The Latest on Medicaid Expansion 

Hospital budget shortfalls and outright hospital closures in states that have expanded Medicaid are the canary in the coal mine that Medicaid expansion isn’t working. But is anyone listening? 

For years, FGA has sounded the alarm on the consequences of Medicaid expansion. In 2023, Medicaid enrollment reached a record high of more than 100 million—meaning one in every three Americans—so the alarm is just as real and relevant as ever. 

With the implementation of ObamaCare, states had the ability to expand the Medicaid program to able-bodied adults. Forty states have now expanded Medicaid, and in every single one, the results are the same: busted budgets, higher-than-expected enrollment, and fewer resources for the truly needy. 

Medicaid expansion means struggling hospitals, not free money

Medicaid began as a program for the truly needy, such as seniors, individuals with disabilities, and low-income children, but it has been expanded to allow able-bodied adults—many of whom already have access to private insurance—to push the truly needy to the back of the line. 

Advocates wrongly promised that expansion was a way for states to access “free money” and reap economic benefits. But by adding millions of able-bodied adults, Medicaid has turned into a bloated government program that forces people off their private health insurance and onto welfare. 

The cost is not only high for states, but also for hospitals. Medicaid reimburses providers at a fraction of what private insurance companies pay—an average of 60 percent. Expansion increases Medicaid enrollment, and the reimbursement rate for care for enrollees is not enough to cover hospital costs. This means consistent budget shortfalls, job losses, and closures for hospitals in expansion states. 

FGA’s latest research on Medicaid expansion dives further into the high cost of expansion, especially for hospitals.

Check it out: 

Medicaid Expansion Would Crush Hospitals in the Remaining Non-Expansion States, Costing Them Billions

Hospitals are being crushed by Medicaid expansion: When able-bodied Americans are forced off private insurance and onto Medicaid, hospitals are left in the red because Medicaid reimburses providers at roughly 60 percent of what private insurance reimburses. Hospitals in expansion states have seen profits slashed by two-thirds between 2013 and 2021—and if the remaining holdout states expand, they could lose more than $5 billion in revenue.

Read the full paper here. 

Four Myths About Medicaid Expansion Funding—And How to Debunk Them

Proponents of Medicaid expansion repeatedly claim that it’s good for a state because it supposedly “brings back” tax dollars that the state sends to the federal government—implying that they have a right to them and that by rejecting Medicaid expansion, states are sending their tax dollars to other states instead. Advocates continue to try to convince states that they can do nothing to reduce the national debt—and, even worse, assert that expansion is essentially a free program that is fully funded by the federal government. In reality, all of these arguments put forth by proponents drastically misrepresent how Medicaid expansion is actually funded—and the threat that expansion poses to state budgets nationwide.

Read the full paper here. 

Medicaid Expansion Dramatically Increases Hospital Shortfalls… and Puts Their Futures at Risk 

Medicaid hurts hospitals, and the situation is not improving as more states expand. Hospitals’ Medicaid shortfalls have increased by 117 percent since 2013. As more people in expansion states enroll in Medicaid, more hospital services get billed to Medicaid. As more hospital services are billed to Medicaid, the greater the shortfall becomes, since Medicaid does not pay hospitals enough to cover their costs. 

Read the full paper here.

The bottom line

Medicaid expansion is a costly endeavor everywhere it’s been tried—and it ends up harming the truly needy populations it was intended to help. The states that have stood strong against expanding Medicaid to able-bodied adults should continue to do so, holding the line for the sake of their hospitals. And those states that have already expanded should take an honest look at the devastating impact it’s having and take steps to roll it back. 

The latest commentary on Medicaid: 

The Wall Street Journal | As Medicaid Expands, Hospitals Close

FGA Blog | A Decade of Medicaid Expansion Disasters

OSP Blog | What Would Happen if Kansas Were to Expand Medicaid?

The Wall Street Journal | The Disabled Will Pay for Indiana’s Medicaid Forecasting Error 

New York Post | Hochul Wants to Create A Middle-Class Medicaid Entitlement That New York Can’t Afford

Magnolia Tribune | Presumptive Eligibility for Medicaid Poses A Serious Threat to Program Integrity