New Hampshire has a major opportunity to reduce the number of people without health insurance by accepting hundreds of millions of dollars in federal funds to extend its Medicaid program. While the state would face some up-front costs, it would benefit from new revenue and savings elsewhere in the budget. Taking advantage of just two such offsets would allow New Hampshire to expand Medicaid without imposing any net cost on its General Fund budget through the end of the decade.
Under the Affordable Care Act (ACA), New Hampshire can elect to extend its Medicaid program to low-income adults earning up to about $15,850. One hundred percent of the costs of providing health benefits to these adults would be paid by the federal government between 2014 and 2017 and no less than 90 percent each year after that.
New Hampshire would face some modest costs. However, most, if not all, of these costs would be offset by savings elsewhere in the budget and by the additional revenue the Medicaid expansion would produce. As the table above illustrates, this holds true both in the proposed budget approved by the House and in a longer-term analysis conducted by the Lewin Group.
In particular, New Hampshire’s decision to implement a managed care program for Medicaid means that extending Medicaid coverage to more people would generate additional insurance premium tax revenue because private managed care companies are subject to the tax. New Hampshire’s Insurance Department finds that this would yield $5.8 million in additional revenue in FY 2015. Based on the Lewin Group’s longer-term analyses, the effect over the FY 2014-2020 period would be close to $45 million.
In addition, the Lewin Group estimates that expanding the state’s Medicaid program would reduce expenditures in the Department of Corrections. At present, inmates in New Hampshire’s prisons are generally not eligible for Medicaid. Under the expansion, the state could collect federal reimbursement for inmates that receive medical treatment outside the prison under some circumstances. This change would lower state corrections costs by roughly $20 million total through FY 2020.
In short, these two offsets alone – additional insurance premium tax revenue and corrections savings – are likely to offset any costs to the states related to Medicaid expansion through the end of the decade. Any other savings would help to lower state expenditures overall.