Can a Poor State Afford Not to Expand Medicaid?

Some advocates of the uninsured support expansion of Medicaid programs, while others say that expansions are simply unaffordable, especially in poor states. State-level analyses of the costs and consequences of these expansion programs are infrequent. This study evaluates three programs to expand eligibility for Alabama's Medicaid program. The first two programs would raise the Aid to Families with Dependent Children (AFDC) eligibility threshold to 50 and 100 percent, respectively, of the federal poverty level. The third program, currently not available to the states without a federal waiver, would drop all categorical eligibility requirements and base eligibility solely on whether income is below the federal poverty level. Only 10.7 and 18.3 percent, respectively, of Alabama's uninsured would gain health care coverage under the first two programs. The third program would increase the proportion of Alabamians with health coverage to nearly 50 percent. For all of these programs, front-end state costs would be largely countered by federal funding and offsets, such as reductions in uncompensated hospital care and savings realized by former uninsureds from reductions in out-of-pocket expenditures for health services.