March 1, 2011 / 10:51 PM / 9 years ago

Expanding Medicaid will cost US states billions-study

* Texas, California, Florida to see greatest increases

* States also worried about flexibility, communication

* 28 million uninsured people could be covered under plan

By Lisa Lambert and Donna Smith

WASHINGTON, March 1 (Reuters) - The costs to U.S. states of the Medicaid insurance program for the poor will grow by hundreds of billions of dollars under the healthcare law passed last year, according to a report released by Republicans in the Senate and House of Representatives on Tuesday.

“This law, because of Medicaid expansions, has put a strain on state budgets,” Senator Orrin Hatch, one of the report’s sponsors, told a meeting of hospital administrators on Tuesday. “Medicaid expansions threaten to bankrupt the states.”

The report tallied state governments’ estimates and found expanding Medicaid will cost at least $118 billion nationally through 2023. States run the program with partial reimbursements from the federal government.

The costs would grow most for Texas, at $27 billion, followed by California at $19.4 billion and Florida at $12.9 billion. Altogether, 15 states will pay more than $1 billion for the new requirements.

The report comes as Republicans work to undo the law that President Barack Obama championed to provide affordable healthcare to all Americans. Members of Congress are introducing bills to repeal its requirements, while more than half of the states are challenging it in federal court.

The recession and financial crisis ravaged states’ revenues and currently their budget gaps total $175 billion. Meanwhile, swells of unemployed people who turned to Medicaid during the recession, industry changes and inflation drove up states’ spending on Medicaid so that it now it accounts for a third of many of their budgets.

When states balked at expanding Medicaid enrollment for fear of further fiscal pain, the U.S. government agreed to cover all costs of new enrollees for the first few years of the reform plan, and a majority of the costs through 2021.

“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,” said January Angeles, policy analyst at a think tank tracking states’ fiscal conditions, the Center on Budget and Policy Priorities.

“The health reform law, by dramatically shrinking the ranks of the uninsured, will lighten the burden on states of providing health care to their uninsured residents,” added Angeles in her blog post. GOVERNORS SEEK FLEXIBILITY

States are charged with carrying out key provisions in the healthcare law, including creating insurance exchanges. Many worry they will not receive enough funding for implementation and slow timing and regulations limit their flexibility.

Distributing Medicaid funds through grants with caps on how much states may receive would drive down costs and increase states’ flexibility, Mississippi Governor Haley Barbour, a possible Republican presidential candidate, told the meeting of the Federation of American Hospitals.

“Most governors would take that in a heartbeat,” he said. “We would make Medicaid better. We would also make it less expensive.”

On Monday, Obama told a bipartisan group of governors he supports giving states more flexibility in implementing the reform law, asked them to create a commission on shrinking Medicaid costs, and said his administration will work to smooth out wrinkles in communicating with states.

Massachusetts Governor Deval Patrick, a Democrat, said the healthcare law will help his state, which established a plan similar to the federal one under former Governor Mitt Romney.

“We see a tremendous amount of flexibility,” Patrick said. “We see some flexibility to try new things in terms of payment delivery and payment system reforms, which is where the real (cost) pickup is.”

In a report released on Tuesday, the Robert Wood Johnson Foundation said that if the law were fully implemented today, about 28 million people currently lacking coverage would have insurance. The law is set to come on-line completely in 2014.

About 12 million people would be newly eligible for Medicaid at a cost of $54 billion nationally, said the foundation, which tracks health policy. Of that amount the federal government would pay about $45 billion.

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