Revised: Medicaid Expansion Still Saves Money in Virginia’s Budget

February 1, 2013

>> Get the new analysis (includes both tables) (pdf)

In January, the Department of Medical Assistance Services (DMAS) revised their assumptions and cost estimates for Medicaid expansion in Virginia. In response we revised our earlier analysis and updated two tables detailing the costs, savings, and new revenues anticipated from the expansion.

Our revised analysis uses the new DMAS estimates showing the net cost of expanding Medicaid at $137 million over 10 years and displays the costs and savings year by year.

In addition to analyzing and updating the estimated impact of expanding Medicaid, we adopted the new DMAS numbers to analyze the estimated impacts of the Affordable Care Act without the Medicaid expansion; added the new revenues that will accrue to Virginia’s General Fund from new jobs created with the generous federal match; and added additional anticipated savings (not included in the DMAS estimate) for state employee health insurance premium growth reductions.

Key findings:

State Savings From ACA ($1.16 billion)
Virginia will achieve significant savings through the prescription rebate program, whereby drug manufacturers pay rebates to the state for prescription drugs that Medicaid covers ($529 million). The state would also benefit from increased federal match for the state’s children’s health insurance program ($322 million) and the reduced need for public programs serving uninsured people ($60 million). Moreover, there will be less uncompensated care, allowing a decrease in indigent care payments ($34 million).

State Savings From Medicaid Expansion ($1.32 billion)
Virginia would achieve savings by expanding Medicaid. The state will be able to reduce general fund payments to hospitals for uncompensated care due to the decreased number of uninsured Virginians ($637 million). The state would be able to use federal Medicaid funds for Department of Corrections’ inmate hospital costs ($290 million) and some Community Services Boards’ services ($292 million) because many people served there would now have coverage paid for with Medicaid. State funding for individuals with temporary detention orders and for other programs could also be supplanted with federal funds ($104 million).

Additional State Budget Enhancements and Savings From Medicaid Expansion ($692 million)
The $2.6 billion per year in federal funding for Medicaid expansion would generate as many as 26,700 health care sector jobs, which would generate an additional $519 million in state income and sales tax revenue over the next eight years. Also there would be a reduction in the increases in Virginia state employees’ health premiums because of reduced “cost-shifting” in the health care market since there will be fewer uninsured Virginians ($173 million).

>> Download the new analysis (includes both tables) (pdf)