Marketplace Pulse: Fiscal Impact of Expanding Medicaid in Mississippi

The Marketplace Pulse series provides expert insights on timely policy topics related to the health insurance marketplaces. The series, authored by RWJF Senior Policy Adviser Katherine Hempstead, analyzes changes in the individual market; shifting carrier trends; nationwide insurance data; and more to help states, researchers, and policymakers better understand the pulse of the marketplace.

A study by Manatt Health (recently summarized in a blog for the Commonwealth Fund) measures the fiscal impact of expanding Medicaid in Mississippi. The results are compelling. Expansion would cover more than 200,000 adults at an estimated net cost to the state of zero dollars for the first six years. This was by no means the first time this question has been asked and answered, not even in Mississippi. Yet the new study provides a timely data point to inform a longstanding health policy dilemma.

Since 2014, states have had the option under the ACA to expand Medicaid eligibility to adults with incomes below 138 percent of the federal poverty level ($18,754 annually for an individual). All but 12 states have now chosen to do so. The plight of those remaining in the “coverage gap”—too poor for Marketplace coverage, yet ineligible for Medicaid—has galvanized national attention. Closing the gap at the federal level is a key component of the proposed Build Back Better package. Understanding the benefits of expansion yet the persistent resistance to action in holdout states underscores why a federal solution is important.

Many prior studies have shown that the net fiscal effect of Medicaid expansion for states is positive. The federal government has provided a powerful incentive to expand by paying at least 90 percent of the cost of covering the expansion population. States also save in other ways when they expand Medicaid, since they can cover certain populations and services that were once funded exclusively with state dollars or at a lower matching rate through the expansion. 

The math becomes even better with the American Rescue Plan Act of 2021 (ARP), which offered newly-expanding states increased federal Medicaid funding for much of their non-expansion Medicaid population. In Mississippi, the cumulative impact of these factors is potent. Expansion would save Mississippi an estimated $333 million in spending on coverage for existing Medicaid populations and other state healthcare programs. Combined with $747 million in increased federal matching dollars under ARP, the total—$1.2 billion—more than offsets the estimated state cost for the expansion. As the authors note: "Medicaid expansion is a better fiscal deal than ever before while also significantly increasing coverage."  

And this fiscal calculation is only the narrowest way to think about the benefit of expanding. Medicaid expansion also increases employment and strengthens the finances of healthcare providers by reducing uncompensated care. Coverage allows people to live healthier and more productive lives, where they are better able to work, complete their education, attend to their children's health, and stay out of debt.  Improvements in health are sorely needed in Mississippi, which gets high marks for uninsurance and poverty and ranks at or near the bottom of states in most measures of health and access to care. The state currently has some of the most restrictive Medicaid eligibility rules in the nation for non-disabled non-elderly adults. Parents and other caretaker relatives are covered only up to 21 percent of the federal poverty level and childless adults are ineligible regardless of income.

These facts are not lost on many Mississippians. A recent poll conducted by the AARP showed 7 out of 10 registered voters aged 50+ believe that expanding Medicaid is "extremely important." Elderly residents of this poor state can relate to the peril of going without coverage. One third of respondents agreed that "it is extremely or very likely that they, or someone they know, may lose health care coverage due to cost or job loss." In 2021, a ballot initiative to expand Medicaid gained momentum before a Mississippi Supreme Court ruling that prohibited the use of the ballot. The Chairman of the State Senate Public Health and Welfare Committee acknowledged that the state was missing out: “It’s been possible since day one to expand Medicaid and have the state make money. It has cost us no telling how much money to refuse to expand Medicaid.”

Leaders in holdout states seem willing to leave money on the table, jeopardize their residents' health and well-being, weaken their healthcare institutions, and even defy public opinion, rather than expand Medicaid. The specific narratives in the twelve states may differ, but the upshot is the same. And while Tolstoy famously observed that all unhappy families are unhappy in their own way, the through line here is that more than 2 million low-income uninsured people around the country, disproportionately people of color, are living in a similar kind of unhappy limbo, each in a state with a story more or less like that of Mississippi.

We may long ponder the intransigence of these states. Yet in the meantime, millions remain uncovered, which is why closing the coverage gap at the federal level is a critical and widely supported component of the currently stalled reconciliation package. Such a solution would still provide an incentive to any state that ultimately chooses to expand Medicaid on their own. In the meantime, closing the gap would provide relief to the low-income uninsured residents of these 12 hold-out states, who have waited nearly a decade for an expansion that has still not come. Despite inter-party disagreements on many components of the social spending package, Senator Joe Manchin recently reaffirmed his support for “Medicaid expansion to the states that got left behind.” Closing the gap in these states is the most important thing we can do to fulfill the promise of the ACA and bring our nation closer to universal coverage.