MS Medicaid Expansion Could Reduce State Medicaid Spending

Mississippi could achieve lower state Medicaid spending over the course of five years by expanding its Medicaid program with the American Rescue Plan boost to federal matching, a Manatt Health white paper found.

The researchers analyzed the impact that Medicaid expansion might have in Mississippi from state fiscal year 2023 through 2027 using data from the U.S. Bureau of the Census’ American Community Survey, the AARP Public Policy Institute, and the Medicaid and CHIP Payment and Access Commission (MACPAC).

Midway through the program’s expansion, Mississippi would see a spike in enrollment, gaining approximately 229,000 new beneficiaries. However, after the first three years of the new model, the state’s enrollment growth would become flat, parallel to the nonelderly adult population growth rate.

From 2023 through 2027, Medicaid expansion savings will offset the costs and ultimately will cost less than continuing without expansion.

That is not to say that the project would be cheap for the state. Mississippi would have to dole out around $956 million over the course of five years in order to sustain Medicaid expansion, the experts projected. 

But the overall cost of the first five years of Medicaid expansion in Mississippi would still amount to $212 million less than it would be if the state refused to expand its Medicaid program.

“If the State were to reserve these offsets (including the ARP FMAP increase), Mississippi would be able to fully finance the State share of Medicaid costs for over six years (i.e., into 2029),” the researchers suggested.

Moreover, federal funding would bear the brunt of the costs for Medicaid expansion. Mississippi would receive a total of $8.1 billion in federal spending, $1.2 billion of which they would not have received prior to the coronavirus pandemic due to the American Rescue Plan’s federal medical assistance percentage (FMAP).

The state would pay $878 million from state fiscal years 2023 through 2027 for the new enrollees that join Medicaid after Medicaid expansion.

The majority of the increase in state spending would tie back to the newly eligible enrollees, the researchers found. New enrollees who would have been eligible for Medicaid under current standards would account for only $148 million of the state’s spending from state fiscal year 2023 through 2027. Newly eligible Medicaid enrollees would account for $730 million in state spending.

Under Medicaid expansion, the state’s administrative costs would be $78 million higher from state fiscal year 2023 through 2027.

There are three main ways in which Mississippi could offset its expenditures if the state expanded its Medicaid program. 

First, the state could implement a two-year federal matching rate through the American Rescue Plan that would apply a five percentage-point bump to its current federal matching. The state would receive $747 million from the American Rescue Plan federal matching boost.

Second, some enrollees would shift from regular Medicaid enrollment to expanded Medicaid enrollment which would lower state costs by around $333 million.

And finally, by transitioning more people from uninsurance into Medicaid the state would be able to reduce uncompensated care. For example, uninsured individuals do not receive behavioral healthcare coverage, but by covering these services through Medicaid expansion Mississippi could receive $99 million from the federal government in matching funds.

These outcomes are crucial in a state with the fifth-highest uninsurance rate in 2019 at 12.9 percent, the white paper emphasized. Mississippi also ranks poorly on access to care quality of care, and affordability of care measures. For example, Mississippi’s obesity rate was ranked the highest in the country in 2019 (40.8 percent).

Experts have estimated that, if Mississippi had expanded its Medicaid program before the coronavirus pandemic struck the US, the state may have seen uninsurance among young adults decline by 57.2 percent.