The Benefits of Medicaid Expansion

Since 2012, states have had the option of expanding Medicaid to all low-income adults, with nearly full financing from the federal government. To date, 36 states and the District of Columbia have expanded their programs in this way, while 14 states have not. This unintentional experiment means that we now have evidence on what happens when a state expands Medicaid coverage. To be specific, we know that Medicaid expansion yields tangible benefits in 3 areas:

1. Expanding Medicaid helps low-income families’ health and financial well-being, especially those in which someone has lost a job. In states that expanded Medicaid under the Patient Protection and Affordable Care Act (ACA), unemployed workers experienced large gains in coverage.¹ These gains improved access to medical care, reducing forgone care.² Better access translates into better health and lower mortality.³ Moreover, there are spillover benefits for economic well-being: lower debt and better credit scores.⁴ Physical health and financial health are inextricably linked. Expanding Medicaid improves both for low-income families.

2. Expanding Medicaid reduces hospitals’ uncompensated care. In an emergency, uninsured patients will still be cared for, as hospitals on the front line have demonstrated every day throughout the coronavirus disease 2019 (COVID-19) pandemic. But these patients will often be saddled with debt, and hospitals will end up footing much of the bill for their care. Medicaid expansion dramatically reduces this burden for hospitals. In Michigan, uncompensated care was cut in half after Medicaid expansion in 2014. Nationally, multiple studies show that Medicaid expansion significantly reduced the burden of such care.^5,6 This is particularly salient given the unprecedented operational and financial stress that hospitals are facing as a result of the COVID-19 pandemic.

3. Expanding Medicaid is a highly effective form of economic stimulus. An often-overlooked benefit of Medicaid expansion is that it creates jobs. During a recession, the infusion of federal spending gives a boost to the state economy. Evidence from the Great Recession shows that Medicaid spending is a highly effective form of stimulus: for every $100 000 of additional federal Medicaid spending, 2 workers gained a year of employment.⁷ With their economies crashing, states should not overlook these benefits.

Given these well-documented benefits, why have some states declined expansion? Opponents of expansion offer 3 primary arguments:

1. “The state can’t afford its share of the cost!” Medicaid expansion requires states to foot 10% of the bill for new beneficiaries. This cost has been cited by some opponents of expansion, such as Maine’s former governor Paul LePage, who refused to implement a Medicaid expansion that was overwhelmingly approved by voters in a referendum. (It has since been implemented by his successor.) But this claim may have more to do with political theater than the reality of state budgets. In many states, this money can come from other health care programs whose users are likely to gain new coverage as a result of Medicaid expansion. In Michigan, for example, the state budget realized substantial savings in correctional health care and community mental health when some of the expenses of these programs were shifted to Medicaid.⁸ Taking into account other economic effects of expansion, such as increased tax revenues from increased economic activity, Medicaid expansion was a net benefit to the state’s budget. Moreover, the Families First Coronavirus Response Act, which was signed into law on March 18, 2020, included a provision for the federal government to assume a larger share of existing Medicaid obligations in every state, freeing up state Medicaid funds for other uses—like expanding coverage.

2. “Expanding Medicaid will discourage work!” Some fear that Medicaid reduces the incentive to work. But multiple studies have found no evidence of this.^1,9 This should not be surprising; low-income households have other pressing material needs that are not met by Medicaid, such as paying rent and putting food on the table. People in the US who lost their jobs because of the COVID-19 pandemic are anxious to get back to work. Now more than ever, the argument that Medicaid will keep them from doing so is not credible.

3. “We don’t want to add more people to a broken system.” Opponents of expanding coverage often deride Medicaid as a low-quality program. Yet a majority of people in the US—Democrats, Republicans, and independents alike—believe that the program is working well. Most Medicaid enrollees are quite happy with their coverage, reporting higher rates of satisfaction than people with private insurance. Furthermore, in states that have not expanded Medicaid, a clear majority favor doing so. And, as noted, there is clear evidence that Medicaid coverage leads to substantial improvements in health and financial well-being.

The Urban Institute has estimated that if all states adopted Medicaid expansion, 4.1 million individuals would gain coverage.¹⁰ The evidence is clear that this expansion would save lives and mitigate the tremendous ongoing economic damage resulting from the COVID-19 pandemic.

Open Access: This is an open access article distributed under the terms of the CC-BY License.

Corresponding Author: Helen Levy, PhD, Institute for Social Research, University of Michigan, 426 Thompson St, Ann Arbor, MI 48104 (hlevy@umich.edu).

Conflict of Interest Disclosures: Dr Buchmueller reported being part of a research team that conducted an independent evaluation of the Healthy Michigan Plan (the state’s Medicaid ACA Medicaid expansion); the evaluation was funded by Centers for Medicare & Medicaid Services (CMS) and the Michigan Department of Health and Human Services. Dr Cliff reported other from CMS. Dr Levy reported being a member of the research team carrying out the independent evaluation of Michigan’s Medicaid expansion under contracts with CMS and the Michigan Department of Health and Human Services.