Since 2014, states have had the option to expand Medicaid eligibility to adults with incomes below 138 percent of the federal poverty level ($18,754 annually for an individual), with the federal government picking up no less than 90 percent of the cost. States have seen significant budget savings from Medicaid expansion because the federal contribution covers individuals and services that were previously covered with a lower matching rate or with unmatched state funds. Furthermore, the American Rescue Plan Act (ARPA), enacted in early 2021, allows states newly expanding Medicaid to access enhanced federal matching funds for most of their nonexpansion Medicaid populations. Combined with the 90 percent matching rate for expansion adults established under the Affordable Care Act (ACA), ARPA makes the fiscal case for expansion even stronger.
Nonetheless, the debate at the state level in nonexpansion states is often focused on cost and whether the 10 percent state share of expansion costs is affordable. A recent white paper by Manatt Health, prepared in partnership with the Commonwealth Fund and the Robert Wood Johnson Foundation, estimated the fiscal impact of Medicaid expansion in Mississippi, one of the 12 remaining nonexpansion states and one of poorest and least healthy states in the country. This analysis demonstrates that Medicaid expansion is a better fiscal deal than ever before, in addition to significantly increasing insurance coverage. We project that expansion in Mississippi would cover more than 200,000 adults; the additional ARPA funding, along with significant ongoing savings, also would result in zero net cost to the state for more than six years.
Mississippi and Medicaid
Low-income Mississippi residents face significant challenges in accessing affordable health care. In 2019, the state had the fifth-highest uninsured rate in the country. Nearly one of five residents live in poverty. Mississippi’s health care system also ranks last among all states across a range of measures of access to health care, quality of care, health care utilization, cost of care, health outcomes, and income-based health care disparities.
Currently, Mississippi covers approximately 840,000 residents through Medicaid and the Children’s Health Insurance Program. Most Medicaid enrollees (88%) are children or elderly or disabled adults. Only a small number of nondisabled parents and pregnant women are covered; Mississippi does not provide coverage for nondisabled childless adults under age 65, regardless of income level.
How Much Would It Cost to Expand Medicaid?
To determine the net cost to the state of expanding Medicaid, we began by estimating the number of people who would gain coverage from expansion, finding that approximately 230,000 Mississippi adults would enroll by the third year of the program. Given the 90 percent federal matching rate, the cost to the state of providing services to these new enrollees would be approximately $878 million over five years. Mississippi also would likely see increased administrative costs, which we estimate to be $78 million over this time period.1
How Significant Are the Offsetting Savings?
Mississippi would realize substantial savings from expansion. We project that expansion would result in $333 million in reduced state spending on existing Medicaid populations over five years, as some of these individuals instead enroll through the expansion.
In addition, Mississippi would qualify for the ARPA enhanced federal funding, which would provide an estimated additional $747 million in federal dollars. While the ARPA funding lasts for two years, Mississippi could “bank” the additional federal dollars to offset future expansion costs.
Finally, expansion likely would lead to reduced prison health care costs. We project that this would result in $88 million in savings over five years.
In total, we estimate $1.2 billion in savings over five years, against only $956 million in costs. If the state were to reserve excess ARPA funding, it would have $212 million in remaining unused funds after five years, allowing it to fund expansion for a sixth year at zero cost.
Medicaid expansion has been shown to offer myriad health-related benefits and associated gains that extend beyond health. While not accounted for as part of this analysis, it also has been shown to offer states substantial indirect fiscal benefits as a result of an influx of new federal dollars. The new dollars directly increase provider revenues and reduce uncompensated care while stimulating economic growth and new jobs as these dollars flow through the broader state economy (known as the “multiplier effect”). With the health needs of the state’s low-income population in the balance, our analysis shows that Medicaid expansion represents a fiscally prudent opportunity for Mississippi to improve health and well-being.