In my column this morning I look at the costs of Medicaid expansion under the Affordable Care Act. Earlier, Emily and I have reported on the findings of the State Budget Crisis Task Force (here and here). Medicaid costs are one of the six major budget threats identified by the group and the one most likely to be confronted here by lawmakers and a new governor. As I note in the column,

The U.S. Supreme Court’s recent ruling on the Affordable Care Act (ACA) allows states to choose whether to expand Medicaid coverage under the act. Currently, the federal government pays about half the average state’s Medicaid costs.

Under the ACA, the federal share for the population covered under the expanded coverage in 2014 is much higher: The feds pick up all the cost of medical expenses for 2014-16, ratcheting down to 90 percent in 2020.

What I didn’t have room to discuss in the column is what some call the “woodwork effect,” currently eligible Medicaid recipients who choose to enroll as a result of the increased attention given the program as it expands. These individuals will be covered with the current federal match, not the sweeter match provided for the newly eligible with expansion.

In a study done for the state budget office by the Urban Institute before the Court made expansion optional, UI analysts estimated enrollment growth. They report the following:

The eligibility expansion will total about 1 million people under age 65.  This figure is nearly as large as the 1.1 million comparable population now enrolled, as of 2011.  Somewhat more than half of these potential new enrollees are already eligible for Medicaid but are not enrolled under their current circumstances—some 545,000 people.  An additional 495,000 people will become newly eligible under the reform.

The distinction between those already eligible and those newly eligible is important under the ACA:  Enrolling a currently eligible person is much more expensive for the state budget than a newly eligible one, because the federal matching rate is so much higher for the newly eligible.

They estimate actual enrollment growth of about 330,000, of whom 80,000 would be people already eligible for the program. Their research is being updated and a new report next month should clarify the costs and benefits of expansion.

Meanwhile, Kaiser Health News reports today that 13 states are cutting Medicaid to balance their budgets. There are tough choices among competing priorities. I conclude my column by saying,

With Medicaid driving so much of state spending, there’s no better time for states to seek policy changes that give them greater flexibility, possibly block grants, to make the system more efficient and improve outcomes.

An unsustainable status quo should not be expanded; it should be reformed.