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How Much Will Federal Health Law Cost States? Depends Whom You Ask

The nation’s governors – well, a lot of them anyway – are up in arms over what they say are increased costs heaped on their shoulders by the new federal health law.

But how much will the Patient Protection and Affordable Care Act really add to states’ budgets? A raft of studies have come out recently purporting to answer that question. And, like just about everything else that has to do with the controversial health law, they reach dramatically different conclusions on the subject.

Ahead of a Tuesday House hearing on Medicaid, a particular sore spot, and the health law, the Republican staffs of the House Energy and Commerce Committee and the Senate Finance Committee put together a report that “conservatively estimates that PPACA will cost state taxpayers at least $118.04 billion through 2023″ in increased state Medicaid costs alone. (Emphasis theirs.)

But the liberal-leaning Center on Budget and Policy Priorities said the GOP report “grossly exaggerates” the cost to states. (Emphasis ours.) In a blog post, analyst January Angeles pointed out that among other things, the federal government will be paying the vast majority of the expanded Medicaid coverage called for in the law. How much? Try 100 percent in the first two years, phasing down eventually to 90 percent.

“The cost to states over this period will be $60 billion – just 2.6 percent more than what they would have spent on Medicaid without health reform,” Angeles wrote.

Why the difference? Other studies (including some cited by Angeles) suggest estimates that focused on increases in state costs failed to look at areas where states might also reap savings.

That was one of the main differences in sources of variation in estimates done by various states themselves, according to a report done by researchers at the Urban Institute for the Kaiser Commission on Medicaid and the Uninsured.

For example, those researchers found, some states may be able to shift “some high-income individuals from Medicaid to coverage in the Exchanges.” Many states already extend Medicaid coverage (for which states pay part of the cost) to pregnant women with incomes well over 133 percent of poverty. Under the health law, those women could get private coverage in the new health exchanges instead, with subsidies provided by the federal government. States would no longer pay any part of their costs.

And yet another study from Urban Institute researchers, this one for the Robert Wood Johnson Foundation, found that the vast majority of new Medicaid enrollees won’t cost all that much anyway.

“Of the 12.3 million newly eligible enrollees, 10.0 million of them are adult nonparents,” the study estimates. “These new enrollees have lower associated costs because, on average, they do not have the same health issues that allowed adult nonparents to enroll previously.”

In the end, of course, no one really knows how much any of this will actually cost any state. As one of the Urban Institute studies points out, “there are many important implementation decisions with a state’s authority. Few of these decisions have been made.”

Until then, however, it’s likely lots more trees will be felled producing lots more studies making lots more estimates.

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States The Health Law