medicaid enrollees will be newly eligible for coverage, but increases in enrollment among those previously eligible will cost the states more because the federal government heavily subsidizes newly eligible enrollees, the study found.

RAND researchers say the selected states are a good representative sample of the U.S. because they are geographically distributed as well as of varying sizes. They claim the estimates are meant to assist elected officials and policymakers in anticipating the choices that will likely be needed by individuals, employers, insurance companies, and governments as various provisions of health reform take hold. “As states move forward preparing for the many provisions of healthcare reform, it’s important for them to have an adequate forecast of what is ahead,” notes Christine Eibner, a co-author of the study and an economist at RAND.

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