EXECUTIVE OFFICE OF THE PRESIDENT
 

COUNCIL OF ECONOMIC ADVISERS
 

THE IMPACT OF HEALTH INSURANCE REFORM ON
 

STATE AND LOCAL GOVERNMENTS
 

SEPTEMBER 15, 2009 
CONTENTS 

OVERVIEW 3-9

APPENDIX ON METHODOLOGY 10-12

ARKANSAS 13-17

CALIFORNIA 18-22

FLORIDA 23-28

IDAHO 29-33

INDIANA 34-39

IOWA 40-44

MAINE 45-49

MICHIGAN 50-56

MINNESOTA 57-61

MONTANA 62-66

NEBRASKA 67-71

NORTH CAROLINA 72-79

OREGON 80-84

PENNSYLVANIA 85-89

VERMONT 90-94

WYOMING 95-99


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 

2
 
OVERVIEW 

The Impact of Health Insurance Reform on State and Local Governments 

Health insurance reform as currently proposed in both the House Tri-Committee and in the 

Senate HELP Committee would ensure that virtually all Americans receive health insurance. As

part of the proposed increases in health insurance coverage, the House Tri-Committee legislation

calls for an expansion in Medicaid to all individuals under 133 percent of the federal poverty line 

(FPL).1 Understandably, there has been some concern in state capitals surrounding this proposal 

given the possible increase in state Medicaid expenditures that could result. 

However, state and local governments are already spending billions of dollars each year 

providing coverage to the uninsured – costs that could be significantly reduced as a result of the 

currently proposed reforms. Additionally, state and local governments employ more than 19

million individuals, and their total spending on health insurance premiums for this group in 2007 

was approximately $95 billion.2

 This group currently pays a “hidden tax” in the form of higher 

health insurance premiums that helps to cover expenses incurred by the uninsured. This burden 

would be greatly reduced as a result of expansions in insurance coverage resulting from health 

insurance reform, which would generate significant savings for state and local governments. 

A June report by the Council of Economic Advisers (CEA) demonstrated the health and overall 

economic benefits of health insurance reform (CEA, 2009a). A subsequent study produced by 

the CEA in July showed the significant benefits to small businesses and their employees from 

health insurance reform. This report, the third in the CEA series, illustrates the potential benefits 

of health insurance reform for state and local government budgets through a detailed analysis of 

current spending levels. Focusing on a sample of sixteen diverse states, we provide detailed case 

studies of the multitude of ways that state and local governments spend billions of dollars on 

uncompensated care. These estimates, combined with estimates of possible state expenditures

associated with reform, indicate that the move to greater insurance coverage would likely result 

in substantial savings for state and local governments. Rather than harming the budget situation 

of the states, health insurance reform would improve it. 

A. Scope and Methodology of the Study 

Determining what states spend on uncompensated care is difficult. This information is not

collected in one place or in a consistent form across states. To gather this information, we 

examined publicly available information from each state government and in many cases from 

county and city governments. We supplemented this with information from federal agencies, 

 

1 The Senate HELP Committee does not have jurisdiction over Medicaid and we therefore focus on the House TriCommittee legislation in this document. 2

 State spending on employee health premiums totaled $19.5 billion in 2003 (NASBO, 2005). Taking the ratio of 

national health care spending in 2007 to spending in 2003, we estimate this increased to $25 billion by 2007. 

However, this reflects only the cost of providing health insurance to the approximately 5 million state employees in 

2007. Assuming that the average cost per employee of health insurance is the same for the 14 million employees of 

local governments, we estimate $95 billion in premium costs to state and local governments. 

3
 
non-profit research organizations, and other sources, all of which we list in the references that 

are included at the end of each state summary. 

Because of the inherent difficulty in locating comprehensive information on all government 

spending on the uninsured, the state and local government programs that we highlight are in no 

way meant to be an exhaustive list. Our estimates should be considered a plausible lower bound 

on the potential cost savings to state and local governments. 

It is precisely because of the difficulty involved in gathering the information that we begin with a 

sample of states. The sixteen states that we examine are Arkansas, California, Florida, Idaho, 

Indiana, Iowa, Maine, Michigan, Minnesota, Montana, Nebraska, North Carolina, Oregon, 

Pennsylvania, Vermont, and Wyoming. While not a random sample, this group covers a range of 

geographic, economic, and demographic features. These states also run the gamut from low to 

high uncompensated care expenditures. For this reason we feel they are largely representative of 

the experience of the states we have not yet analyzed. 

In addition to gathering uncompensated care expenditure data from a multitude of sources, we 

also provide estimates of how much states pay in higher health care premiums for state 

employees because of uncompensated care. Though not as large as some of the direct 

expenditures, this hidden tax is substantial, especially for larger states. The technical appendix 

provides details on the methodology that we use to do this calculation. 

To estimate the possible cost to state governments of health insurance reform, we use detailed 

statistics for each state from the March 2008 Current Population Survey to estimate the number 

of uninsured citizens at various income levels. We combine these estimates with information on 

Medicaid expenditures by state and details from the proposed legislation on the share to be paid 

for by the states. Details of how we conduct this analysis are also included in the Appendix. 

B. State Spending on Uncompensated Care 

Our analysis reveals that states spend billions on uncompensated care in a wide variety of ways. 

Most obviously, there are state programs to cover low-income uninsured patients. Consider the 

following three examples. 

•	 In California, counties are the “providers of last resort” for health services to low-income 

uninsured people with no other sources of care. In 2004-2005, 24 California counties 

spent $1.61 billion providing care to the uninsured through their Medically Indigent 

Services Programs. The remaining 34 (primarily rural) counties spent $283 million on 

care to the uninsured through their County Medical Services Programs during the 2008 

fiscal year. Between both programs, California spent $1.90 billion. 

•	 In Minnesota, the state-funded General Assistance Medical Care program provides full 

health coverage to uninsured adults up to 75 percent of the FPL who are not eligible for 

federal benefits. In FY 2007, the state spent $281 million in payments to providers for 

GAMC services. 

4
 
 

•	 In Miami-Dade County, Florida, funding for uncompensated care through its public 

health facilities comes from a 0.5 percent sales tax. In FY 2007-2008, revenue from this 

tax amounted to $187 million. 

Under current draft legislation, low-income uninsured citizens and legal residents would be 

covered by Medicaid, which would be primarily federally-funded, greatly reducing the need for 

such expenditures by state and local governments. 

Many states fund programs which cover residents who earn above 133 percent of the federal 

poverty level. Consider the following three examples. 

•	 In Maine, Dirigo Health subsidizes health insurance for certain individuals up to 300 

percent of the FPL. These subsidies are financed by an earmarked assessment on health 

insurance and self-insured companies and drawing on the state treasury’s cash pool. In 

2008, Dirigo had subsidy costs of $41.5 million and operating costs of $2.8 million. 

In Pennsylvania, the adultBasic program provides subsidized basic health insurance to 

legal residents with incomes up to 200 percent of the FPL. In 2008, the program cost 

$172 million. Due to high demand and budget constraints, the program is limited in size 

and there is a substantial waiting list for the subsidized coverage. 

In Vermont, uninsured citizens who are not eligible for Medicaid or other state programs 

and do not have reliable access to an employer-sponsored plan can enroll in a 

“Catamount Health” plan, and may receive state-funded premium assistance if they meet 

certain qualifications. In state fiscal year 2008, Vermont paid a net amount of $10.2 

million in state funds for Catamount Health enrollees. 

•	 

•	 

Under current proposals for reform, these individuals would be eligible for subsidized health 

insurance through the national health insurance exchange, at no cost to the state. 

Finally, providing uncompensated care to the uninsured imposes a “hidden tax” on health 

insurance premiums for the insured. This tax increases premiums for all employers, including 

state and local governments and their 19.4 million employees (16.5 million as measured by “fulltime equivalents”). By greatly reducing uncompensated care, health insurance reform would 

reduce this hidden tax.3 

Table 1 shows our estimates of the amount spent in each of our sixteen states on uncompensated 

care and the hidden tax on the health insurance provided to state employees each year. There is 

substantial variation across states, most obviously because states vary greatly in size and thus in 

the number of uninsured. But importantly, in each case, the estimates are large. Summing the 

sixteen states together, we estimate that they spend at least $4.2 billion on uncompensated care 

per year. 

3

 It is possible that part of the savings from lower employer contributions to health insurance premiums would be 

passed on to workers in the form of higher wages. This would to some extent offset the estimated savings to state 

and local governments, though it would improve the economic well-being of their employees. 

5
 
 

As described above, it is simply impossible to track down every state and local program that 

contributes to covering the uninsured. As a result, true expenditures on uncompensated care are 

surely substantially larger than our estimates. Therefore, health insurance reform that greatly 

reduces uncompensated care would reduce costs to the states by more than the amount that we 

identify. This is true even taking into account the fact that some uncompensated care would 

remain following reform. 

Table 1: Summary of Detailed Analyses of Net Health Insurance Reform Savings in 16 States 

($ millions) 

State 

Spending 

on 

Existing 

Programs 

Cost of Hidden 

Tax on State 

Employee 

Health 

Premiums 

 Lower Bound 

Estimate of 

Uncompensated 

Care Spending 

Cost of 

Medicaid 

Expansion 

with 90% 

FMAP 

Net 

Budget 

Impact 

with 90% 

FMAP 

Net 

Budget 

Impact 

with 100% 

FMAP 

Arkansas $6.2 $17.2 $23.4 -$20.4 $3.0 $23.4 

California $1,934.0 $210.0 $2,144.0 -$195.0 $1,949.0 $2,144.0 

Florida $275.3 $102.0 $377.3 -$251.6 $125.7 $377.3 

Idaho $38.9 $8.3 $47.2 -$25.8 $21.4 $47.2 

Indiana $308.0 $29.5 $337.5 -$62.3 $275.2 $337.5 

Iowa $33.6 $11.2 $44.8 -$20.0 $24.8 $44.8 

Maine $45.7 $5.1 $50.8 -$15.3 $35.5 $50.8 

Michigan $168.4 $43.5 $211.9 -$68.1 $143.8 $211.9 

Minnesota $281.0 $13.6 $294.6 -$31.7 $262.9 $294.6 

Montana $22.8 $7.0 $29.8 -$20.8 $9.0 $29.8 

Nebraska $27.0 $8.6 $35.6 -$17.8 $17.8 $35.6 

North Carolina $150.7 $58.6 $209.3 -$188.3 $21.0 $209.3 

Oregon $116.0 $22.3 $138.3 -$59.3 $79.0 $138.3 

Pennsylvania $171.8 $43.1 $214.9 -$149.7 $65.2 $214.9 

Vermont $17.5 $3.3 $20.8 -$6.8 $14.0 $20.8 

Wyoming $6.9 $4.5 $11.4 -$10.6 $0.8 $11.4 

Total $3,603.8 $587.8 $4,191.6 -$1,143.5 $3,048.1 $4,191.6 

One way to quantify the degree to which our state-by-state estimates of uncompensated care 

could be too low is to compare it to estimates using different approaches. Hadley et al. (2008) 

use individual-level data from the Medical Expenditure Panel Survey to form an estimate of 

uncompensated care for the United States as a whole. They estimate that state and local 

governments spent $15.9 billion on care for the uninsured during the 2008 calendar year. We 

estimate that the hidden tax on the insurance policies provided to state employees adds another 

$1.6 billion to costs for state and local governments for the country as a whole.4 Thus, these 

estimates suggest that state and local governments spend a total of $17.5 billion nationally on 

uncompensated care. 

4

 See appendix for details of this calculation. 

6
 
 

 

 

Our estimate based on detailed analysis of state programs is $4.2 billion for sixteen states. These 

sixteen states include 38.1 percent of the total population of the United States. If one scaled up 

our estimate to be an estimate for the entire country (by multiplying by 100/38.1), the resulting 

number is $11.0 billion. This suggests that our direct identification of expenditures on 

uncompensated care is indeed a lower bound by a significant margin. 

C. Bottom Line for State Governments 

Table 1 also shows our estimates of the costs to the states of expanding coverage. For uninsured 

citizens and legal permanent residents above 133 percent of the federal poverty level, current 

proposals call for the creation of an insurance exchange with a sliding-scale subsidy. These 

subsidies would be paid for entirely by the federal government. Therefore, they would add 

nothing to state expenditures. 

Current proposals call for uninsured citizens with incomes less than 133 percent of the federal 

poverty level to be covered by Medicaid. Under existing proposals, the federal government 

would pay 100 percent of the cost of this addition to Medicaid for the first three years and State 

governments would pay none. After that, the federal government would pay 90 percent and the 

State governments would pay 10 percent. As with the current Medicaid program, only citizens 

and legal permanent residents would be covered. 

Table 1 shows our estimate of the cost of increased Medicaid coverage for each of the states we 

analyze and for the sum of the sixteen. Again, the estimated cost varies substantially across states 

because both the number of people who would be covered and the Medicaid costs per person 

vary substantially across states. The total cost of coverage expansion in the sixteen states we 

analyze is $11.4 billion (in 2007 dollars).5

 In current versions of the draft legislation, states 

would be required to pay zero under the 100 percent federal matching rates for the first three 

years. Under the 90 percent matching rate after three years, the amount would be $1.1 billion per 

6 year.

For the sixteen states we analyze taken together, the total net saving is $4.2 billion per year for 

each of the first three years when the federal government is paying for all of the expansion of 

Medicaid. Importantly, even when the federal matching rate is reduced to 90 percent, the saving 

to state governments from health insurance reform is substantial. We estimate that the sixteen 

states we analyze would save $3.0 billion per year with the 90 percent match, with the savings 

more than offsetting the additional Medicaid costs in every one of the sixteen states. Thus, health 

insurance reform, far from harming state budgets, would likely improve them substantially. 

In addition, further savings may come from the Children’s Health Insurance Program (CHIP). In 

FY 2008, the sixteen states that we analyze spent $1.3 billion on CHIP coverage for low-income 

children, with the federal government paying an additional $2.7 billion on CHIP in these same 

5

 Projections for Medicaid spending cited here and elsewhere in the document are in 2007 dollars to facilitate 

comparisons with existing spending by state and local governments on care for the uninsured and on their 

employees’ health insurance premiums. 

6

 If instead of a 90 percent FMAP, the sixteen states’ existing FMAPs were in effect, their share of the $11.4 billion 

in total Medicaid costs would be $4.8 billion. 

7
 
 

 

 

states (Kaiser Family Foundation, 2009). Under the current draft legislation, children in families 

with incomes above 133 percent of the FPL may transition to equivalent, federally-financed 

coverage through the national health insurance exchange, potentially allowing states to save a 

considerable amount of the costs of this program.7

 However, CEA does not include savings on 

CHIP in the bottom line calculations of net savings from health insurance reform detailed below, 

because transitioning children from CHIP to equivalent federal coverage would be subject to 

approval by the Secretary of Health and Human Services, and may not occur in all states. 

Our study has only focused on sixteen states so far. However, there is every reason to believe 

that the findings for these states would generalize to others. Thus, health insurance reform is 

likely to be widely beneficial to state and local governments in the U.S. 

This conclusion is strengthened by the fact that this analysis has only focused on the savings to 

state and local governments from reduced expenditures on uncompensated care. Health insurance 

reform is like to reduce their health care expenditures in a number of other ways. For example, 

cost savings from Medicaid reform and increased efficiency of health care utilization would 

reduce state Medicaid expenses and reduce the cost of providing health insurance for 

government employees. Similarly, increased health insurance coverage would imply more 

continuous care received by the millions of individuals who transition in and out of Medicaid 

eligibility in a typical year. To the extent that this greater continuity leads to improvements in 

health for Medicaid recipients, program expenditures would decline. Thus, there is every reason 

to expect health insurance reform to be even more beneficial to state budgets than our estimates 

suggest. 

7

 In current draft legislation, CHIP would expire after 2013 and thus state governments would realize savings from 

this as these children would then be financed through the federally-financed exchange. 

8
 
 

References 

Executive Office of the President. Council of Economic Advisers. “The Economic Case for 

Health Care Reform.” June 2009. 

Executive Office of the President. Council of Economic Advisers. “The Economic Effects of 

Health Care Reform on Small Businesses and Their Employees.” July 25, 2009. 

Hadley, Jack, J. Holahan, T. Coughlin, and D. Miller. “Covering the Uninsured in 2008: Current 

Costs, Sources of Payment, and Incremental Costs.” Health Affairs, 2008, 27(5): w399-

w415. 

U.S. Census Bureau. “Government Employment and Payroll.” Accessed August 12, 2009. 

http://www.census.gov/govs/apes/index.html. 

U.S. Centers for Medicare and Medicaid Services. “Medicaid Statistical Information System 

(MSIS) State Summary Datamart.” Accessed August 11, 2009. http://msis.cms.hhs.gov/. 

9
 
 

APPENDIX ON METHODOLOGY 

In each of the sixteen state reports that follow, we utilize data from several different sources to 

estimate the effects of health insurance reform on state and local governments. Two important 

components of these effects are the reduction in employee health insurance premiums that would 

result from an elimination of the “hidden tax” on state and local government employees’ health 

insurance premiums and the cost of the Medicaid expansion to individuals with incomes of less 

than 133 percent of the FPL. In this section, we discuss our methodology for estimating the 

impact of both of these components and also describe our key data sources. 

A. Estimating the Savings to State and Local Governments from Reduction of the “Hidden Tax” 

Individuals without health insurance receive a significant amount of uncompensated care from 

hospitals and from other health care providers. Much of the cost of this care is then passed on to 

those with private health insurance in the form of higher prices for health care services, with this 

ultimately translating into higher health insurance premiums. Because state and local 

governments provide health insurance to most of their 19.4 million employees, this “hidden tax” 

results in higher costs for state and local governments. By extending health insurance to the 

uninsured, health insurance reform would lower these costs to state and local governments. 

To estimate the magnitude of this effect for each state, we begin with the results from recent 

research by Hadley et al (2008), which indicates that $14.1 billion of this uncompensated care 

for the uninsured was not funded through government sources and thus would plausibly lead to 

higher premiums for individuals with private health insurance. We then divide this number by 

the 45.7 million uninsured U.S. residents8

 to obtain an average of $309 in uncompensated care 

costs per uninsured person. We then multiply this cost by our estimate of the number of nonelderly uninsured U.S. citizens and legal residents in each state.9

 Finally, we multiply this 

estimate of total uncompensated care costs in each state by the share of employment accounted 

for by state and local government workers to estimate the total savings to state and local 

governments from reduced health insurance premiums.10 

B. Estimating the Costs of the Medicaid Expansion 

Health insurance reform as currently proposed in draft legislation would expand Medicaid to 

uninsured individuals with incomes of less than 133 percent of the federal poverty line (FPL). To 

estimate the number of uninsured individuals who would become eligible for Medicaid in each 

state, we utilized data from the March 2008 Current Population Survey, which contains 

individual-level data on income, poverty, and health insurance coverage for a large sample of 

U.S. residents. 

8

 New data from the Census indicate that the number of uninsured individuals increased to 46.3 million in 2008. 9 We exclude undocumented immigrants from this calculation as they would not be eligible to obtain health 

insurance through Medicaid or through the exchange as a result of reform. 

10 Our 2007 employment data for state and local governments comes from the U.S. Census Bureau. Raw data is 

located at: http://www.census.gov/govs/apes/index.html. To calculate the share of employment accounted for by 

state and local employees, we divide the number of employees working for state and local governments by the total 

number of employees, taken from the March 2008 CPS. 

10
 
 

 

 

 

 

We define individuals in the survey as uninsured if they do not report coverage from either 

private or public (e.g. Medicare, Medicaid, or military health care) health insurance. We combine 

these data with information on the ratio of each survey respondent’s family income to the FPL to 

estimate the number who are both uninsured and who are in families with incomes of less than 

133 percent of the FPL.11 It is this group that would be potentially eligible for Medicaid as a 

result of health insurance reform. Uninsured individuals with family incomes above 133 percent 

of the FPL would be eligible for health insurance through the exchange. 

In Table 1 of each state’s report, we provide detailed information on the health insurance 

coverage of children (defined as ages 0 through 18 inclusive) and non-elderly adults residing in 

the state. We differentiate between those with high and low incomes (above and below 133 

percent of the FPL, respectively) and place each individual into one of four mutually exclusive 

insurance categories: uninsured, privately insured, Medicaid, and Medicare / VA / TRICARE.12 

In Table 2 of each state’s report, in which we summarize our estimates of the cost of the 

Medicaid expansion, we list the estimated number of low-income uninsured adults and children 

residing in each state who are U.S. citizens or legal residents. We exclude undocumented 

immigrants because they would not be eligible for Medicaid as a result of health insurance 

reform.13 

We next combine this estimate with data from the Centers for Medicare and Medicaid Services 

(CMS) regarding average Medicaid spending per recipient in each state. More specifically, we 

use the data that is available from the CMS Medicaid Statistical Information State Summary 

Datamart (http://msis.cms.hhs.gov/). We consider Medicaid spending for recipients who are not 

disabled, not dually eligible for Medicare, and who have a basis of eligibility (BOE) as either 

children (ages 0 to 18) or non-elderly adults (ages 19 to 64). We use the default settings of all 

other variables. Most states have data from 2007, although some states have data only for 2006 

or (in one case) 2004. We adjust all numbers to a 2007 baseline using the average annual rate of 

Medicaid expenditure growth of 7.2 percent from 2006 to 2007.14 

11 The categorical variable “povll” in the March 2008 CPS takes on one of fourteen values depending on the ratio of 

the family’s income to the poverty line. Those in one of the four lowest categories (0 to 49 percent up to 100 to 124 

percent) are defined as being below 133 percent of the FPL. One of the categories for this variable is 125 to 149 

percent of the FPL. For this group, we divide their reported family income by the state-specific (the value for 

Alsaska and Hawaii is different from other states) poverty guidelines that pertain to their family size and structure 

from http://aspe.hhs.gov/poverty/08fedreg.htm to determine whether they are below 133 percent of the FPL. 12 Some individuals report multiple sources of health insurance coverage. If a person reports Medicare, VA, or 

TRICARE, then we place him or her in that category. If the person does not report coverage from any of these 

sources but reports that they were covered by Medicaid, he or she is placed in the Medicaid category. Individuals are 

placed into the private health insurance category if they report private health insurance coverage but do not report 

public health insurance coverage. Uninsured individuals are those who do not report coverage from any private or 

public source.

13 We rely on estimates from Jeffrey Passel at the Pew Hispanic Center regarding the number of undocumented 

immigrants in each state. See Passel and Cohn’s “A Portrait of Undocumented Immigrants in the U.S.” at 

http://pewresearch.org/pubs/1190/portrait-unauthorized-immigrants-states for a description of their methodology, 

which accounts for under-sampling of undocumented immigrants in the CPS. 

14 See http://www.cms.hhs.gov/NationalHealthExpendData/downloads/highlights.pdf. 

11
 
 

We then multiply these values for average Medicaid spending in each state by 1.20 to account 

for the fact that disabled individuals typically have higher health care costs than the nondisabled. For example, disabled Medicaid recipients have average program expenditures that are 

approximately five times greater than similarly aged non-disabled Medicaid recipients. 

Furthermore, approximately five percent of uninsured individuals report in the March 2008 CPS 

that they are disabled. If the same five-to-one spending ratio would hold for disabled and nondisabled uninsured individuals when they became eligible for Medicaid, then on average costs 

would be twenty percent greater than implied by the average for the non-disabled.15 

We then multiply the estimated state-specific number of low-income, uninsured U.S. citizens and 

legal residents in each age group by the corresponding state-specific average Medicaid spending 

to estimate the average costs of the Medicaid expansion. The key assumption of this approach is 

that average Medicaid spending per uninsured individual would be equal to average Medicaid 

spending for current recipients. It also assumes that only the uninsured would enroll, and thus 

that the expansion would not “crowd out” health insurance from other sources. 

15 It is perhaps most useful to explain this with an example. Suppose that, on average, annual Medicaid spending for 

non-disabled adults in a state was $2,000 per year and for disabled adults in the same state it was $10,000 per year. 

If five percent of individuals were disabled, then average annual costs would be $2,400, which is twenty percent 

greater than the non-disabled average of $2,000 per year. 

12
 
 

 

ARKANSAS 

Health insurance reform as currently proposed in both the House Tri-Committee and in the 

Senate HELP Committee would ensure that virtually all Americans receive health insurance. 

This memo explores the likely effects of this reform on the budget of the state of Arkansas and 

its local governments. 

Arkansas subsidizes small businesses to offer their employees health insurance and both the state 

and local governments provide direct services to the uninsured. In addition, the state and local 

governments indirectly pay for uncompensated care through higher insurance premiums for 

government employees. On each of these fronts, the reform would save money for the state and 

local governments. On the other hand, the reform calls for an expansion in Medicaid for all 

individuals under 133 percent of the federal poverty line (FPL). 

Our findings, which we summarize below, indicate that Arkansas and its local governments 

currently spend at least $23 million on care for the uninsured. Because this is a lower bound of 

such expenditures, we estimate that at least that much would be saved by current reform 

proposals. We estimate that the total annual cost of the Medicaid expansion to Arkansas’ 

143,713 low-income uninsured individuals would be $204 million (in 2007 dollars).16 After 

initially sharing none of that cost, Arkansas’ share with a 90 percent FMAP would be $20 

million. Thus health insurance reform would provide a substantial financial benefit to the state of 

Arkansas and its local governments. 

A. Current State and Local Expenditures on Health Care for the Uninsured 

The state and local governments of Arkansas would benefit fiscally from health insurance reform 

because they currently spend money encouraging individuals to become insured, treating the 

uninsured, and providing uncompensated care. Health insurance reform would reduce each of 

these costs and would have additional financial benefits for Arkansas’ private hospitals and other 

health care providers, which bear heavy costs for providing care to Arkansas’ residents who are 

not insured. These and other uncompensated care costs are passed on to the privately insured, 

including the employees of state and local governments in Arkansas. 

The following is a summary of some of the savings that Arkansas and its local governments 

could expect from health insurance reform. 

•	 ARHealthnet: ARHealthnet is a group health insurance program for small to medium 

businesses (two to 500 employees) that have not offered insurance for 12 months (Arkansas 

Department of Human Services, 2009). Benefits are limited and premiums are subsidized for 

employees under 200 percent of the FPL (RWJF, 2009). In 2007, the first year of operations, 

the state spent $781,000 on the program. Costs are expected to grow significantly as the 

program expands (Arkansas Tobacco Settlement Commission, 2008). It is reasonable to 

assume that under health insurance reform Arkansas would recover a substantial amount of 

what they currently spend on ARHealthnet. Under current reform proposals, small businesses 

16 The estimated number of low-income uninsured individuals excludes undocumented residents, who would not be 

eligible for Medicaid as a result of health insurance reform. 

13
 
 

 

 

would be offered tax credits as an incentive to offer health insurance to their employees. 

Additionally, individuals now enrolled in ARHealthnet with incomes below 133 percent of 

the FPL would become eligible for Medicaid, with the vast majority of this cost funded by 

the federal government. Individuals with incomes above 133 percent would be eligible for 

subsidized health insurance through the national health insurance exchange. It would cost the 

state nothing to insure these individuals. 

•	 Hospital Indigent Care: The University of Arkansas Medical Sciences (UAMS) provides 

services to the indigent. In 2009, the state allocated $5.4 million to UAMS for covering these 

costs (Arkansas Funded Operating Budget, FY 2008). Much of what Arkansas currently 

allocates for indigent care at UAMS would be saved under health insurance reform. All 

individuals below 133 percent would qualify for Medicaid and those above that threshold 

would be eligible to obtain subsidized insurance through the exchange, at no cost to the state. 

•	 Hidden Tax: Arkansas’ hospitals and other health care providers also shoulder much of the 

burden of the state’s uncompensated care. Much of this cost is then shifted to those who have 

private health insurance in the form of higher prices for health care services. As a result of 

this uncompensated care, private health insurance premiums are higher than they otherwise 

would be. Health insurance reform would reduce this “hidden tax” that individuals with 

private health insurance pay for uncompensated care for the uninsured. This is of particular 

importance to Arkansas because the state and its local governments help pay for health 

insurance for many of their 165,666 full-time equivalent employees. We estimate that the 

hidden cost of uncompensated care costs the state of Arkansas and its local governments 

$17.2 million a year in the form of higher employee health insurance premiums.17 

Additional savings may come from the Children’s Health Insurance Program (CHIP). The state 

of Arkansas currently spends $26.3 million on CHIP coverage (Kaiser Family Foundation, 2009) 

for children in families with incomes up to 200 percent of the FPL (RWJF, 2009). Under the 

current draft of reform legislation, children in families with incomes above 133 percent of the 

FPL may transition to equivalent, federally-financed coverage through the national health 

insurance exchange, potentially allowing the state to save a considerable amount of the costs of 

this program. However, CEA does not include savings on CHIP in bottom line calculations of 

net state savings from health insurance reform, because transitioning children from CHIP to 

equivalent federal coverage would be subject to approval by the Secretary of Health and Human 

Services, and may not occur in all states. 

The discussion above has highlighted some of the most important examples of state and local 

financing of care for the uninsured, though the list is by no means intended to be comprehensive. 

Instead, it is a lower bound on the savings that state and local governments would realize as a 

result of health insurance reform. Added together, we estimate that Arkansas would see at least 

17 CEA calculates the hidden tax for Arkansas and for all subsequent states in the following way. We use the 

estimate of $14.1 billion in uncompensated care that was not funded by other government sources from Hadley et al 

(2008). We then divide this by the 45.7 million uninsured to obtain an estimate of $309 per uninsured person. We 

then multiply this by the number of non-elderly non-illegal uninsured in the state to arrive at $118.9 million for the 

state of Arkansas. Finally, we multiply this by the share of employment accounted for by state and local employees 

(14.5 percent in Arkansas in 2007) to arrive at $17.2 million. 

14
 
 

 

$23 million in savings in existing programs and in reduced health insurance premiums for state 

and local employees as a result of health insurance reform. 

B. A Snapshot of Health Insurance Coverage for Non-Elderly Residents of Arkansas 

A brief snapshot of insurance coverage in the state helps illustrate the fiscal and coverage impact 

of national health insurance reform. Table 1 shows the insurance status of Arkansas’ non-elderly 

residents during the 2007 calendar year, broken down by poverty status and by age groups. 

These estimates suggest that there are roughly 135,000 uninsured adults and 23,000 uninsured 

children in Arkansas with family incomes below 133 percent of the FPL. 

As the table shows, the majority of uninsured individuals (62 percent) in Arkansas has incomes 

above 133 percent of the FPL, and would therefore qualify for health insurance through the 

exchange rather than through Medicaid. The state of Arkansas would not be responsible for any 

of the financing for this group. 

Table 1: Total Estimated Non-Elderly Population of Arkansas 

Poverty Status Uninsured Private 

Insurance Medicaid Medicare, VA, or TRICARE 

Adults 

(19-64) 

≥ 133% FPL 228,576 1,043,576 30,143 102,349 

< 133% FPL 134,719 71,579 43,674 34,535 

Children 

(0-18) 

≥ 133% FPL 24,433 339,906 161,297 18,521 

< 133% FPL 22,667 29,508 153,069 7,342 

Note: Data from the March 2008 CPS. Uninsured individuals report having no form of insurance. See the technical appendix for 

a further discussion of the data used and CEA’s methodology with respect to poverty and insurance status classification. 

Number of observations in the CPS for Arkansas: 1,241. 

C. Estimated Costs to the State of Arkansas from the Medicaid Expansions 

Table 2 lists the estimated number of legal, non-elderly residents in Arkansas with incomes of 

less than 133 percent of the FPL who would become eligible for Medicaid under the proposed 

legislation. The table also presents the projected costs of extending Medicaid to these 

individuals. These estimates suggest that the total cost of this expansion would be $204 million 

per year. With an FMAP of 90 percent, the annual cost to the state would be $20 million. We 

consider a 90 percent FMAP because it is the one scheduled to take effect in 2017 in current 

draft legislation, though we recognize that this could change as the legislation moves forward. 

Table 2: Uninsured, Low-Income, Legal, and Non-Elderly Population of Arkansas 

Number of 

Legal Uninsured 

Below 133% 

FPL 

Cost of 

Medicaid 

Expansion 

($ millions) 

Cost per 

New 

Enrollee 

State 

Population 

Cost to State 

with 90% 

FMAP 

($ millions) 

Adults 

(19-64) 124,771 $165 $1,321 

2,834,797 $20 Children 

(18 and under) 18,942 $40 $2,091 

Note: Data from the March 2008 CPS. Uninsured individuals report having no form of health insurance. See the technical 

appendix for a further discussion of the data used and CEA’s methodology with respect to poverty and insurance status 

classification. These data exclude undocumented residents; estimates come from Passel and are described in the appendix. 

15
 
 

 

D. Bottom Line for Arkansas 

Table 3 shows the net impact for the Arkansas state budget of health insurance reform. It shows 

the likely cost of the Medicaid expansion under three FMAP matching rates – current, 90 percent 

and 100 percent. It then shows the identifiable savings from reducing uncompensated care. As 

the following table shows, those savings would more than offset the cost of the Medicaid 

expansion described above if a 90 percent FMAP were in effect, as is proposed in current draft 

legislation. And these other savings would offset 42 percent of the cost even if the current FMAP 

of 72.78 percent was used.18 

Table 3: Financial Impact of Health Insurance Reform on 

State and Local Governments in Arkansas ($ millions) 

Component Current FMAP 90% FMAP 100% FMAP 

Medicaid Expansion -55.6 -20.4 0.0 

AR Health Net +0.8 +0.8 +0.8 

U of Arkansas +5.4 +5.4 +5.4 

Hidden Tax +17.2 +17.2 +17.2 

Net Effect for Arkansas -32.2 +3.0 +23.4 

This table likely understates the benefits to the state of Arkansas and its local governments for at 

least three additional reasons. First, it does not include savings that would result from reductions 

in other state and local programs not listed above that finance health care for the uninsured. 

Second, it ignores the increase in tax revenue that would result from reform-induced increases in 

the efficiency of the labor market, including a reduction in “job lock.” And finally, it does not 

include the benefits of reductions in health care spending that would result from more 

coordinated care. At present, many individuals transition in and out of health insurance, leading 

to inefficient care delivery including more care in emergency rooms. 

18 CEA recognizes that not all of the costs from some of these programs will be saved under health insurance reform, 

and thus our calculations are not exact. State and local governments retain the discretion to offer subsidized care 

programs to their residents. Additionally, some of the individuals covered by these programs are undocumented 

immigrants who would not obtain health insurance as a result of reform. However, given that the programs analyzed 

here are not exhaustive of all uncompensated care spending in the state, this table is meant to be illustrative of a 

conservative estimate of the potential cost savings Arkansas can expect to see from health insurance reform. 

16
 
References 

Arkansas Department of Human Services. ARHealthNetworks. “What is ARHealthNetworks?” 

Accessed August 14, 2009. http://www.arhealthnetworks.com/. 

Arkansas Tobacco Settlement Commission. “Biennial Progress Report: Arkansas Tobacco 

Settlement Proceeds Act.” Report to the Governor and General Assembly of the State of 

Arkansas, August 1, 2008. 

Kaiser Family Foundation. State Health Facts. “Medicaid & CHIP.” Accessed 

August 14, 2009. http://www.statehealthfacts.org/comparetable.jsp?ind=235&cat=4. 

Hadley, Jack, J. Holahan, T. Coughlin, and D. Miller. “Covering the Uninsured in 2008: Current 

Costs, Sources of Payment, and Incremental Costs.” Health Affairs, 2008, 27(5): w399-

w415. 

Robert Wood Johnson Foundation. State Coverage Initiatives. “Arkansas: Coverage Strategies.” 

Accessed August 14, 2009. http://www.statecoverage.org/node/82/state_strategies. 

State of Arkansas. “Funded Operating Budget: Fiscal Year 2008.” June 30, 2008. 

http://www.state.ar.us/dfa/budget/documents/fy2008_funded_budget_schedule_063008.pdf. 

17
 
 

 

CALIFORNIA 

Health insurance reform as currently proposed in both the House Tri-Committee and in the 

Senate HELP Committee would ensure that virtually all Americans receive health insurance. 

This memo explores the likely effects of this reform on the budget of the state of California and 

its local governments. 

California and its local governments subsidize individuals to obtain health insurance and provide 

direct services to the uninsured. In addition, the state and local governments indirectly pay for 

uncompensated care through higher insurance premiums for government employees. On each of 

these fronts, the reform would save money for the state and local governments. On the other 

hand, the reform calls for an expansion in Medicaid for all individuals under 133 percent of the 

federal poverty line (FPL). 

Our findings, which we summarize below, indicate that California and its local governments 

currently spend at least $2.14 billion on care for the uninsured. Because this is a lower bound of 

such expenditures, we estimate that at least that much would be saved by current reform 

proposals. We estimate that the total annual cost of the Medicaid expansion to California’s 

1,717,309 low-income uninsured individuals would be $1.95 billion (in 2007 dollars).19 After 

initially sharing none of that cost, California’s share with a 90 percent FMAP would be $195 

million. Thus health insurance reform would provide a substantial financial benefit to the state of 

California and its local governments. 

A. Current State and Local Expenditures on Health Care for the Uninsured 

The state and local governments of California would benefit fiscally from health insurance 

reform because they currently spend money helping individuals to become insured, treating the 

uninsured, and providing uncompensated care. Health insurance reform would reduce each of 

these costs, and would have additional financial benefits for California’s private hospitals and 

other health care providers, which bear heavy costs for providing care to California’s residents 

who are not insured. These and other uncompensated care costs are passed on to the privately 

insured, including the employees of state and local governments in California. 

The following is a summary of some of the savings that California and its local governments 

could expect from health insurance reform. 

•	 Medically Indigent Services Programs (MISP): This program provides insurance coverage 

to low-income adults in 24 California mostly large, urban counties. Under California law, 

counties are the “providers of last resort” for health services to low-income uninsured people 

with no other sources of care. These programs vary in their eligibility requirements and 

coverage. Most programs provide care free of charge to adults under some income threshold 

(100 percent of the FPL to 300 percent of the FPL) and care with some measure of cost 

sharing to those earning above the threshold (California Health Care Foundation, 2006). In 

19 The estimated number of low-income uninsured individuals excludes undocumented residents, who would not be 

eligible for Medicaid as a result of health insurance reform. 

18
 
 

 

2004-2005, the most recent year for which data are available, counties spent $1.613 billion 

on this program (California Department of Public Health, 2008). 

•	 County Medical Services Program (CMSP): This program provides health insurance 

coverage to low-income adults in 34 primarily rural California counties. Enrollees must be 

legal citizens with incomes below 200 percent of the FPL (California Health Care 

Foundation, 2006). In 2008-09, the program had a budget of $283 million (County Medical 

Services Program, 2009). It is reasonable to assume that under health insurance reform 

California would recover a substantial amount of what they currently spend on the MISP and 

CMSP programs. Under current reform proposals, legal residents now enrolled in MISP or 

CMSP with incomes below 133 percent of the FPL would become eligible for Medicaid, 

with virtually all of this cost financed by the federal government. Individuals currently 

enrolled in MISP or CMSP with incomes above 133 percent of the FPL would be eligible for 

subsidized health insurance through the national health insurance exchange. It would cost the 

state nothing to insure these individuals. 

•	 California’s Major Risk Medical Insurance Program (MRMIP): This program provides 

California residents with subsidized insurance if they cannot otherwise obtain affordable 

insurance (California Managed Risk Medical Insurance Board, 2009). Enrollees must have 

been rejected for private insurance, involuntarily dropped from insurance, or been offered 

insurance only at a premium higher than the MRMIP rate. Due to budget constraints, there is 

often a waiting list for this program (National Conference of State Legislatures, 2009). In 

2008-09, MRMIP’s budget was $37.7 million (California Managed Risk Medical Insurance 

Board, 2008). California should save virtually all of the costs of this program under health 

insurance reform, since the national health insurance exchange would offer reasonably-price 

health insurance to all enrollees, regardless of pre-existing conditions. 

•	 Hidden Tax: California’s hospitals and other health care providers also shoulder much of the 

burden of the state’s uncompensated care. Much of this cost is then shifted to those who have 

private health insurance in the form of higher prices for health care services. As a result of 

this uncompensated care, private health insurance premiums are higher than they otherwise 

would be. Health insurance reform would reduce this “hidden tax” that individuals with 

private health insurance pay for uncompensated care for the uninsured. This is of particular 

importance to California because the state and its local governments help pay for health 

insurance for many of their 1,835,452 full-time equivalent employees. We estimate that the 

hidden cost of uncompensated care costs the state of California and its local governments 

$210 million a year in the form of higher employee health insurance premiums.20 

Additional savings may come from the Children’s Health Insurance Program (CHIP). The state 

of California currently spends $707 million on CHIP coverage for children in families with 

incomes up to 250 percent of the FPL (Kaiser Family Foundation, 2009). Under the current draft 

of reform legislation, children in families with incomes above 133 percent of the FPL may 

transition to equivalent, federally-financed coverage through the national health insurance 

exchange, potentially allowing the state to save a considerable amount of the costs of this 

program. However, CEA does not include savings on CHIP in bottom line calculations of net 

20 Based on calculation that 13.3 percent of California’s employment is in state and local government. 

19
 
state savings from health insurance reform, because transitioning children from CHIP to 

equivalent federal coverage would be subject to approval by the Secretary of Health and Human 

Services, and may not occur in all states. 

The discussion above has highlighted some of the most important examples of state and local 

financing of care for the uninsured, though the list is by no means intended to be comprehensive. 

Instead, it is a lower bound on the savings that state and local governments would realize as a 

result of health insurance reform. Added together, we estimate that California would see at least 

$2.14 billion in savings in existing programs and in reduced health insurance premiums for state 

and local employees as a result of health insurance reform. 

B. A Snapshot of Health Insurance Coverage for Non-Elderly Residents of California 

A brief snapshot of insurance coverage in the state helps illustrate the fiscal and coverage impact 

of national health insurance reform. Table 1 shows the insurance status of California’s nonelderly residents, broken down by poverty status and by age groups. These estimates suggest that 

there are roughly 1.84 million uninsured adults and 454,000 uninsured children in California 

with family incomes below 133 percent of the FPL. 

Table 1: Total Estimated Non-Elderly Population of California 

Poverty Status Uninsured Private 

Insurance Medicaid Medicare, VA, or TRICARE 

Adults 

(19-64) 

≥ 133% FPL 3,482,926 13,583,882 895,274 564,625 

< 133% FPL 1,836,675 825,016 925,098 241,776 

Children 

(0-18) 

≥ 133% FPL 706,707 5,048,759 1,235,885 146,040 

< 133% FPL 454,028 492,895 1,837,020 47,342 

Note: Data from the March 2008 CPS. Uninsured individuals report having no form of insurance. See the technical appendix for 

a further discussion of the data used and CEA’s methodology with respect to poverty and insurance status classification. 

Number of observations in the CPS for California: 10,049. 

As the table also shows, the majority (65 percent) of the uninsured in California has incomes 

above 133 percent of the FPL, and would therefore qualify for health insurance through the 

exchange rather than through Medicaid. The state of California would not be responsible for any 

of the financing for this group. 

C. Estimated Costs to the State of California from the Medicaid Expansion 

Table 2 lists the estimated number of legal, non-elderly residents in California with incomes of 

less than 133 percent of the FPL who would become eligible for Medicaid under the proposed 

legislation. The table also presents the projected costs of extending Medicaid to these 

individuals. These estimates suggest that the total cost of this expansion would be approximately 

$1.950 billion per year. With a 90 percent FMAP, the annual cost to the state would be $195 

million. We consider a 90 percent FMAP because it is the one scheduled to take effect in 2017 in 

current draft legislation, though we recognize that this could change as the legislation moves 

forward. 

20
 
 

 

 

 

Table 2: Uninsured, Low-Income, Legal, and Non-Elderly Population of California 

Number of 

Legal Uninsured 

Below 133% 

FPL 

Cost of 

Medicaid 

Expansion 

($ millions) 

Cost per 

New 

Enrollee 

State 

Population 

Cost to State 

with 90% 

FMAP 

($ millions) 

Adults 

(19-64) 1,332,828 $1,391 $1,044 

36,553,215 $195 Children 

(18 and under) 384,481 $559 $1,454 

Note: Data from the March 2008 CPS. Uninsured individuals report having no form of health insurance. See the technical 

appendix for a further discussion of the data used and CEA’s methodology with respect to poverty and insurance status 

classification. These data exclude undocumented residents; estimates come from Passel and are described in the appendix. 

D. Bottom Line for California 

Table 3 shows the net impact for the California state budget of health insurance reform. It shows 

the likely cost of Medicaid expansion under three FMAP matching rates – current, 90 percent, 

and 100 percent. It then shows the identifiable savings from reducing uncompensated care. As 

the following table shows, those savings would more than offset the cost of the Medicaid 

expansion described even if the current FMAP of 50 percent was used.21 

Table 3: Financial Impact of Health Insurance Reform on 

State and Local Governments in California ($ millions) 

Component Current FMAP 90% FMAP 100% FMAP 

Medicaid Expansion -975 -195 -0 

MISP +1,613 +1,613 +1,613 

CMSP +283 +283 +283 

MRMIP +38 +38 +38 

Hidden Tax +210 +210 +210 

Net Effect for California +1,169 +1,949 +2,144 

This table understates the benefits to the state of California and its local governments for at least 

three additional reasons. First, it does not include savings that would result from reductions in 

other state and local programs not listed above that finance health care for the uninsured. Second, 

it ignores the increase in tax revenue that would result from reform-induced increases in the 

efficiency of the labor market, including a reduction in “job lock.” And finally, it does not 

include the benefits of reductions in health care spending that would result from more 

coordinated care. At present, many individuals transition in and out of health insurance, leading 

to inefficient care delivery including more care in emergency rooms. 

21 CEA recognizes that not all of the costs from some of these programs will be saved under health insurance reform, 

and thus our calculations are not exact. State and local governments retain the discretion to offer subsidized care 

programs to their residents. Additionally, some of the individuals covered by these programs are undocumented 

immigrants who would not obtain health insurance as a result of reform. However, given that the programs analyzed 

here are not exhaustive of all uncompensated care spending in the state, this table is meant to be illustrative of a 

conservative estimate of the potential cost savings California can expect to see from health insurance reform. 

21
 
 

References 

California Department of Public Health. “County Health Care Program Expenditures for the 

Medically Indigent.” March 27, 2008. 

http://www.cdph.ca.gov/data/statistics/Documents/MICRSCountyIndigentExpendituresByTypeofService.pdf. 

California Health Care Foundation. “County Programs for the Medically Indigent in California.” 

August 2006. 

http://www.chcf.org/documents/policy/CountyPrgrmsMedicallyIndigentFactSheet.pdf. 

California Healthy Families Program. “Welcome to the California Health Families Program.” 

Accessed August 14, 2009. http://www.healthyfamilies.ca.gov/Home/default.aspx. 

California Managed Risk Medical Insurance Board. “California’s High-Risk Health Insurance 

Pool: Major Risk Medical Insurance Program.” Presentation by Lesley Cummings, 

Executive Director, June 26, 2008. 

http://www.mrmib.ca.gov/MRMIB/MRMIP_June26-Capitol-Briefing.pdf. 

California Managed Risk Medical Insurance Board. “Major Risk Medical Insurance Program 

(MRMIP).” Accessed August 14, 2009. 

http://www.mrmib.ca.gov/MRMIB/MRMIP.shtml. 

County Medical Services Program. “Budget: FY 08-09 Budget.” Accessed August 4, 2009. 

http://74.125.155.132/search?q=cache:-

xya64I21EcJ:www.cmspcounties.org/about/budget.html+County+Medical+Services+Pro 

gram+%24283&cd=1&hl=en&ct=clnk&gl=us. 

Kaiser Family Foundation. State Health Facts. “Medicaid & CHIP.” Accessed 

August 14, 2009. http://www.statehealthfacts.org/comparetable.jsp?ind=235&cat=4. 

National Conference of State Legislatures. “State Health Programs to Cover the Uninsured.” July 

2009. 

http://www.ncsl.org/IssuesResearch/Health/StateHealthProgramsToCoverTheUninsured2 

009/tabid/13878/Default.aspx#id. 

22
 
 

 

FLORIDA 

Health insurance reform as currently proposed in both the House Tri-Committee and in the 

Senate HELP Committee would ensure that virtually all Americans receive health insurance. 

This memo explores the likely effects of this reform on the budget of the state of Florida and its 

local governments. 

Florida and its local governments subsidize individuals to obtain health insurance and provide 

direct services to the uninsured. In addition, the state and local governments indirectly pay for 

uncompensated care through higher insurance premiums for government employees. On each of 

these fronts, the reform would save money for the state and local governments. On the other 

hand, the reform calls for an expansion in Medicaid for all individuals under 133 percent of the 

federal poverty line (FPL). 

Our findings, which we summarize below, indicate that Florida and its local governments 

currently spend at least $377 million on care for the uninsured. Because this is a lower bound of 

such expenditures, we estimate that at least that much would be saved by current reform 

proposals. We estimate that the total annual cost of the Medicaid expansion to Florida’s 933,638 

low-income uninsured individuals would be $2.52 billion (in 2007 dollars).22 After initially 

sharing none of that cost, Florida’s share with a 90 percent FMAP would be $252 million. Thus 

health insurance reform would provide a substantial financial benefit to the state of Florida and 

its local governments. 

A. Current State and Local Expenditures on Health Care for the Uninsured 

The state and local governments of Florida would benefit fiscally from health insurance reform 

because they currently spend money encouraging individuals to become insured, treating the 

uninsured, and providing uncompensated care. Health insurance reform would reduce each of 

these costs, and would have additional financial benefits for Florida’s private hospitals and other 

health care providers, which bear heavy costs for providing care to Florida’s residents who are 

not insured. These and other uncompensated care costs are passed on to the privately insured, 

including the employees of state and local governments in Florida. 

The following is a summary of some of the savings that Florida’s state government and its local 

governments could expect from health insurance reform. 

•	 Florida’s Health Flex: This program allows private health insurers, as well as non-profits or 

local governments, to offer basic health insurance plans to individuals with income under 300 

percent of the FPL. The plans offered through Health Flex do not have to meet Florida’s 

regular criteria for licensed insurance companies. The Health Flex program has little cost to 

the state (Florida Agency for Health Care Administration, 2009). However, since coverage in 

the Health Flex program is often very basic, individuals who switch from Health Flex plans 

to the exchange would likely benefit from having more comprehensive coverage. In addition, 

22 The estimated number of low-income uninsured individuals excludes undocumented residents, who would not be 

eligible for Medicaid as a result of health insurance reform. 

23
 
 

 

 

local governments that fund health coverage through Health Flex would see savings (see 

JaxCare, below.) 

•	 The Health Care Responsibility Act: This requires counties to reimburse hospitals in other 

counties for providing uncompensated care to their residents. Some counties also provide 

reimbursement to their own hospitals. Hospitals are not eligible to get reimbursement until 

their uncompensated care costs exceed 2 percent of their total operations. In FY 2006-2007, 

counties spent $5.6 million reimbursing hospitals (Florida Agency for Health Care 

Administration, 2008). 

•	 Hidden Tax: Florida’s hospitals and other health care providers also shoulder much of the 

burden of the state’s uncompensated care.23 Much of this cost is then shifted to those who 

have private health insurance in the form of higher prices for health care services. As a result 

of this uncompensated care, private health insurance premiums are higher than they 

otherwise would be. Health insurance reform would reduce this “hidden tax” that individuals 

with private health insurance pay for uncompensated care for the uninsured. This is of 

particular importance to Florida because the state and its local governments help pay for 

health insurance for many of their 890,834 full-time equivalent employees. We estimate that 

the hidden cost of uncompensated care costs the state of Florida and its local governments 

$102 million a year in the form of higher employee health insurance premiums.24 

Some counties have their own programs to provide health care or health insurance to low income 

residents. Examples of such programs: 

•	 Hillsborough County Health Care: This program provides comprehensive managed health 

care for low-income individuals who are not eligible for Medicaid or Medicare. It is funded 

with a local sales tax. In FY 2007-2008, the program had expenses of $82 million for its 

Direct Health Care Services program (Hillsborough County, 2008). 

•	 Miami-Dade County: This county, which has a high number of uninsured residents, funds 

its public health facilities, including Jackson Memorial Hospital, with a 0.5 percent sales tax. 

In FY 2007-2008, revenue from this tax in just this one county amounted to $187 million 

(Miami-Dade County, 2008). 

•	 Duval County’s JaxCare: This program provides health coverage in Duval County through 

the state Health Flex program. JaxCare provides subsidized coverage to individuals with 

incomes under 200 percent of the FPL, through the individual’s employers. JaxCare is 

funded through premiums, donations, federal grants, and by the city of Jacksonville. In 2006, 

projected costs of the program were $2.6 million, $660,000 of which was funded by the city 

of Jacksonville (Jacksonville Community Forums on Health Care and the Uninsured, 2006). 

Additional savings may come from the Children’s Health Insurance Program (CHIP). The state 

of Florida currently spends $117.7 million on CHIP coverage for children in families with 

23 Hospitals in Florida incurred $1.561 billion in uncompensated care costs in 2003 (U.S. Government
 

Accountability Office, 2005). 

24 Based on calculation that 11.8 percent of Florida’s employment is in state and local government.
 

24
 
incomes up to 200 percent of the FPL (Kaiser Family Foundation, 2009). Under the current draft 

of reform legislation, children in families with incomes above 133 percent of the FPL may 

transition to equivalent, federally-financed coverage through the national health insurance 

exchange, potentially allowing the state to save a considerable amount of the costs of this 

program. However, CEA does not include savings on CHIP in bottom line calculations of net 

state savings from health insurance reform, because transitioning children from CHIP to 

equivalent federal coverage would be subject to approval by the Secretary of Health and Human 

Services, and may not occur in all states. 

The discussion above has highlighted some of the most important examples of state and local 

financing of care for the uninsured, though the list is by no means intended to be comprehensive. 

Instead, it is a lower bound on the savings that state and local governments would realize as a 

result of health insurance reform. Added together, we estimate that Florida would see at least 

$377 million in savings in existing programs and in reduced health insurance premiums for state 

and local employees as a result of health insurance reform. 

B. A Snapshot of Health Insurance Coverage for Non-Elderly Residents of Florida 

A brief snapshot of insurance coverage in the state helps illustrate the fiscal and coverage impact 

of national health insurance reform. Table 1 shows the insurance status of Florida’s non-elderly 

residents, broken down by poverty status and by age groups. These estimates suggest that there 

are roughly 818,000 uninsured adults and 360,000 uninsured children in Florida with family 

incomes below 133 percent of the FPL. 

Table 1: Total Estimated Non-Elderly Population of Florida 

Poverty 

Status Uninsured Private Insurance Medicaid Medicare, VA, or TRICARE 

Adults 

(19-64) 

≥ 133% FPL 1,777,668 6,253,888 232,548 751,172 

< 133% FPL 817,593 425,288 215,899 162,284 

Children 

(18 and under) 

≥ 133% FPL 425,341 2,075,165 448,184 137,771 

< 133% FPL 359,619 262,755 543,485 49,620 

Note: Data from the March 2008 CPS. Uninsured individuals report having no form of insurance. See the technical appendix for 

a further discussion of the data used and CEA’s methodology with respect to poverty and insurance status classification. 

Number of observations in the CPS for Florida: 4,226. 

As the table also shows, the majority (65 percent) of the uninsured in Florida have incomes 

above 133 percent of the FPL, and would therefore qualify for health insurance through the 

exchange rather than through Medicaid. The state of Florida would not be responsible for any of 

the financing for this group. 

C. Estimated Costs to the State of Florida from the Medicaid Expansion 

Table 2 lists the estimated number of legal, non-elderly residents in Florida with incomes of less 

than 133 percent of the FPL who would become eligible for Medicaid under the proposed 

legislation. The table also presents the projected costs of extending Medicaid to these 

individuals. 

25
 
 

 

 

Table 2: Uninsured, Low-Income, Legal, and Non-Elderly Population of Florida 

Number of Legal 

Uninsured Below 

133% FPL 

Cost of 

Medicaid 

Expansion 

($ millions) 

Cost per 

New 

Enrollee 

State 

Population 

Cost to State 

with 90% 

FMAP 

($ millions) 

Adults 

(19-64) 618,769 $1,987 $3,211 

18,251,243 $252 Children 

(18 and under) 314,869 $529 $1,682 

Note: Data from the March 2008 CPS. Uninsured individuals report having no form of health insurance. See the technical 

appendix for a further discussion of the data used and CEA’s methodology with respect to poverty and insurance status 

classification. These data exclude undocumented residents; estimates come from Passel and are described in the appendix. 

These estimates suggest that the total cost of this expansion would be approximately $2.516 

billion per year. With an FMAP of 90 percent, the cost to the state would be $252 million. We 

consider a 90 percent FMAP because it is the one scheduled to take effect in 2017 in current 

draft legislation, though we recognize that this could change as the legislation moves forward. 

D. Bottom Line for Florida 

Table 3 shows the net impact for the Florida state budget of health insurance reform. It shows the 

likely cost of Medicaid expansion under three FMAP matching rates – current, 90 percent, and 

100 percent. It then shows the identifiable savings from reducing uncompensated care. And as 

the following table shows, those savings would more than offset the cost of the Medicaid 

expansion described above if a 90 percent FMAP were in effect, as is proposed in current draft 

legislation. Moreover, these other savings would offset one-third of the cost even if the current 

FMAP of 54.98 percent was used.25 

Table 3: Financial Impact of Health Insurance Reform on 

State and Local Governments in Florida ($ millions) 

Component Current FMAP 90% FMAP 100% FMAP 

Medicaid Expansion -1,132.9 -251.6 -0.0 

Miami-Dade hospital sales tax +187 +187 +187 

Health Care Responsibility Act +5.6 +5.6 +5.6 

Hillsborough County Health Care +82 +82 +82 

JaxCare +0.7 +0.7 +0.7 

Hidden Tax +102.0 +102.0 +102.0 

Net Effect for Florida -755.6 +125.7 +377.3 

This table understates the benefits to the state of Florida and its local governments for at least 

three additional reasons. First, it does not include savings that would result from reductions in 

other state and local programs not listed above that finance health care for the uninsured. Second, 

25 CEA recognizes that not all of the costs from some of these programs will be saved under health insurance reform, 

and thus our calculations are not exact. State and local governments retain the discretion to offer subsidized care 

programs to their residents. Additionally, some of the individuals covered by these programs are undocumented 

immigrants who would not obtain health insurance as a result of reform. However, given that the programs analyzed 

here are not exhaustive of all uncompensated care spending in the state, this table is meant to be illustrative of a 

conservative estimate of the potential cost savings Florida can expect to see from health insurance reform. 

26
 
it ignores the increase in tax revenue that would result from reform-induced increases in the 

efficiency of the labor market, including a reduction in “job lock.” And finally, it does not 

include the benefits of reductions in health care spending that would result from more 

coordinated care. At present, many individuals transition in and out of health insurance, leading 

to inefficient care delivery including more care in emergency rooms. 

27
 
References 

Florida Agency for Health Care Administration. “Health Care Responsibility Act (HCRA): 

County Expenditures CFY0203-CFY0607.” February 8, 2008. 

http://www.fdhc.state.fl.us/MCHQ/Managed_Health_Care/HCRA/index.shtml. 

Florida Agency for Health Care Administration. “Health Flex Plan Program Annual Report.” 

January 2009. 

http://www.fdhc.state.fl.us/MCHQ/Managed_Health_Care/Health_Flex/HealthFlexAnnu 

alReport-Jan09.pdf. 

Jacksonville Community Forums on Health Care and the Uninsured. “JaxCare Mid-Point 

Report.” April 2006. 

http://www.jaxcare.org/articles/JaxCare_Midpoint_Report_20060403.pdf 

Kaiser Family Foundation. State Health Facts. “Medicaid & CHIP.” Accessed 

August 14, 2009. http://www.statehealthfacts.org/comparetable.jsp?ind=235&cat=4. 

Miami-Dade County. “Statement of Activities for Fiscal Year Ended September 30, 2008.” 

Accessed September 13, 2009. http://www.miamidade.gov/finance/library/act08.pdf. 

National Conference of State Legislatures. “State Health Programs to Cover the Uninsured.” July 

2009. 

http://www.ncsl.org/IssuesResearch/Health/StateHealthProgramsToCoverTheUninsured2 

009/tabid/13878/Default.aspx#id. 

U.S. Government Accountability Office. “Nonprofit, For-Profit, and Government Hospitals: 

Uncompensated Care and Other Community Benefits.” Testimony of Comptroller David 

M. Walker before the House Committee on Ways and Means, May 26, 2005. 

28
 
 

 

IDAHO 

Health insurance reform as currently proposed in both the House Tri-Committee and in the 

Senate HELP Committee would ensure that virtually all Americans receive health insurance. 

This memo explores the likely effects of this reform on the budget of the state of Idaho and its 

local governments. 

Idaho and its local governments subsidize individuals to obtain health insurance and provide 

direct services to the uninsured. In addition, the state and local governments indirectly pay for 

uncompensated care through higher insurance premiums for government employees. On each of 

these fronts, the reform would save money for the state and local governments. On the other 

hand, the reform calls for an expansion in Medicaid for all individuals under 133 percent of the 

federal poverty line (FPL). 

Our findings, which we summarize below, indicate that Idaho and its local governments 

currently spend at least $47 million on care for the uninsured. Because this is a lower bound of 

such expenditures, we estimate that at least that much would be saved by current reform 

proposals. We estimate that the total annual cost of the Medicaid expansion to Idaho’s 66,798 

low-income uninsured individuals would be $258 million (in 2007 dollars).26 After initially 

sharing none of that cost, Idaho’s share with a 90 percent FMAP would be $26 million. Thus 

health insurance reform would provide a substantial financial benefit to the state of Idaho and its 

local governments. 

A. Current State and Local Expenditures on Health Care for the Uninsured 

The state and local governments of Idaho would benefit fiscally from health insurance reform 

because they currently spend money encouraging individuals to become insured, treating the 

uninsured, and providing uncompensated care. Health insurance reform would reduce each of 

these costs, and would have additional financial benefits for Idaho’s private hospitals and other 

health care providers, which bear heavy costs for providing care to Idaho’s residents who are not 

insured. These and other uncompensated care costs are passed on to the privately insured, 

including the employees of state and local governments in Idaho. 

The following is a summary of some of the savings that Idaho and its local governments could 

expect from health insurance reform. 

•	 The Idaho Individual High Risk Reinsurance Pool: The pool provides insurance to 

individuals who have been turned down by private insurers. All Idaho insurance companies 

must provide high risk plans; the state reinsurance program covers losses past a certain point 

for a single event. In 2006, state expenditures for this program were $2.4 million (SHADAC, 

2007a). Under the bill, the individuals covered in the high risk pool could obtain insurance 

through the exchange instead. 

26 The estimated number of low-income uninsured individuals excludes undocumented residents, who would not be 

eligible for Medicaid as a result of health insurance reform. 

29
 
 

 

•	 County Governments: Idaho’s counties have traditionally been responsible for covering 

health care expenses for residents who have no other source of care, through the County 

Medical Indigency Program. In 2006, county expenditures under this program totaled $16.1 

million (SHADAC, 2007a). These costs could be reduced substantially if the individuals 

using uncompensated care in Idaho were insured through the exchange. 

•	 The State Catastrophic Health Care Cost Program: This program assists counties in 

covering uncompensated care costing more than $10,000 for a single incident. State 

expenditures under the Catastrophic Health Care Cost Program were $20.4 million in 2006 

(SHADAC, 2007a). These costs could be reduced substantially if the individuals using 

uncompensated care in Idaho were insured through the exchange. 

•	 Hidden Tax: Idaho’s hospitals and other health care providers also shoulder much of the 

burden of the state’s uncompensated care.27 Much of this cost is then shifted to those who 

have private health insurance in the form of higher prices for health care services. As a result 

of this uncompensated care, private health insurance premiums are higher than they 

otherwise would be. Health insurance reform would reduce this “hidden tax” that individuals 

with private health insurance pay for uncompensated care for the uninsured. This is of 

particular importance to Idaho because the state and its local governments help pay for health 

insurance for many of their 80,585 full-time equivalent employees. We estimate that the 

hidden cost of uncompensated care costs the state of Idaho and its local governments $8.3 

million a year in the form of higher employee health insurance premiums.28 

Additional savings may come from the Children’s Health Insurance Program (CHIP). The state 

of Idaho currently spends $9.4 million on CHIP coverage for children in families with incomes 

up to 185 percent of the FPL (Kaiser Family Foundation, 2009). Under the current draft of 

reform legislation, children in families with incomes above 133 percent of the FPL may 

transition to equivalent, federally-financed coverage through the national health insurance 

exchange, potentially allowing the state to save a considerable amount of the costs of this 

program. However, CEA does not include savings on CHIP in bottom line calculations of net 

state savings from health insurance reform, because transitioning children from CHIP to 

equivalent federal coverage would be subject to approval by the Secretary of Health and Human 

Services, and may not occur in all states. 

The discussion above has highlighted some of the most important examples of state and local 

financing of care for the uninsured, though the list is by no means intended to be comprehensive. 

Instead, it is a lower bound on the savings that state and local governments would realize as a 

result of health insurance reform. Added together, we estimate that Idaho would see at least $47 

million in savings in existing programs and in reduced health insurance premiums for state and 

local employees as a result of health insurance reform. 

27 Idaho hospitals incurred $42.7 million in uncompensated care costs in 2005 (SHADAC, 2007b). 

28 Based on calculation that 14.5 percent of Idaho’s employment is in state and local government. 

30
 
 

 

B. A Snapshot of Health Insurance Coverage for Non-Elderly Residents of Idaho 

A brief snapshot of insurance coverage in the state helps illustrate the fiscal and coverage impact 

of national health insurance reform. Table 1 shows the insurance status of Idaho’s non-elderly 

residents, broken down by poverty status and by age groups. 

Table 1: Total Estimated Non-Elderly Population of Idaho 

Poverty 

Status Uninsured Private Insurance Medicaid Medicare, VA, or TRICARE 

Adults 

(19-64) 

≥ 133% FPL 95,056 587,667 15,130 31,386 

< 133% FPL 55,028 35,292 21,431 11,484 

Children 

(18 and under) 

≥ 133% FPL 34,623 261,130 40,933 11,366 

< 133% FPL 21,617 23,733 43,678 7,995 

Note: Data from the March 2008 CPS. Uninsured individuals report having no form of insurance. See the technical appendix for 

a further discussion of the data used and CEA’s methodology with respect to poverty and insurance status classification. 

Number of observations in the CPS for Idaho: 1,352. 

These estimates suggest that there are roughly 55,000 uninsured adults and 22,000 uninsured 

children in Idaho with family incomes below 133 percent of the FPL. 

As the table also shows, the majority (63 percent) of the uninsured in Idaho have incomes above 

133 percent of the FPL, and would therefore qualify for health insurance through the exchange 

rather than through Medicaid. The state of Idaho would not be responsible for any of the 

financing for this group. 

C. Estimated Costs to the State of Idaho from the Medicaid Expansion 

Table 2 lists the estimated number of legal, non-elderly residents in Idaho with incomes of less 

than 133 percent of the FPL who would become eligible for Medicaid under the proposed 

legislation. The table also presents the projected costs of extending Medicaid to these 

individuals. These estimates suggest that the total cost of this expansion is approximately $258 

million per year. With an FMAP of 90 percent, the cost to the state would be $26 million. We 

consider a 90 percent FMAP because it is the one scheduled to take effect in 2017 in current 

draft legislation, though we recognize that this could change as the legislation moves forward. 

Table 2: Uninsured, Low-Income, Legal, and Non-Elderly Population of Idaho 

Number of Legal 

Uninsured Below 

133% FPL 

Cost of 

Medicaid 

Expansion 

($ millions) 

Cost per 

New 

Enrollee 

State 

Population 

Cost to State 

with 90% 

FMAP 

($ millions) 

Adults 

(19-64) 46,547 $217 $4,654 

1,499,402 $26 Children 

(18 and under) 20,251 $41 $2,048 

Note: Data from the March 2008 CPS. Uninsured individuals report having no form of health insurance. See the technical 

appendix for a further discussion of the data used and CEA’s methodology with respect to poverty and insurance status 

classification. These data exclude undocumented residents; estimates come from Passel and are described in the appendix. 

31
 
 

D. Bottom Line for Idaho 

Table 3 shows the net impact for the Idaho state budget of health insurance reform. It shows the 

likely cost of Medicaid expansion under three FMAP matching rates – current, 90 percent, and 

100 percent. It then shows the identifiable savings from reducing uncompensated care. And as 

the following table shows, those savings would more than offset the cost of the Medicaid 

expansion described above if a 90 percent FMAP were in effect, as is proposed in current draft 

legislation. Moreover, these other savings would offset nearly 60 percent of the cost even if the 

current FMAP of 69.4 percent was used.29 

Table 3: Financial Impact of Health Insurance Reform on 

State and Local Governments in Idaho ($ millions) 

Component Current FMAP 90% FMAP 100% FMAP 

Medicaid Expansion -79.0 -25.8 -0.0 

Idaho Individual High Risk 

Reinsurance Pool +2.4 +2.4 +2.4 

County Governments +16.1 +16.1 +16.1 

Catastrophic Care Program +20.4 +20.4 +20.4 

Hidden Tax +8.3 +8.3 +8.3 

Net Effect for Idaho -31.8 +21.4 +47.2 

This table understates the benefits to the state of Idaho and its local governments for at least 

three additional reasons. First, it does not include savings that would result from reductions in 

other state and local programs not listed above that finance health care for the uninsured. Second, 

it ignores the increase in tax revenue that would result from reform-induced increases in the 

efficiency of the labor market, including a reduction in “job lock.” And finally, it does not 

include the benefits of reductions in health care spending that would result from more 

coordinated care. At present, many individuals transition in and out of health insurance, leading 

to inefficient care delivery including more care in emergency rooms. 

29 CEA recognizes that not all of the costs from some of these programs will be saved under health insurance reform, 

and thus our calculations are not exact. State and local governments retain the discretion to offer subsidized care 

programs to their residents. Additionally, some of the individuals covered by these programs are undocumented 

immigrants who would not obtain health insurance as a result of reform. However, given that these programs 

analyzed here are not exhaustive of all uncompensated care spending in the state, this table is meant to be illustrative 

of a conservative estimate of the potential cost savings Idaho can expect to see from health insurance reform. 

32
 
References 

Kaiser Family Foundation. State Health Facts. “Medicaid & CHIP.” Accessed 

August 14, 2009. http://www.statehealthfacts.org/comparetable.jsp?ind=235&cat=4. 

State Health Access Data Assistance Center (SHADAC). “Idaho’s Health Care Costs and 

Options to Improve Health Care Access: Report on Task 1.” December 2007a. 

http://www.shadac.org/files/shadac/publications/Idaho2007_Task1_Report.pdf. 

State Health Access Data Assistance Center (SHADAC). “Idaho’s Health Care Costs and 

Options to Improve Health Care Access: Report on Task 2.” December 2007b. 

http://www.shadac.org/files/shadac/publications/Idaho2007_Task2_Report.pdf. 

33
 
 

 

INDIANA 

Health insurance reform as currently proposed in both the House Tri-Committee and in the 

Senate HELP Committee would ensure that virtually all Americans receive health insurance. 

This memo explores the likely effects of this reform on the budget of the state of Indiana and its 

local governments. 

Indiana and its local governments subsidize individuals to obtain health insurance and provide 

direct services to the uninsured. In addition, the state and local governments indirectly pay for 

uncompensated care through higher insurance premiums for government employees. On each of 

these fronts, the reform would save money for the state and local governments. On the other 

hand, the reform calls for an expansion in Medicaid for all individuals under 133 percent of the 

federal poverty line (FPL). 

Our findings, which we summarize below, indicate that Indian and its local governments 

currently spend at least $338 million on care for the uninsured. Because this is a lower bound of 

such expenditures, we estimate that at least that much would be saved by current reform 

proposals. We estimate that the total annual cost of the Medicaid expansion to Indiana’s 220,939 

low-income uninsured individuals would be $623 million (in 2007 dollars).30 After initially 

sharing none of that cost, Indiana’s share with a 90 percent FMAP would be $62 million. Thus 

health insurance reform would provide a substantial financial benefit to the state of Indiana and 

its local governments. 

A. Current State and Local Expenditures on Health Care for the Uninsured 

The state and local governments of Indiana would benefit fiscally from health insurance reform 

because they currently spend money encouraging individuals to become insured, treating the 

uninsured, and providing uncompensated care. Health insurance reform would reduce each of 

these costs, and would have additional financial benefits for Indiana’s private hospitals and other 

health care providers, which bear heavy costs for providing care to Indiana’s residents who are 

not insured. These and other uncompensated care costs are passed on to the privately insured, 

including the employees of state and local governments in Indiana. 

The following is a summary of some of the savings that Indiana and its local governments could 

expect from health insurance reform. 

•	 The Healthy Indiana Plan (HIP): This program covers individuals up to 200 percent of the 

FPL who are ineligible for Medicaid. The HIP program provides a high deductible health 

plan and a health savings account. HIP provides $500 in “first-dollar” preventive benefits. 

Members make monthly contributions to their health savings account based on income level 

(RWJF, 2009). Funding for HIP comes from $50 million in disproportionate share hospital 

(DSH) payments and through a 44 cent per pack tax on cigarettes. The money is allocated to 

a special fund that maintains reserves (State University of New York, 2009). In 2009, Indiana 

30 The estimated number of low-income uninsured individuals excludes undocumented immigrants, who would not 

be eligible for Medicaid as a result of health insurance reform. 

34
 
 

allocated $154.8 million to the fund for HIP, of which $11 million is reserved for childhood 

immunization programs (Indiana Legislative Services Agency, 2007). 

It is reasonable to assume that under health insurance reform Indiana would recover a 

substantial amount of what they currently spend on the HIP program. Under current reform 

proposals, individuals now enrolled in HIP with incomes below 133 percent of the FPL 

would become eligible for Medicaid, likely at no additional cost to the state. Individuals 

currently enrolled in HIP with incomes above 133 percent of the FPL would be eligible for 

subsidized health insurance through the national health insurance exchange. It would cost the 

state nothing to insure these individuals. 

•	 The Indiana Comprehensive Health Insurance Association (ICHIA): The ICHIA, the 

state’s high-risk pool, provides coverage for individuals who cannot obtain it through 

Medicaid or private insurers as well as to those who have federal eligibility through HIPAA 

or TAA. The program offers premium subsidies for those with incomes up to 350 percent of 

the FPL. The program is funded by premiums, state general funds and insurance carrier 

assessments (National Conference of State Legislatures, 2009). In 2008, the state spent $15 

million on the program (Indiana Comprehensive Health Insurance Association, 2008). 

Indiana would save the costs of this program under health insurance reform, since the federal 

government would take responsibility for providing a larger, more efficient subsidized pool 

for low-income uninsured individuals in the form of a national health insurance exchange. 

•	 Tax Credit: Indiana’s tax credit incentive for businesses to offer health insurance provides 

the lesser of $50 per employee or $2,500 for two years if the employer establishes a Section 

125 plan. In 2009, Indiana spent $12.2 million on this program (Indiana Legislative Services 

Agency, 2007). Indiana would much of the cost of this program under health insurance 

reform, since the federal government would take responsibility for offering small businesses 

tax credits as an incentive to offer health insurance to their employees. 

•	 Hospital Uncompensated Care for the Indigent Program (HCIP): HCIP is available to 

patients who receive emergency medical care and meet other program criteria. As of January 

2009, funding for the HCIP predominantly comes from state funding streams (Community 

Catalyst, 2009). In 2009, the governor recommended allocating $126 million to the HCI fund 

in the FY 2010-11 state budget (Indiana State Budget Agency, 2009). Much of what Indiana 

currently allocates for hospital indigent care would be saved under health insurance reform. 

All individuals below 133 percent of the FPL would qualify for Medicaid and those above 

that threshold would be eligible to obtain subsidized insurance through the exchange, at no 

cost to the state. 

•	 Hidden Tax: Indiana’s hospitals and other health care providers also shoulder much of the 

burden of the state’s uncompensated care.31 Much of this cost is then shifted to those who 

have private health insurance in the form of higher prices for health care services. As a result 

of this uncompensated care, private health insurance premiums are higher than they 

otherwise would be. Health insurance reform would reduce this “hidden tax” that individuals 

31 Hospitals in Indiana incurred $342 million in uncompensated care costs in 2003 (U.S. Government Accountability 

Office, 2005). 

35
 
 

 

with private health insurance pay for uncompensated care for the uninsured. This is of 

particular importance to Indiana because the state and its local governments help pay for 

health insurance for many of their 339,787 full-time equivalent employees. We estimate that 

the hidden cost of uncompensated care costs the state of Indiana and its local governments 

$29.5 million a year in the form of higher employee health insurance premiums.32 

Additional savings may come from the Children’s Health Insurance Program (CHIP). The state 

of Indiana currently spends $36.2 million on CHIP coverage (Kaiser Family Foundation, 2009) 

for children in families with incomes up to 200 percent of the FPL (RWJF, 2009). Under the 

current draft of reform legislation, children in families with incomes above 133 percent of the 

FPL may transition to equivalent, federally-financed coverage through the national health 

insurance exchange, potentially allowing the state to save a considerable amount of the costs of 

this program. However, CEA does not include savings on CHIP in bottom line calculations of 

net state savings from health insurance reform, because transitioning children from CHIP to 

equivalent federal coverage would be subject to approval by the Secretary of Health and Human 

Services, and may not occur in all states. 

The discussion above has highlighted some of the most important examples of state and local 

financing of care for the uninsured, though the list is by no means intended to be comprehensive. 

Instead, it is a lower bound on the savings that state and local governments would realize as a 

result of health insurance reform. Added together, we estimate that Indiana would see at least 

$338 million in savings in existing programs and in reduced health insurance premiums for state 

and local employees as a result of health insurance reform. 

B. A Snapshot of Health Insurance Coverage for Non-Elderly Residents of Indiana 

A brief snapshot of insurance coverage in the state helps illustrate the fiscal and coverage impact 

of national health insurance reform. Table 1 shows the insurance status of Indiana’s non-elderly 

residents, broken down by poverty status and by age groups. These estimates suggest that there 

are roughly 211,000 uninsured adults and 34,000 uninsured children in Indiana with family 

incomes below 133 percent of the FPL. 

Table 1: Total Estimated Non-Elderly Population of Indiana 

Poverty 

Status Uninsured Private Insurance Medicaid Medicare, VA, or TRICARE 

Adults 

(19-64) 

≥ 133% FPL 443,780 2,700,676 50,330 152,716 

< 133% FPL 210,607 113,573 117,548 45,474 

Children 

(18 and under) 

≥ 133% FPL 75,810 1,036,075 156,813 20,878 

< 133% FPL 33,777 76,753 258,794 14,217 

Note: Data from the March 2008 CPS. Uninsured individuals report having no form of insurance. See the technical appendix for 

a further discussion of the data used and CEA’s methodology with respect to poverty and insurance status classification. 

Number of observations in the CPS for Indiana: 1,783. 

As the table also shows, the majority (68 percent) of the uninsured in Indiana have incomes 

above 133 percent of the FPL, and would therefore qualify for health insurance through the 

32 Based on calculation that 13.4 percent of Indiana’s employment is in state and local government. 

36 
 

 

exchange rather than through Medicaid. The state of Indiana would not be responsible for any of 

the financing for this group. 

C. Estimated Costs to the State of Indiana from the Medicaid Expansion 

Table 2 lists the estimated number of legal, non-elderly residents in Indiana with incomes of less 

than 133 percent of the FPL who would become eligible for Medicaid under the proposed 

legislation. The table also presents the projected costs of extending Medicaid to these 

individuals. These estimates suggest that the total cost of this expansion is approximately $623 

million per year. With an FMAP of 90 percent, the cost to the state would be $62 million. We 

consider a 90 percent FMAP because it is the one scheduled to take effect in 2017 in current 

draft legislation, though we recognize that this could change as the legislation moves forward. 

Table 2: Uninsured, Low-Income, Legal, and Non-Elderly Population of Indiana 

Number of Legal 

Uninsured Below 

133% FPL 

Cost of 

Medicaid 

Expansion 

($ millions) 

Cost per 

New 

Enrollee 

State 

Population 

Cost to State 

with 90% 

FMAP 

($ millions) 

Adults 

(19-64) 189,296 $563 $2,974 

6,345,389 $62 Children 

(18 and under) 31,643 $60 $1,898 

Note: Data from the March 2008 CPS. Uninsured individuals report having no form of health insurance. See the technical 

appendix for a further discussion of the data used and CEA’s methodology with respect to poverty and insurance status 

classification. These data exclude undocumented residents; estimates come from Passel and are described in the appendix. 

D. Bottom Line for Indiana 

Table 3 shows the net impact for the Indiana state budget of health insurance reform. It shows 

the likely cost of Medicaid expansion under three FMAP matching rates – current, 90 percent, 

and 100 percent. It then shows the identifiable savings from reducing uncompensated care. And 

as the following table shows, those savings would more than offset the cost of the Medicaid 

expansion described above even if the current FMAP of 65.93 percent was used.33 

33 CEA recognizes that not all of the costs from some of these programs will be saved under health insurance reform, 

and thus our calculations are not exact. State and local governments retain the discretion to offer subsidized care 

programs to their residents. Additionally, some of the individuals covered by these programs are undocumented 

immigrants who would not obtain health insurance as a result of reform. However, given that these programs 

analyzed here are not exhaustive of all uncompensated care spending in the state, this table is meant to be illustrative 

of a conservative estimate of the potential cost savings Indiana can expect to see from health insurance reform. 

37
 
 

Table 3: Financial Impact of Health Insurance Reform on 

State and Local Governments in Indiana ($ millions) 

Component Current FMAP 90% FMAP 100% FMAP 

Medicaid Expansion -212.3 -62.3 -0.0 

Healthy Indiana Plan +154.8 +154.8 +154.8 

ICHIA +15 +15 +15 

Tax Credit +12.2 +12.2 +12.2 

HCIP +126 +126 +126 

Hidden Tax +29.5 +29.5 +29.5 

Net Effect for Indiana +125.2 +275.2 +337.5 

This table understates the benefits to the state of Indiana and its local governments for at least 

three additional reasons. First, it does not include savings that would result from reductions in 

other state and local programs not listed above that finance health care for the uninsured. Second, 

it ignores the increase in tax revenue that would result from reform-induced increases in the 

efficiency of the labor market, including a reduction in “job lock.” And finally, it does not 

include the benefits of reductions in health care spending that would result from more 

coordinated care. At present, many individuals transition in and out of health insurance, leading 

to inefficient care delivery including more care in emergency rooms. 

38
 
References 

Community Catalyst. “Free Care Compendium: Indiana.” Accessed August 14, 2009. 

http://www.communitycatalyst.org/projects/hap/free_care?id=0014. 

Indiana Comprehensive Health Insurance Association. “Statement of Net Assets.” January 2008. 

https://www.onlinehealthplan.com/content/html/acs/12/01_Jan_08.pdf. 

Indiana Family and Social Services Administration. “Hoosier Healthwise Health Care Program.” 

Accessed August 14, 2009. http://www.in.gov/fssa/ompp/2544.htm. 

Indiana Legislative Services Agency. Office of Fiscal and Management Analysis. “Fiscal Impact 

Statement.” May 14, 2007. 

http://www.in.gov/legislative/bills/2007/PDF/FISCAL/HB1678.008.pdf. 

Indiana State Budget Agency. Office of Management and Budget. “FY 2010-11 Budget 

Recommendations.” January 8, 2009. 

http://www.in.gov/sba/files/as_2009_Pres_to_BC_20090108.pdf. 

Kaiser Family Foundation. State Health Facts. “Medicaid & CHIP.” Accessed 

August 14, 2009. http://www.statehealthfacts.org/comparetable.jsp?ind=235&cat=4. 

National Conference of State Legislatures. “State Health Programs to Cover the Uninsured.” July 

2009. 

http://www.ncsl.org/IssuesResearch/Health/StateHealthProgramsToCoverTheUninsured2 

009/tabid/13878/Default.aspx#id. 

Robert Wood Johnson Foundation. State Coverage Initiatives. “Indiana: Coverage Strategies.” 

Accessed August 14, 2009. http://www.statecoverage.org/node/95/state_strategies. 

State University of New York. The Nelson A. Rockefeller Institute of Government. Health 

Policy Research Center. “State Financing for Health Coverage Initiatives: Observations 

and Options.” June 2009. 

http://www.rockinst.org/pdf/health_care/2009-06-03-HPRC_State_Financing.pdf. 

U.S. Government Accountability Office. “Nonprofit, For-Profit, and Government Hospitals: 

Uncompensated Care and Other Community Benefits.” Testimony of Comptroller David 

M. Walker before the House Committee on Ways and Means, May 26, 2005. 

39
 
 

 

IOWA 

Health insurance reform as currently proposed in both the House Tri-Committee and in the 

Senate HELP Committee would ensure that virtually all Americans receive health insurance. 

This memo explores the likely effects of this reform on the budget of the state of Iowa and its 

local governments. 

Iowa and its local governments subsidize individuals to obtain health insurance and provide 

direct services to the uninsured. In addition, the state and local governments indirectly pay for 

uncompensated care through higher insurance premiums for government employees. On each of 

these fronts, the reform would save money for the state and local governments. On the other 

hand, the reform calls for an expansion in Medicaid for all individuals under 133 percent of the 

federal poverty line (FPL). 

Our findings, which we summarize below, indicate that Iowa and its local governments currently 

spend at least $45 million on care for the uninsured. Because this is a lower bound of such 

expenditures, we estimate that at least that much would be saved by current reform proposals. 

We estimate that the total annual cost of the Medicaid expansion to Iowa’s 90,745 low-income 

uninsured individuals would be $200 million (in 2007 dollars).34 After initially sharing none of 

that cost, Iowa’s share with a 90 percent FMAP would be $20 million. Thus health insurance 

reform would provide a substantial financial benefit to the state of Iowa and its local 

governments. 

A. Current State and Local Expenditures on Health Care for the Uninsured 

The state and local governments of Iowa would benefit fiscally from health insurance reform 

because they currently spend money encouraging individuals to become insured, treating the 

uninsured, and providing uncompensated care. Health insurance reform would reduce each of 

these costs, and would have additional financial benefits for Iowa’s private hospitals and other 

health care providers, which bear heavy costs for providing care to Iowa’s residents who are not 

insured. These and other uncompensated care costs are passed on to the privately insured, 

including the employees of state and local governments in Iowa. 

The following is a summary of some of the savings that Iowa and its local governments could 

expect from health insurance reform. 

•	 IowaCare: IowaCare is a Medicaid expansion program created with a Section 1115 waiver. 

The program provides a limited set of Medicaid benefits to uninsured adults ages 19 through 

64 with incomes up to 200 percent of the FPL (RWJF, 2009). In 2010, it is estimated that 

state funding for IowaCare will total $33.6 million (Iowa Department of Human Services, 

2009). It is reasonable to assume that under health insurance reform Iowa would recover a 

substantial amount of what they currently spend on the IowaCare program. For example, 

individuals currently enrolled in IowaCare with incomes above 133 percent of the FPL would 

34 The estimated number of low-income uninsured individuals excludes undocumented immigrants, who would not 

be eligible for Medicaid as a result of health insurance reform. 

40
 
 

 

be eligible for subsidized health insurance through the national health insurance exchange. It 

would cost the state nothing to insure these individuals. 

•	 Hidden Tax: Iowa’s hospitals and other health care providers also shoulder much of the 

burden of the state’s uncompensated care.35 Much of this cost is then shifted to those who 

have private health insurance in the form of higher prices for health care services. As a result 

of this uncompensated care, private health insurance premiums are higher than they 

otherwise would be. Health insurance reform would reduce this “hidden tax” that individuals 

with private health insurance pay for uncompensated care for the uninsured. This is of 

particular importance to Iowa because the state and its local governments help pay for health 

insurance for many of their 182,356 full-time equivalent employees. We estimate that the 

hidden cost of uncompensated care costs the state of Iowa and its local governments $11.2 

million a year in the form of higher employee health insurance premiums.36 

Additional savings may come from the Children’s Health Insurance Program (CHIP). The state 

of Iowa currently spends $20.2 million on CHIP coverage (Kaiser Family Foundation, 2009) for 

children in families with incomes up to 300 percent of the FPL (RWJF, 2009). Under the current 

draft of reform legislation, children in families with incomes above 133 percent of the FPL may 

transition to equivalent, federally-financed coverage through the national health insurance 

exchange, potentially allowing the state to save a considerable amount of the costs of this 

program. However, CEA does not include savings on CHIP in bottom line calculations of net 

state savings from health insurance reform, because transitioning children from CHIP to 

equivalent federal coverage would be subject to approval by the Secretary of Health and Human 

Services, and may not occur in all states. 

The discussion above has highlighted some of the most important examples of state and local 

financing of care for the uninsured, though the list is by no means intended to be comprehensive. 

Instead, it is a lower bound on the savings that state and local governments would realize as a 

result of health insurance reform. Added together, we estimate that Iowa would see at least $45 

million in savings in existing programs and in reduced health insurance premiums for state and 

local employees as a result of health insurance reform. 

B. A Snapshot of Health Insurance Coverage for Non-Elderly Residents of Iowa 

A brief snapshot of insurance coverage in the state helps illustrate the fiscal and coverage impact 

of national health insurance reform. Table 1 shows the insurance status of Iowa’s non-elderly 

residents, broken down by poverty status and by age groups. These estimates suggest that there 

are roughly 95,000 uninsured adults and 11,000 uninsured children in Iowa with family incomes 

below 133 percent of the FPL. 

35 Iowa’s hospitals incurred $465 million in uncompensated care costs in 2005 (Iowa Hospital Association, 2005). 36 Based on calculation that 15.0 percent of Iowa’s employment is in state and local government 

41
 
 

 

 

Table 1: Total Estimated Non-Elderly Population of Iowa 

Poverty 

Status Uninsured Private Insurance Medicaid Medicare, VA, or TRICARE 

Adults 

(19-64) 

≥ 133% FPL 141,802 1,340,990 49,661 70,152 

< 133% FPL 94,539 53,758 52,969 18,589 

Children 

(18 and under) 

≥ 133% FPL 17,191 475,417 92,127 13,025 

< 133% FPL 10,744 14,955 115,217 6,477 

Note: Data from the March 2008 CPS. Uninsured individuals report having no form of insurance. See the technical appendix for 

a further discussion of the data used and CEA’s methodology with respect to poverty and insurance status classification. 

Number of observations in the CPS for Iowa: 2,202. 

As the table also shows, the majority (60 percent) of the uninsured in Iowa have incomes above 

133 percent of the FPL, and would therefore qualify for health insurance through the exchange 

rather than through Medicaid. The state of Iowa would not be responsible for any of the 

financing for this group. 

C. Estimated Costs to the State of Iowa from the Medicaid Expansion 

Table 2 lists the estimated number of legal, non-elderly residents in Iowa with incomes of less 

than 133 percent of the FPL who would become eligible for Medicaid under the proposed 

legislation. The table also presents the projected costs of extending Medicaid to these 

individuals. These estimates suggest that the total cost of this expansion is approximately $200 

million per year. With an FMAP of 90 percent, the cost to the state would be $20 million. We 

consider a 90 percent FMAP because it is the one scheduled to take effect in 2017 in current 

draft legislation, though we recognize that this could change as the legislation moves forward. 

Table 2: Uninsured, Low-Income, Legal, and Non-Elderly Population of Iowa 

Number of Legal 

Uninsured Below 

133% FPL 

Cost of 

Medicaid 

Expansion 

($ millions) 

Cost per 

New 

Enrollee 

State 

Population 

Cost to State 

with 90% 

FMAP 

($ millions) 

Adults 

(19-64) 81,075 $184 $2,264 

2,988,046 $20 Children 

(18 and under) 9,670 $17 $1,736 

Note: Data from the March 2008 CPS. Uninsured individuals report having no form of health insurance. See the technical 

appendix for a further discussion of the data used and CEA’s methodology with respect to poverty and insurance status 

classification. These data exclude undocumented residents; estimates come from Passel and are described in the appendix. 

D. Bottom Line for Iowa 

Table 3 shows the net impact for the Iowa state budget of health insurance reform. It shows the 

likely cost of Medicaid expansion under three FMAP matching rates – current, 90 percent, and 

100 percent. It then shows the identifiable savings from reducing uncompensated care. As the 

following table shows, those savings would more than offset the cost of the Medicaid expansion 

described above if a 90 percent FMAP were in effect, as is proposed in current draft legislation. 

42
 
 

 

Moreover, these other savings would offset more than 60 percent of the cost even if the current 

FMAP of 63.51 percent was used.37 

Table 3: Financial Impact of Health Insurance Reform on 

State and Local Governments in Iowa ($ millions) 

Component Current FMAP 90% FMAP 100% FMAP 

Medicaid Expansion -73.1 -20.0 -0.0 

IowaCare +33.6 +33.6 +33.6 

Hidden Tax +11.2 +11.2 +11.2 

Net Effect for Iowa -28.3 +24.8 +44.8 

This table understates the benefits to the state of Iowa and its local governments for at least three 

additional reasons. First, it does not include savings that would result from reductions in other 

state and local programs not listed above that finance health care for the uninsured. Second, it 

ignores the increase in tax revenue that would result from reform-induced increases in the 

efficiency of the labor market, including a reduction in “job lock.” And finally, it does not 

include the benefits of reductions in health care spending that would result from more 

coordinated care. At present, many individuals transition in and out of health insurance, leading 

to inefficient care delivery including more care in emergency rooms. 

37 CEA recognizes that not all of the costs from some of these programs will be saved under health insurance reform, 

and thus our calculations are not exact. State and local governments retain the discretion to offer subsidized care 

programs to their residents. Additionally, some of the individuals covered by these programs are undocumented 

immigrants who would not obtain health insurance as a result of reform. However, given that these programs 

analyzed here are not exhaustive of all uncompensated care spending in the state, this table is meant to be illustrative 

of a conservative estimate of the potential cost savings Iowa can expect to see from health insurance reform. 

43
 
References 

Iowa Department of Human Services. “Offer 401-HHS-003: Medical Services.” Accessed 

August 14, 2009. 

http://www.dhs.state.ia.us/docs/10-401-HHS-003B-Medical-Assistance.pdf. 

Iowa Hospital Association. “Iowa Hospital Association Policy Statement on Hospital Billing and 

Collection Practices.” October 5, 2005. 

http://www.ihaonline.org/govrelations/finance/billing/IHA%20statement.pdf. 

Kaiser Family Foundation. State Health Facts. “Medicaid & CHIP.” Accessed 

August 14, 2009. http://www.statehealthfacts.org/comparetable.jsp?ind=235&cat=4. 

Robert Wood Johnson Foundation. State Coverage Initiatives. “Iowa: Coverage Strategies.” 

Accessed August 14, 2009. http://www.statecoverage.org/node/96/state_strategies. 

44
 
 

 

MAINE 

Health insurance reform as currently proposed in both the House Tri-Committee and in the 

Senate HELP Committee would ensure that virtually all Americans receive health insurance. 

This memo explores the likely effects of this reform on the budget of the state of Maine and its 

local governments. 

The state government in Maine subsidizes individuals to obtain health insurance and provides 

direct services to the uninsured. In addition, the state and local governments indirectly pay for 

uncompensated care through higher insurance premiums for government employees. On each of 

these fronts, the reform would save money for the state and local governments. On the other 

hand, the reform calls for an expansion in Medicaid for all individuals under 133 percent of the 

federal poverty line (FPL), which may increase state expenditures on this program. 

Our findings, which we summarize below, indicate that Maine and its local governments 

currently spend at least $51 million on care for the uninsured. Because this is a lower bound of 

such expenditures, we estimate that at least that much would be saved by current reform 

proposals. We estimate that the total annual cost of the Medicaid expansion to Maine’s 24,322 

low-income uninsured individuals would be $153 million (in 2007 dollars).38 After initially 

sharing none of that cost, Maine’s share with a 90 percent FMAP would be $15 million. Thus 

health insurance reform would provide a substantial financial benefit to the state of Maine and its 

local governments. 

A. Current State and Local Expenditures on Health Care for the Uninsured 

The state and local governments of Maine would benefit fiscally from health insurance reform 

because they currently spend money encouraging individuals to become insured, treating the 

uninsured, and providing uncompensated care. Health insurance reform would reduce each of 

these costs, and would have additional financial benefits for Maine’s private hospitals and other 

health care providers, which bear heavy costs for providing care to Maine’s residents who are not 

insured. These and other uncompensated care costs are passed on to the privately insured, 

including the employees of state and local governments in Maine. 

The following is a summary of some of the savings that Maine and its local governments could 

expect from health insurance reform. 

•	 Maine’s Dirigo Health Agency: Dirigo Health subsidizes health insurance for individuals 

who are self-employed, work in small businesses, are unemployed, work less than 20 hours 

per week for any particular employer, or are early retirees and whose incomes are less than 

300 percent of the FPL. Dirigo had subsidy costs of $41.5 million and operating costs of $2.8 

million in 2008. These state subsidies are funded by an assessment on health insurance and 

self-insured companies that operate in the state, and drawing on the state treasury’s cash 

pool. In 2008, Dirigo was projected to draw $9.0 million from the state’s cash pool, in 

addition to collecting earmarked assessments totaling $40.1 million to pay for subsidy and 

38 The estimated number of low-income uninsured individuals excludes undocumented immigrants, who would not 

be eligible for Medicaid as a result of health insurance reform. 

45
 
 

 

 

 

 

operating expenses. Moreover, the state is trying to move to an alternative funding source to 

the assessment on health insurance companies, such as taxes on beer, wine, and soda. (Dirigo 

Health Agency, 2009). While some of the individuals insured by Dirigo may move to 

Medicaid under the bill, those with incomes of more than 133 percent of the FPL would 

receive federally-subsidized coverage in the exchange. The money that the state would save 

from the resulting decline in Dirigo Health subsidy and operating expenses would provide a 

sizeable offset to any additional Medicaid costs as the program would draw less spending 

from the state treasury’s cash pool, and other sources of state funds.39 

•	 Municipalities: Some of Maine’s municipalities have programs that pay for health care for 

the uninsured. For example, the city of Portland pays $1.4 million a year to run a free clinic 

program (Portland Department of Health and Human Services, 2009). In addition, the Knox 

County Health Clinic was received funding from the Maine Department of Health and 

Human Services (Knox County Health Clinic, 2009). The Leavitt’s Mill Free Health Center, 

located in Bar Mills, receives municipal support for its coverage of the uninsured (Leavitt’s 

Mill Free Health Center, 2008). Additional coverage through Medicaid and through the 

exchange would reduce the need for locally financed programs such as these. 

•	 Hidden Tax: Maine’s hospitals also shoulder much of the burden of the state’s 

uncompensated care. All Maine hospitals must provide free care to uninsured individuals 

with incomes of less than 150 percent of the FPL, and many provide care to individuals with 

higher incomes.40 Much of this cost is then shifted to those who have private health insurance 

in the form of higher prices for health care services. As a result of this uncompensated care, 

private health insurance premiums are higher than they otherwise would be. Health insurance 

reform would reduce this “hidden tax” that individuals with private health insurance pay for 

uncompensated care for the uninsured. This is of particular importance to Maine because the 

state and its local governments help pay for health insurance for many of their 76,382 fulltime equivalent employees. We estimate that the hidden cost of uncompensated care costs the 

state of Maine and its local governments $5.1 million a year in the form of higher employee 

health insurance premiums.41 

Additional savings may come from the Children’s Health Insurance Program (CHIP). The state 

of Maine currently spends $11.5 million on CHIP coverage for children in families with incomes 

up to 200 percent of the FPL (Kaiser Family Foundation, 2009). Under the current draft of 

reform legislation, children in families with incomes above 133 percent of the FPL may 

transition to equivalent, federally-financed coverage through the national health insurance 

exchange, potentially allowing the state to save a considerable amount of the costs of this 

program. However, CEA does not include savings on CHIP in bottom line calculations of net 

state savings from health insurance reform, because transitioning children from CHIP to 

39 There are also many privately financed charity care programs. For example, CarePartners provides free medical 

care to uninsured individuals with incomes of less than 175 percent of the federal poverty line in Cumberland,
 

Kennebec, and Lincoln counties, and the Franklin Health Access Project provides free medical care to uninsured 

individuals living in Franklin County, Livermore, Livermore Falls, and Vienna.

40 Recent data indicate that hospitals and other health care providers in Maine incurred $138 million in
 

uncompensated care costs in 2005. (Maine Health Access Foundation, 2007).

41 Based on calculation that 13.0 percent of Maine’s employment is in state and local government.
 

46
 
 

equivalent federal coverage would be subject to approval by the Secretary of Health and Human 

Services, and may not occur in all states. 

According to one recent study of Maine’s health care system, “large numbers of uninsured 

persons and their inevitable need to receive health care has resulted in a complex mosaic of 

government programs and private initiatives (Maine Health Access Foundation, 2007).” 

The discussion above has highlighted some of the most important examples of this, though the 

list is not intended to be comprehensive. Instead, it clearly demonstrates that the state of Maine 

and its local governments would realize substantial savings from health insurance reform that 

would more than offset the costs of the Medicaid expansion to the state government as shown in 

the following table. Added together, we estimate that Maine would see at least $51 million in 

savings in existing programs and in reduced health insurance premiums for state and local 

employees as a result of health insurance reform. 

B. A Snapshot of Health Insurance Coverage for Non-Elderly Residents of Maine 

A brief snapshot of insurance coverage in the state helps illustrate the fiscal and coverage impact 

of national health insurance reform. Table 1 shows the insurance status of Maine’s non-elderly 

residents during the 2007 calendar year, broken down by poverty status and by age groups. 

These estimates suggest that there are roughly 23,000 uninsured adults and 1,500 uninsured 

children in Maine with family incomes below 133 percent of the federal poverty line. 

Table 1: Total Estimated Non-Elderly Population of Maine 

Poverty 

Status Uninsured Private Insurance Medicaid Medicare, VA, or TRICARE 

Adults 

(19-64) 

≥ 133% FPL 72,426 511,964 44,934 59,761 

< 133% FPL 23,051 23,667 53,834 11,858 

Children 

(18 and under) 

≥ 133% FPL 12,412 161,790 46,261 11,515 

< 133% FPL 1,530 7,689 56,146 2,661 

Note: Data from the March 2008 CPS. Uninsured individuals report having no form of insurance. See the technical appendix for 

a further discussion of the data used and CEA’s methodology with respect to poverty and insurance status classification. 

Number of observations in the CPS for Maine: 2,087. 

As the table also shows, the vast majority (78 percent) of the uninsured in Maine have incomes 

above 133 percent of the FPL, and would therefore qualify for health insurance through the 

exchange rather than through Medicaid. The state of Maine would not be responsible for any of 

the financing for this group. 

C. Estimated Costs to the State of Maine from the Medicaid Expansion 

Table 2 lists the estimated number of legal, non-elderly residents in Maine with incomes of less 

than 133 percent of the FPL who would become eligible for Medicaid under the proposed 

legislation. The table also presents the projected costs of extending Medicaid to these 

individuals. These estimates suggest that the total cost of this expansion would be approximately 

$153 million per year. With an FMAP of 90 percent, the cost to the state would be $15 million. 

We consider a 90 percent FMAP because it is the one scheduled to take effect in 2017 in current 

draft legislation, though we recognize that this could change as the legislation moves forward. 

47
 
 

 

 

Table 2: Uninsured, Low-Income, Legal, and Non-Elderly Population of Maine 

Number of Legal 

Uninsured Below 

133% FPL 

Cost of 

Medicaid 

Expansion 

($ millions) 

Cost per 

New 

Enrollee 

State 

Population 

Cost to State 

with 90% 

FMAP 

($ millions) 

Adults 

(19-64) 22,792 $145 $6,352 

1,317,207 $15 Children 

(18 and under) 1,530 $8 $5,075 

Note: Data from the March 2008 CPS. Uninsured individuals report having no form of health insurance. See the technical 

appendix for a further discussion of the data used and CEA’s methodology with respect to poverty and insurance status 

classification. These data exclude undocumented residents; estimates come from Passel and are described in the appendix. 

D. Bottom Line for Maine 

Table 3 shows the net impact for the Maine state budget of health insurance reform. It shows the 

likely cost of Medicaid expansion under three FMAP matching rates – current, 90 percent, and 

100 percent. It then shows the identifiable savings from reducing uncompensated care. As the 

following table shows, those savings would offset more than 95 percent of the cost of the 

Medicaid expansion described above even if the current FMAP of 64.99 percent was used.42 

Table 3: The Impact of Health Insurance Reform on 

State and Local Governments in Maine ($ millions) 

Component Current FMAP 90% FMAP 100% FMAP 

Medicaid Expansion -53.4 -15.3 -0.0 

Dirigo Health +44.3 +44.3 +44.3 

Portland Free Clinics +1.4 +1.4 +1.4 

Hidden Tax +5.1 +5.1 +5.1 

Net Effect for Maine -2.6 +35.5 +50.8 

This table understates the benefits to the state of Maine and its local governments for a number 

of reasons. First, it does not include savings that would result from reductions in other state and 

local programs not listed above that finance health care for the uninsured. Second, it ignores the 

increase in tax revenue that would result from reform-induced increases in the efficiency of the 

labor market, including a reduction in “job lock.” And finally, it does not include the benefits of 

reductions in health care spending that would result from more coordinated care. At present, 

many individuals transition in and out of health insurance, leading to inefficient care delivery 

including more care in emergency rooms. 

42 CEA recognizes that not all of the costs from some of these programs will be saved under health insurance reform, 

and thus our calculations are not exact. State and local governments retain the discretion to offer subsidized care 

programs to their residents. Additionally, some of the individuals covered by these programs are undocumented 

immigrants who would not obtain health insurance as a result of reform. However, given that these programs 

analyzed here are not exhaustive of all uncompensated care spending in the state, this table is meant to be illustrative 

of a conservative estimate of the potential cost savings Maine can expect to see from health insurance reform. 

48
 
References 

Dirigo Health Agency. “Annual Reports State Fiscal Year 2008.” Accessed August 14, 2009. 

http://www.dirigohealth.maine.gov/Documents/SFY%202008%20Annual%20Report%2 

0012009.pdf. 

Kaiser Family Foundation. State Health Facts. “Medicaid & CHIP.” Accessed 

August 14, 2009. http://www.statehealthfacts.org/comparetable.jsp?ind=235&cat=4. 

Knox County Health Clinic. “Facts About KCHC & Midcoast Health Net.” Accessed August 14, 

2009. http://www.knoxclinic.org/facts.html. 

Leavitt’s Mill Free Health Center. “Annual Report: 2008.” November 2008. 

http://www.leavittsmill.org/annualreport08.pdf. 

Maine Health Access Foundation. “Cost of Caring For Uninsured People in Maine.” May 2007. 

http://www.urban.org/UploadedPDF/1001088_Uninsured_Maine.pdf. 

National Conference of State Legislatures. “State Health Programs to Cover the Uninsured.” July 

2009. 

http://www.ncsl.org/IssuesResearch/Health/StateHealthProgramsToCoverTheUninsured2 

009/tabid/13878/Default.aspx#id. 

Portland Department of Health and Human Services. Public Health Division. “Annual 

Report Fiscal Year 2008-2008.” Accessed August 14, 2009. 

http://www.portlandmaine.gov/hhs/2008annualreport.pdf. 

49
 
 

 

MICHIGAN 

Health insurance reform as currently proposed in both the House Tri-Committee and in the 

Senate HELP Committee would ensure that virtually all Americans receive health insurance. 

This memo explores the likely effects of this reform on the budget of the state of Michigan and 

its local governments. 

Michigan and its local governments subsidize individuals to obtain health insurance and provide 

direct services to the uninsured. In addition, the state and local governments indirectly pay for 

uncompensated care through higher insurance premiums for government employees. On each of 

these fronts, the reform would save money for the state and local governments. On the other 

hand, the reform calls for an expansion in Medicaid for all individuals under 133 percent of the 

federal poverty line (FPL). 

Our findings, which we summarize below, indicate that Michigan and its local governments 

currently spend at least $212 million on care for the uninsured. Because this is a lower bound of 

such expenditures, we estimate that at least that much would be saved by current reform 

proposals. We estimate that the total annual cost of the Medicaid expansion to Michigan’s 

291,180 low-income uninsured individuals would be $681 million (in 2007 dollars).43 After 

initially sharing none of that cost, Michigan’s share with a 90 percent FMAP would be $68 

million. Thus health insurance reform would provide a substantial financial benefit to the state of 

Michigan and its local governments. 

A. Current State and Local Expenditures on Health Care for the Uninsured 

The state and local governments of Michigan would benefit fiscally from health insurance 

reform because they currently spend money encouraging individuals to become insured, treating 

the uninsured, and providing uncompensated care. Health insurance reform would reduce each of 

these costs, and would have additional financial benefits for Michigan’s private hospitals and 

other health care providers, which bear heavy costs for providing care to Michigan’s residents 

who are not insured. These and other uncompensated care costs are passed on to the privately 

insured, including the employees of state and local governments in Michigan. 

The following is a summary of some of the savings that Michigan and its local governments 

could expect from health insurance reform. 

Michigan County Health Plans 

Much of Michigan’s indigent care is provided through County Health Plans. These programs, 

which operate in 72 of Michigan’s 83 counties, provide access to organized systems of health 

care for approximately 150,000 indigent uninsured and low income state residents (Michigan 

County Health Plan Association, 2009). Some County Health Plans, such as the Medical Access 

Program, which is administered by the Medical Care Access Coalition for all 15 counties in the 

Upper Peninsula, cover wide geographic areas. Others operate in only one county. Where they 

43 The estimated number of low-income uninsured individuals excludes undocumented residents, who would not be 

eligible for Medicaid as a result of health insurance reform. 

50
 
exist, County Health Plans oversee both state and local indigent care programs. These programs 

are referred to as Plan A, Plan B, and Plan C (Health Management Associates, 2005). 

•	 Plan A: The Adult Medical Program (AMP) provides basic medical care to childless adults 

below 35 percent of the FPL who do not qualify for Medicaid. The program is limited in that 

it excludes inpatient coverage, but it does provide pharmaceutical benefits. Areas with 

County Health Plans provide AMP coverage through those programs, while in other areas 

benefits are provided through fee for service (Michigan Department of Community Health, 

2009). The coverage is funded by state general funds and an increased utilization of 

Michigan's CHIP allocation to cover uninsured childless adults. Enrollment in this program is 

currently capped at 62,000, and as a result of the cap, enrollment has been closed much of the 

time since July 1, 2004 (Michigan League for Human Services, 2009). In 2008, the state 

spent $30.8 million on the program, while local governments spent $6.7 million. Starting on 

October 1, 2009, the program would include a hospital benefit at an additional estimated cost 

of $23,673,400 to the state (Michigan House Fiscal Agency, 2009b). 

While Michigan may not recover a substantial amount of what it currently spends on the 

AMP program under health insurance reform, the state and its low-income residents still 

stand to gain. Under reform, AMP beneficiaries would become eligible for Medicaid. Since 

the federal government matches state Medicaid spending, Michigan may end up spending 

less to provide care to current AMP beneficiaries through the Medicaid program than they 

spent to provide a more limited benefit under AMP. 

•	 Plan B: Plan B programs provide basic medical care to uninsured adults up to 200 percent of 

the FPL who are not eligible for Medicaid or other public programs. Each County Health 

Plan administers its own program, so health benefits and eligibility specifics are determined 

locally. There are currently 49 counties in Michigan with Plan B programs, and as of 

December 2005, estimated enrollment was between 50,000 to 52,000 Michigan residents. Due to 

both budget constraints as well as unprecedented demand, many Plan B programs have 

stopped accepting new enrollees. Plan B programs are funded from special Medicaid DSH 

payments that are comprised of state, local, and federal dollars (Michigan Department of 

Community Health, 2006). In 2008, Michigan appropriated $88.5 million for the three-share 

program (see below) and county indigent care in general, which includes Plan B programs 

(Michigan House Fiscal Agency, 2009a). However, due to the mechanism by which Plan B 

programs are funded, it is difficult to estimate the exact proportion of this number which is 

actually state and local general fund spending, and which is federal Medicaid DSH payment 

program pass-throughs. 

It is reasonable to assume that under health insurance reform Michigan would recover a 

substantial amount of what it currently spends on Plan B programs. Under current reform 

proposals, individuals now enrolled in Plan B plans with incomes below 133 percent of the 

FPL would become eligible for Medicaid, likely at no additional cost to the state. Individuals 

currently enrolled in Plan B plans with incomes above 133 percent of the FPL would be 

eligible for subsidized health insurance through the national health insurance exchange. It 

would cost the state nothing to insure these individuals. 

51
 
•	 Plan C: Third-Share Programs are comprehensive insurance programs for low-income 

employees of small employers. Under a third-share program, the employee, his or her 

employer, and community funding share the premium in three equal or similar parts. Thirdshare programs are administered by County Health Plans, and thus employer and employee 

eligibility for the program is determined locally. As of 2006, approximately 5,000 individuals 

were enrolled in a Third-Share program in Michigan (Health Management Associates, 2005). 

Like Plan B programs, Third-Share programs are largely funded by federal Medicaid DSH 

funds. Counties transfer employer contributions to the state, which it then considers a DSH 

payment to county hospitals, thereby qualifying the funds for a federal match. The money is 

then used to fund the counties’ share of the program (Fronstin and Lee, 2005). In 2008, 

Michigan appropriated $88.5 million for the three-share program and county indigent care in 

general. However, as discussed above, it is difficult to estimate the exact proportion of this 

number which is actually state and local general fund spending, and which is federal 

Medicaid DSH payment program pass-throughs. 

It is reasonable to assume that under health insurance reform Michigan would recover a 

substantial amount of what it currently spends on Third-Share programs. There would be no 

need for local governments to offer incentives for small businesses to offer health insurance 

to their employees, since under reform small businesses would receive federal tax credits for 

offering insurance. Furthermore, under current reform proposals, individuals now enrolled in 

Third-Share plans with incomes below 133 percent of the FPL would become eligible for 

Medicaid, likely at no additional cost to the state. Individuals currently enrolled in ThirdShare plans with incomes above 133 percent of the FPL would be eligible for subsidized 

health insurance through the national health insurance exchange. It would cost the state 

nothing to insure these individuals. 

•	 Maternity Outpatient Medical Services (MOMS): MOMS provides pregnancy-related 

services to women up to 185 percent of the FPL who are pregnant or were recently pregnant 

and do not qualify for Medicaid or whose Medicaid application is pending (Michigan 

Surgeon General, 2009). State funding for this program was $1.6 million in FY 2008-09 

(Michigan House Fiscal Agency, 2008). It is reasonable to assume that under health 

insurance reform Michigan would recover a substantial amount of what it currently spends 

on the MOMS program. Under current reform proposals, individuals now enrolled in MOMS 

with incomes below 133 percent of the FPL would become eligible for Medicaid, likely at no 

additional cost to the state. Individuals currently enrolled in MOMS with incomes above 133 

percent of the FPL would be eligible for subsidized health insurance through the national 

health insurance exchange. It would cost the state nothing to insure these individuals. 

•	 Local Health Administration and Grants: In Michigan the costs of providing safety net 

care are shared between the state and local governments (Michigan Department of 

Community Health, 2006). In 2008, state appropriations for local public health departments 

for state-local cost-shared public health services totaled $35.7 million. Local spending was 

$5.1 million (Michigan House Fiscal Agency, 2009a). Much of what Michigan currently 

spends on safety net care through local health departments would be saved under health 

insurance reform. All individuals below 133 percent of the FPL would qualify for Medicaid 

52
 
 

 

 

and those above that threshold would be eligible to obtain subsidized insurance through the 

exchange, at no cost to the state. 

•	 Hidden Tax: Michigan’s hospitals and other health care providers also shoulder much of the 

burden of the state’s uncompensated care.44 Much of this cost is then shifted to those who 

have private health insurance in the form of higher prices for health care services. As a result 

of this uncompensated care, private health insurance premiums are higher than they 

otherwise would be. Health insurance reform would reduce this “hidden tax” that individuals 

with private health insurance pay for uncompensated care for the uninsured. This is of 

particular importance to Michigan because the state and its local governments help pay for 

health insurance for many of their 493,466 full-time equivalent employees. We estimate that 

the hidden cost of uncompensated care costs the state of Michigan and its local governments 

$43.5 million a year in the form of higher employee health insurance premiums.45 

Additional savings may come from the Children’s Health Insurance Program (CHIP). The state 

of Michigan currently spends $71.9 million on CHIP coverage for children in families with 

incomes up to 200 percent of the FPL (Kaiser Family Foundation, 2009). Under the current draft 

of reform legislation, children in families with incomes above 133 percent of the FPL may 

transition to equivalent, federally-financed coverage through the national health insurance 

exchange, potentially allowing the state to save a considerable amount of the costs of this 

program. However, CEA does not include savings on CHIP in bottom line calculations of net 

state savings from health insurance reform, because transitioning children from CHIP to 

equivalent federal coverage would be subject to approval by the Secretary of Health and Human 

Services, and may not occur in all states. 

The discussion above has highlighted some of the most important examples of state and local 

financing of care for the uninsured, though the list is by no means intended to be comprehensive. 

Instead, it is a lower bound on the savings that state and local governments would realize as a 

result of health insurance reform. Added together, we estimate that Michigan would see at least 

$212 million in savings in existing programs and in reduced health insurance premiums for state 

and local employees as a result of health insurance reform. 

B. A Snapshot of Health Insurance Coverage for Non-Elderly Residents of Michigan 

A brief snapshot of insurance coverage in the state helps illustrate the fiscal and coverage impact 

of national health insurance reform. Table 1 shows the insurance status of Michigan’s nonelderly residents, broken down by poverty status and by age groups. These estimates suggest that 

there are roughly 269,000 uninsured adults and 37,000 uninsured children in Michigan with 

family incomes below 133 percent of the FPL. 

44 Michigan hospitals incurred more than $2 billion in uncompensated care costs in 2007 (Michigan Health and 

Hospital Association, 2009). 

45 Based on calculation that 13.7 percent of Michigan’s employment is in state and local government. 

53
 
 

 

Table 1: Total Estimated Non-Elderly Population of Michigan 

Poverty 

Status Uninsured Private Insurance Medicaid Medicare, VA, or TRICARE 

Adults 

(19-64) 

≥ 133% FPL 658,523 4,106,360 156,123 290,620 

< 133% FPL 268,954 190,277 249,642 93,935 

Children 

(18 and under) 

≥ 133% FPL 106,549 1,535,117 261,738 55,006 

< 133% FPL 37,124 118,898 420,360 16,947 

Note: Data from the March 2008 CPS. Uninsured individuals report having no form of insurance. See the technical appendix for 

a further discussion of the data used and CEA’s methodology with respect to poverty and insurance status classification. 

Number of observations in the CPS for Michigan: 2,723. 

As the table also shows, the vast majority (71 percent) of the uninsured in Michigan have 

incomes above 133 percent of the FPL, and would therefore qualify for health insurance through 

the exchange rather than through Medicaid. The state of Michigan would not be responsible for 

any of the financing for this group. 

C. Estimated Costs to the State of Michigan from the Medicaid Expansion 

Table 2 lists the estimated number of legal, non-elderly residents in Michigan with incomes of 

less than 133 percent of the FPL who would become eligible for Medicaid under the proposed 

legislation. The table also presents the projected costs of extending Medicaid to these 

individuals. These estimates suggest that the total cost of this expansion would be approximately 

$681 million per year. With an FMAP of 90 percent, the cost to the state would be $68 million. 

We consider a 90 percent FMAP because it is the one scheduled to take effect in 2017 in current 

draft legislation, though we recognize that this could change as the legislation moves forward. 

Table 2: Uninsured, Low-Income, Legal, and Non-Elderly Population of Michigan 

Number of Legal 

Uninsured Below 

133% FPL 

Cost of 

Medicaid 

Expansion 

($ millions) 

Cost per 

New 

Enrollee 

State 

Population 

Cost to State 

with 90% 

FMAP 

($ millions) 

Adults 

(19-64) 255,356 $629 $2,463 

10,071,822 $68 Children 

(18 and under) 35,824 $52 $1,458 

Note: Data from the March 2008 CPS. Uninsured individuals report having no form of health insurance. See the technical 

appendix for a further discussion of the data used and CEA’s methodology with respect to poverty and insurance status 

classification. These data exclude undocumented residents; estimates come from Passel and are described in the appendix. 

D. Bottom Line for Michigan 

Table 3 shows the net impact for the Michigan state budget of health insurance reform. It shows 

the likely cost of Medicaid expansion under three FMAP matching rates – current, 90 percent, 

and 100 percent. It then shows the identifiable savings from reducing uncompensated care. As 

shown in the table, the savings would much more than offset the cost if a 90 percent FMAP was 

54
 
 

in effect and would offset nearly 85 percent of the cost even if the current FMAP of 63.19 

percent was used.46 

Table 3: Financial Impact of Health Insurance Reform on 

State and Local Governments in Michigan ($ millions) 

Component Current FMAP 90% FMAP 100% FMAP 

Medicaid Expansion -250.7 -68.1 -0.0 

Plan A +37.5 +37.5 +37.5 

Plan B, Plan C and Indigent care +88.5 +88.5 +88.5 

MOMS +1.6 +1.6 +1.6 

Local Health Admin and Grants +40.8 +40.8 +40.8 

Hidden Tax +43.5 +43.5 +43.5 

Net Effect for Michigan -38.8 +143.8 +211.9 

This table understates the benefits to the state of Michigan and its local governments for at least 

three additional reasons. First, it does not include savings that would result from reductions in 

other state and local programs not listed above that finance health care for the uninsured. Second, 

it ignores the increase in tax revenue that would result from reform-induced increases in the 

efficiency of the labor market, including a reduction in “job lock.” And finally, it does not 

include the benefits of reductions in health care spending that would result from more 

coordinated care. At present, many individuals transition in and out of health insurance, leading 

to inefficient care delivery including more care in emergency rooms. 

46 CEA recognizes that not all of the costs from some of these programs will be saved under health insurance reform, 

and thus our calculations are not exact. State and local governments retain the discretion to offer subsidized care 

programs to their residents. Additionally, some of the individuals covered by these programs are undocumented 

immigrants who would not obtain health insurance as a result of reform. However, given that these programs 

analyzed here are not exhaustive of all uncompensated care spending in the state, this table is meant to be illustrative 

of a conservative estimate of the potential cost savings Michigan can expect to see from health insurance reform. 

55
 
 References 

Fronstin, Paul and J. Lee. “Report: A Community Expands Access to Health Care: The Case of 

Access Health In Michigan.” Health Affairs, 2005, 24(3): 858-863. 

Health Management Associates. “County Health Plans: Community-Based Health Care for the 

Uninsured.” May 2005 

http://www.michigan.gov/documents/County_Health_Plan_Overview_-

_May_2005_138368_7.pdf. 

Kaiser Family Foundation. State Health Facts. “Medicaid & CHIP.” Accessed 

August 14, 2009. http://www.statehealthfacts.org/comparetable.jsp?ind=235&cat=4. 

Michigan County Health Plan Association. “Goals Objectives and Work Plan.” Accessed August 

14, 2009. 

http://list.msu.edu/cgi-bin/wa?A3=ind0811&L=jmcinfo&P=2615070&E=2&B=------

%3D_NextPart_000_003E_01C944B9.E91759F0&N=Information+about+MCHPA+Pos 

ition.doc&T=application%2Fmsword. 

Michigan Department of Community Health. “Michigan’s Health Care Safety Net Providers: 

Current Capacity and Future Outlook.” February 1, 2006. 

http://www.michigan.gov/documents/SAFETY_NET_White_Paper_149766_7.pdf. 

Michigan Department of Community Health. “Health Care Programs Eligibility.” Accessed 

August 14, 2009. 

http://www.michigan.gov/mdch/0,1607,7-132-2943_4860-35199--,00.html. 

Michigan Health and Hospital Association. “Michigan’s Health Care Safety Net: In Jeopardy.” 

February 2009. 

Michigan House Fiscal Agency. Healthy Michigan Fund FY 2008-09 Appropriations. August 15, 

2008. http://house.michigan.gov/hfa/Summaries/HMF%2009%20enacted.pdf. 

Michigan House Fiscal Agency. Department of Community Health. “FY 2008-09 Appropriation 

Report.” November 2009a. http://house.michigan.gov/hfa/PDFs/dch%20intent2009.pdf. 

Michigan House Fiscal Agency. Department of Community Health. FY 2009-10 Appropriations 

Summary: As Reported from House Appropriations. Accessed August 14, 2009b. 

http://house.michigan.gov/hfa/PDFs/09h4436h1%20passed%20comm.pdf. 

Michigan Surgeon General’s Health Status Report. “Healthy Michigan 2010.” April 8, 2004. 

http://www.michigan.gov/documents/Healthy_Michigan_2010_1_88117_7.pdf. 

National Conference of State Legislatures. “State Programs to Cover the Uninsured.” July 2009. 

http://www.ncsl.org/IssuesResearch/Health/StateHealthProgramsToCoverTheUninsured2 

009/tabid/13878/Default.aspx#id. 

56
 

 

MINNESOTA 

Health insurance reform as currently proposed in both the House Tri-Committee and in the 

Senate HELP Committee would ensure that virtually all Americans receive health insurance. 

This memo explores the likely effects of this reform on the budget of the state of Minnesota and 

its local governments. 

Minnesota and its local governments subsidize individuals to obtain health insurance and provide 

direct services to the uninsured. In addition, the state and local governments indirectly pay for 

uncompensated care through higher insurance premiums for government employees. On each of 

these fronts, the reform would save money for the state and local governments. On the other 

hand, the reform calls for an expansion in Medicaid for all individuals under 133 percent of the 

federal poverty line (FPL). 

Our findings, which we summarize below, indicate that Minnesota and its local governments 

currently spend at least $295 million on care for the uninsured. Because this is a lower bound of 

such expenditures, we estimate that at least that much would be saved by current reform 

proposals. We estimate that the total annual cost of the Medicaid expansion to Minnesota’s 

91,627 low-income uninsured individuals would be $317 million (in 2007 dollars).47 After 

initially sharing none of that cost, Minnesota’s share with a 90 percent FMAP would be $32 

million. Thus health insurance reform would provide a substantial financial benefit to the state of 

Minnesota and its local governments. 

A. Current State and Local Expenditures on Health Care for the Uninsured 

The state and local governments of Minnesota would benefit fiscally from health insurance 

reform because they currently spend money encouraging individuals to become insured, treating 

the uninsured, and providing uncompensated care. Health insurance reform would reduce each of 

these costs, and would have additional financial benefits for Minnesota’s private hospitals and 

other health care providers, which bear heavy costs for providing care to Minnesota’s residents 

who are not insured. These and other uncompensated care costs are passed on to the privately 

insured, including the employees of state and local governments in Minnesota. The following is a 

summary of some of the savings that Minnesota and its local governments could expect from 

health insurance reform. 

•	 General Assistance Medical Care (GAMC): GAMC is a state-funded program which 

covers adults who are not eligible for federal programs. Full medical benefits are provided 

for individuals at or below 75 percent of the FPL, while limited hospital coverage is provided 

to those at or below 175 percent of the FPL. All enrollees must pay co-pays, and individuals 

with incomes above 175 percent of the FPL have a $1,000 hospital deductible (Minnesota 

Department of Human Services, 2009). In fiscal year 2007, the state spent $281 million in 

payments to health care providers for GAMC services (Minnesota House of Representatives, 

2008). It is reasonable to assume that under health insurance reform Minnesota would 

recover a substantial amount of what they currently spend on the GAMC program. Under 

47 The estimated number of low-income uninsured individuals excludes undocumented immigrants, who would not 

be eligible for Medicaid as a result of health insurance reform. 

57
 
 

 

current reform proposals, individuals now enrolled in GAMC with incomes below 133 

percent of the FPL would become eligible for Medicaid, likely at no additional cost to the 

state. Individuals currently enrolled in GAMC with incomes above 133 percent of the FPL 

would be eligible for subsidized health insurance through the national health insurance 

exchange. It would cost the state nothing to insure these individuals. 

•	 Hidden Tax: Minnesota’s hospitals and other health care providers also shoulder much of 

the burden of the state’s uncompensated care.48 Much of this cost is then shifted to those who 

have private health insurance in the form of higher prices for health care services. As a result 

of this uncompensated care, private health insurance premiums are higher than they 

otherwise would be. Health insurance reform would reduce this “hidden tax” that individuals 

with private health insurance pay for uncompensated care for the uninsured. This is of 

particular importance to Minnesota because the state and its local governments help pay for 

health insurance for many of their 280,783 full-time equivalent employees. We estimate that 

the hidden cost of uncompensated care costs the state of Minnesota and its local governments 

$13.6 million a year in the form of higher employee health insurance premiums.49 

Additional savings may come from the Children’s Health Insurance Program (CHIP). The state 

of Minnesota currently spends $38.4 million on CHIP coverage (Kaiser Family Foundation, 

2009) for children in families with incomes up to 275 percent of the FPL (National Conference 

of State Legislatures, 2009). Under the current draft of reform legislation, children in families 

with incomes above 133 percent of the FPL may transition to equivalent, federally-financed 

coverage through the national health insurance exchange, potentially allowing the state to save a 

considerable amount of the costs of this program. However, CEA does not include savings on 

CHIP in bottom line calculations of net state savings from health insurance reform, because 

transitioning children from CHIP to equivalent federal coverage would be subject to approval by 

the Secretary of Health and Human Services, and may not occur in all states. 

The discussion above has highlighted some of the most important examples of state and local 

financing of care for the uninsured, though the list is by no means intended to be comprehensive. 

Instead, it is a lower bound on the savings that state and local governments would realize as a 

result of health insurance reform. Added together, we estimate that Minnesota would see at least 

$295 million in savings in existing programs and in reduced health insurance premiums for state 

and local employees as a result of health insurance reform. 

B. A Snapshot of Health Insurance Coverage for Non-Elderly Residents of Minnesota 

A brief snapshot of insurance coverage in the state helps illustrate the fiscal and coverage impact 

of national health insurance reform. Table 1 shows the insurance status of Minnesota’s nonelderly residents, broken down by poverty status and by age groups. These estimates suggest that 

there are roughly 91,000 uninsured adults and 29,000 uninsured children in Minnesota with 

family incomes below 133 percent of the FPL. 

48 Hospitals in Minnesota incurred $244 million in uncompensated care costs in 2007 (State Health Access Data
 

Assistance Center, 2009). 

49 Based on calculation that 13.5 percent of Minnesota’s employment is in state and local government. 

58
 
 

 

 

Table 1: Total Estimated Non-Elderly Population of Minnesota 

Poverty 

Status Uninsured Private Insurance Medicaid Medicare, VA, or TRICARE 

Adults 

(19-64) 

≥ 133% FPL 220,025 2,409,884 127,643 121,670 

< 133% FPL 91,037 103,563 119,101 41,019 

Children 

(18 and under) 

≥ 133% FPL 38,269 897,050 126,871 18,807 

< 133% FPL 28,801 52,639 150,831 10,087 

Note: Data from the March 2008 CPS. Uninsured individuals report having no form of insurance. See the technical appendix for 

a further discussion of the data used and CEA’s methodology with respect to poverty and insurance status classification. 

Number of observations in the CPS for Minnesota: 2751. 

As the table also shows, the majority (68 percent) of the uninsured in Minnesota have incomes 

above 133 percent of the FPL, and would therefore qualify for health insurance through the 

exchange rather than through Medicaid. The state of Minnesota would not be responsible for any 

of the financing for this group. 

C. Estimated Costs to the State of Minnesota from the Medicaid Expansion 

Table 2 lists the estimated number of legal, non-elderly residents in Minnesota with incomes of 

less than 133 percent of the FPL who would become eligible for Medicaid under the proposed 

legislation. The table also presents the projected costs of extending Medicaid to these 

individuals. These estimates suggest that the total cost of this expansion is approximately $317 

million per year. With an FMAP of 90 percent, the cost to the state would be $32 million. We 

consider a 90 percent FMAP because it is the one scheduled to take effect in 2017 in current 

draft legislation, though we recognize that this could change as the legislation moves forward. 

Table 2: Uninsured, Low-Income, Legal, and Non-Elderly Population of Minnesota 

Number of Legal 

Uninsured Below 

133% FPL 

Cost of 

Medicaid 

Expansion 

($ millions) 

Cost per 

New 

Enrollee 

State 

Population 

Cost to State 

with 90% 

FMAP 

($ millions) 

Adults 

(19-64) 70,447 $252 $3,582 

5,197,621 $32 Children 

(18 and under) 21,180 $65 $3,057 

Note: Data from the March 2008 CPS. Uninsured individuals report having no form of health insurance. See the technical 

appendix for a further discussion of the data used and CEA’s methodology with respect to poverty and insurance status 

classification. These data exclude undocumented residents; estimates come from Passel and are described in the appendix. 

D. Bottom Line for Minnesota 

Table 3 shows the net impact for the Minnesota state budget of health insurance reform. It shows 

the likely cost of Medicaid expansion under three FMAP matching rates – current, 90 percent, 

and 100 percent. It then shows the identifiable savings from reducing uncompensated care. And 

as the following table shows, those savings would more than offset the cost of the Medicaid 

expansion described above even if the current FMAP of 50 percent was used.50 

50 CEA recognizes that not all of the costs from some of these programs will be saved under health insurance reform, 

and thus our calculations are not exact. State and local governments retain the discretion to offer subsidized care 

59
 
 

 

 

Table 3: Financial Impact of Health Insurance Reform on 

State and Local Governments in Minnesota ($ millions) 

Component Current FMAP 90% FMAP 100% FMAP 

Medicaid Expansion -158.5 -31.7 -0.0 

GAMC +281 +281 +281 

Hidden Tax +13.6 +13.6 +13.6 

Net Effect for Minnesota +136.1 +262.9 +294.6 

This table understates the benefits to the state of Minnesota and its local governments for at least 

three additional reasons. First, it does not include savings that would result from reductions in 

other state and local programs not listed above that finance health care for the uninsured. Second, 

it ignores the increase in tax revenue that would result from reform-induced increases in the 

efficiency of the labor market, including a reduction in “job lock.” And finally, it does not 

include the benefits of reductions in health care spending that would result from more 

coordinated care. At present, many individuals transition in and out of health insurance, leading 

to inefficient care delivery including more care in emergency rooms. 

programs to their residents. Additionally, some of the individuals covered by these programs are undocumented 

immigrants who would not obtain health insurance as a result of reform. However, given that these programs 

analyzed here are not exhaustive of all uncompensated care spending in the state, this table is meant to be illustrative 

of a conservative estimate of the potential cost savings Minnesota can expect to see from health insurance reform. 

60 
 

References 

Kaiser Family Foundation. State Health Facts. “Medicaid & CHIP.” Accessed 

August 14, 2009. http://www.statehealthfacts.org/comparetable.jsp?ind=235&cat=4. 

Minnesota Department of Human Services. “General Assistance Medical Care.” Accessed 

August 14, 2009. 

http://www.dhs.state.mn.us/main/idcplg?IdcService=GET_DYNAMIC_CONVERSION 

&RevisionSelectionMethod=LatestReleased&dDocName=id_006257. 

Minnesota House of Representatives. Research Department. “General Assistance Medical Care.” 

October, 2008. http://www.house.leg.state.mn.us/hrd/pubs/gamcib.pdf. 

National Conference of State Legislatures. “State Health Programs to Cover the Uninsured.” July 

2009. 

http://www.ncsl.org/IssuesResearch/Health/StateHealthProgramsToCoverTheUninsured2 

009/tabid/13878/Default.aspx#id. 

State Health Access Data Assistance Center (SHADAC). “Economic Impact on Minnesota’s 

Health Care Delivery System.” February 10, 2009. 

http://www.slideshare.net/soder145/economic- impact-on-minnesotas-health-caredelivery-system 

61
 
 

 

MONTANA 

Health insurance reform as currently proposed in both the House Tri-Committee and in the 

Senate HELP Committee would ensure that virtually all Americans receive health insurance. 

This memo explores the likely effects of this reform on the budget of the state of Montana and its 

local governments. 

Montana and its local governments subsidize individuals to obtain health insurance and provide 

direct services to the uninsured. In addition, the state and local governments indirectly pay for 

uncompensated care through higher insurance premiums for government employees. On each of 

these fronts, the reform would save money for the state and local governments. On the other 

hand, the reform calls for an expansion in Medicaid for all individuals under 133 percent of the 

federal poverty line (FPL). 

Our findings, which we summarize below, indicate that Montana and its local governments 

currently spend at least $30 million on care for the uninsured. Because this is a lower bound of 

such expenditures, we estimate that at least that much would be saved by current reform 

proposals. We estimate that the total annual cost of the Medicaid expansion to Montana’s 56,790 

low-income uninsured individuals would be $208 million (in 2007 dollars).51 After initially 

sharing none of that cost, Montana’s share with a 90 percent FMAP would be $21 million. Thus 

health insurance reform would provide a substantial financial benefit to the state of Montana and 

its local governments. 

A. Current State and Local Expenditures on Health Care for the Uninsured 

The state and local governments of Montana would benefit fiscally from health insurance reform 

because they currently spend money encouraging individuals to become insured, treating the 

uninsured, and providing uncompensated care. Health insurance reform would reduce each of 

these costs, and would have additional financial benefits for Montana’s private hospitals and 

other health care providers, which bear heavy costs for providing care to Montana’s residents 

who are not insured. These and other uncompensated care costs are passed on to the privately 

insured, including the employees of state and local governments in Montana. 

The following is a summary of some of the savings that Montana and its local governments could 

expect from health insurance reform. 

•	 The Montana Comprehensive Health Association (MCHA): MCHA offers policies to 

individuals who cannot obtain insurance due to medical conditions. There is a limitedenrollment premium assistance program for low income individuals. The program is funded 

through state funds from Tobacco Settlement monies and by assessments on insurance 

companies operating in Montana. In FY 2007-2008, state funding was $960,000, while 

assessments totaled $7.4 million (Montana Comprehensive Health Association, 2008). Under 

the proposed legislation, many of the individuals insured through the high risk pool would be 

51 The estimated number of low-income uninsured individuals excludes undocumented immigrants, who would not 

be eligible for Medicaid as a result of health insurance reform. 

62
 
 

able to obtain insurance through the exchange. This would provide some offsetting cost 

savings for the state of Montana. 

•	 The Insure Montana Purchasing Pool: The pool provides premium assistance aimed at 

encouraging small businesses to provide health insurance for their employees. For qualified 

businesses with 2-9 employees, the program subsidizes both the employer’s and employee’s 

portion of the monthly premium for a policy in the pool. Enrollment in the pool is currently 

capped due to funding constraints (Montana State Auditor’s Office, 2009a). In 2007, the 

Montana state legislature allocated $13.1 million in tobacco tax revenue to fund this program 

(Montana Legislative Fiscal Division, 2008). Under health insurance reform, the cost of the 

purchasing pool would be saved. 

•	 Small Business Tax Credit: The Insure Montana Tax Credit provides a tax credit to small 

businesses that provide health insurance to their employers through private insurance. The 

number of businesses that can receive this credit is capped due to funding constraints 

(Montana State Auditor’s Office, 2009b). In 2007, the Montana state legislature allocated 

$8.7 million in tobacco tax revenue to fund this program (Montana Legislative Fiscal 

Division, 2008). Under health insurance reform, the cost of the tax credit would be saved, 

since there would be a national small business tax credit. 

•	 Hidden Tax: Montana’s hospitals and other health care providers also shoulder much of the 

burden of the state’s uncompensated care.52 Much of this cost is then shifted to those who 

have private health insurance in the form of higher prices for health care services. As a result 

of this uncompensated care, private health insurance premiums are higher than they 

otherwise would be. Health insurance reform would reduce this “hidden tax” that individuals 

with private health insurance pay for uncompensated care for the uninsured. This is of 

particular importance to Montana because the state and its local governments help pay for 

health insurance for many of their 55,982 full-time equivalent employees. We estimate that 

the hidden cost of uncompensated care costs the state of Montana and its local governments 

$7.0 million a year in the form of higher employee health insurance premiums.53 

Additional savings may come from the Children’s Health Insurance Program (CHIP). The state 

of Montana currently spends $7.0 million on CHIP coverage for children in families with 

incomes up to 175 percent of the FPL (Kaiser Family Foundation, 2009). Under the current draft 

of reform legislation, children in families with incomes above 133 percent of the FPL may 

transition to equivalent, federally-financed coverage through the national health insurance 

exchange, potentially allowing the state to save a considerable amount of the costs of this 

program. However, CEA does not include savings on CHIP in bottom line calculations of net 

state savings from health insurance reform, because transitioning children from CHIP to 

equivalent federal coverage would be subject to approval by the Secretary of Health and Human 

Services, and may not occur in all states. 

52 Montana’s hospitals incurred $43.7 million in uncompensated care costs in 2008 (Montana Office of Consumer
 

Protection, 2008). 

53 Based on calculation that 14.8 percent of Montana’s employment is in state and local government. 

63
 
 

The discussion above has highlighted some of the most important examples of state and local 

financing of care for the uninsured, though the list is by no means intended to be comprehensive. 

Instead, it is a lower bound on the savings that state and local governments would realize as a 

result of health insurance reform. Added together, we estimate that Montana would see at least 

$30 million in savings in existing programs and in reduced health insurance premiums for state 

and local employees as a result of health insurance reform. 

B. A Snapshot of Health Insurance Coverage for Non-Elderly Residents of Montana 

A brief snapshot of insurance coverage in the state helps illustrate the fiscal and coverage impact 

of national health insurance reform. Table 1 shows the insurance status of Montana’s non-elderly 

residents, broken down by poverty status and by age groups. These estimates suggest that there 

are roughly 44,000 uninsured adults and 13,000 uninsured children in Montana with family 

incomes below 133 percent of the FPL. 

Table 1: Total Estimated Non-Elderly Population of Montana 

Poverty 

Status Uninsured Private Insurance Medicaid Medicare, VA, or TRICARE 

Adults 

(19-64) 

≥ 133% FPL 76,373 358,505 7,861 37,361 

< 133% FPL 43,756 27,658 25,008 18,520 

Children 

(18 and under) 

≥ 133% FPL 20,811 105,834 22,019 1,861 

< 133% FPL 13,034 8,292 46,353 6,207 

Note: Data from the March 2008 CPS. Uninsured individuals report having no form of insurance. See the technical appendix for 

a further discussion of the data used and CEA’s methodology with respect to poverty and insurance status classification. 

Number of observations in the CPS for Montana: 1,111. 

As the table also shows, the majority (63 percent) of the uninsured in Montana have incomes 

above 133 percent of the FPL, and would therefore qualify for health insurance through the 

exchange rather than through Medicaid. The state of Montana would not be responsible for any 

of the financing for this group. 

C. Estimated Costs to the State of Montana from the Medicaid Expansion 

Table 2 lists the estimated number of legal, non-elderly residents in Montana with incomes of 

less than 133 percent of the FPL who would become eligible for Medicaid under the proposed 

legislation. The table also presents the projected costs of extending Medicaid to these 

individuals. These estimates suggest that the total cost of this expansion is approximately $208 

million per year. With an FMAP of 90 percent, the cost to the state would be $21 million. We 

consider a 90 percent FMAP because it is the one scheduled to take effect in 2017 in current 

draft legislation, though we recognize that this could change as the legislation moves forward. 

64
 
 

 

 

Table 2: Uninsured, Low-Income, Legal, and Non-Elderly Population of Montana 

Number of Legal 

Uninsured Below 

133% FPL 

Cost of 

Medicaid 

Expansion 

($ millions) 

Cost per 

New 

Enrollee 

State 

Population 

Cost to State 

with 90% 

FMAP 

($ millions) 

Adults 

(19-64) 42,992 $177 $4,124 

957,861 $21 Children 

(18 and under) 13,034 $31 $2,368 

Note: Data from the March 2008 CPS. Uninsured individuals report having no form of health insurance. See the technical 

appendix for a further discussion of the data used and CEA’s methodology with respect to poverty and insurance status 

classification. These data exclude undocumented residents; estimates come from Passel and are described in the appendix. 

D. Bottom Line for Montana 

Table 3 shows the net impact for the Montana state budget of health insurance reform. It shows 

the likely cost of Medicaid expansion under three FMAP matching rates – current, 90 percent, 

and 100 percent. It then shows the identifiable savings from reducing uncompensated care, 

which would more than offset the cost of the Medicaid expansion described above if a 90 percent 

FMAP were in effect, as is proposed in current draft legislation. Moreover, these savings would 

offset nearly half of the cost even if the current FMAP of 67.42 percent was used.54 

Table 3: Financial Impact of Health Insurance Reform on 

State and Local Governments in Montana ($ millions) 

Component Current FMAP 90% FMAP 100% FMAP 

Medicaid Expansion -67.8 -20.8 -0.0 

MCHA +1.0 +1.0 +1.0 

Insure Montana Purchasing Pool +13.1 +13.1 +13.1 

Small Business Tax Credit +8.7 +8.7 +8.7 

Hidden Tax +7.0 +7.0 +7.0 

Net Effect for Montana -38.0 +9.0 +29.8 

This table understates the benefits to the state of Montana and its local governments for at least 

three additional reasons. First, it does not include savings that would result from reductions in 

other state and local programs not listed above that finance health care for the uninsured. Second, 

it ignores the increase in tax revenue that would result from reform-induced increases in the 

efficiency of the labor market, including a reduction in “job lock.” And finally, it does not 

include the benefits of reductions in health care spending that would result from more 

coordinated care. At present, many individuals transition in and out of health insurance, leading 

to inefficient care delivery including more care in emergency rooms. 

54 CEA recognizes that not all of the costs from some of these programs will be saved under health insurance reform, 

and thus our calculations are not exact. State and local governments retain the discretion to offer subsidized care 

programs to their residents. Additionally, some of the individuals covered by these programs are undocumented 

immigrants who would not obtain health insurance as a result of reform. However, given that these programs 

analyzed here are not exhaustive of all uncompensated care spending in the state, this table is meant to be illustrative 

of a conservative estimate of the potential cost savings Montana can expect to see from health insurance reform. 

65
 
References 

Kaiser Family Foundation. State Health Facts. “Total Chip Expenditures, FY 2008.” August 14, 

2009. http://www.statehealthfacts.org/comparetable.jsp?ind=235&cat=4. 

Montana Comprehensive Health Association. “Annual Report: July 1, 2007 – June 30, 2008.” 

November 2008. http://www.mthealth.org/pdf/annual_report.pdf. 

Montana Legislative Fiscal Division. “Focus on Insure Montana.” October 2008. 

http://leg.mt.gov/content/publications/fiscal/leg_reference/Brochures/Insure_Montana.pdf. 

Montana Office of Consumer Protection. “Montana’s Hospitals: Issues and Facts Related to the 

Charitable Purposes of Our Hospital and the Protection of Montana’s Consumers.” 

December 2008. 

http://www.doj.mt.gov/consumer/consumer/hospital/hospitalreport200812.pdf. 

Montana State Auditor’s Office. “Insure Montana: Purchasing Pool.” Accessed August 14, 

2009a. http://www.insuremontana.org/purchasingpool.asp. 

Montana State Auditor’s Office. “Insure Montana: Tax Credit.” Accessed August 14, 

2009b. http://www.insuremontana.org/taxcredit.asp. 

66
 
 

 

NEBRASKA 

Health insurance reform as currently proposed in both the House Tri-Committee and in the 

Senate HELP Committee would ensure that virtually all Americans receive health insurance. 

This memo explores the likely effects of this reform on the budget of the state of Nebraska and 

its local governments. 

Nebraska and its local governments subsidize individuals to obtain health insurance and provide 

direct services to the uninsured. In addition, the state and local governments indirectly pay for 

uncompensated care through higher insurance premiums for government employees. On each of 

these fronts, the reform would save money for the state and local governments. On the other 

hand, the reform calls for an expansion in Medicaid for all individuals under 133 percent of the 

federal poverty line (FPL). 

Our findings, which we summarize below, indicate that Nebraska and its local governments 

currently spend at least $36 million on care for the uninsured. Because this is a lower bound of 

such expenditures, we estimate that at least that much would be saved by current reform 

proposals. We estimate that the total annual cost of the Medicaid expansion to Nebraska’s 55,345 

low-income uninsured individuals would be $178 million (in 2007 dollars).55 After initially 

sharing none of that cost, Nebraska’s share with a 90 percent FMAP would be $18 million. Thus 

health insurance reform would provide a substantial financial benefit to the state of Nebraska and 

its local governments. 

A. Current State and Local Expenditures on Health Care for the Uninsured 

The state and local governments of Nebraska would benefit fiscally from health insurance reform 

because they currently spend money encouraging individuals to become insured, treating the 

uninsured, and providing uncompensated care. Health insurance reform would reduce each of 

these costs, and would have additional financial benefits for Nebraska’s private hospitals and 

other health care providers, which bear heavy costs for providing care to Nebraska’s residents 

who are not insured. These and other uncompensated care costs are passed on to the privately 

insured, including the employees of state and local governments in Nebraska. 

The following is a summary of some of the savings that Nebraska and its local governments 

could expect from health insurance reform. 

•	 Nebraska’s Comprehensive Health Insurance Pool: The pool provides health insurance 

coverage for high risk individuals that have been turned down for private coverage (National 

Conference of State Legislatures, 2009). The program is funded partially through premiums 

and cost $27 million in 2008 (Nebraska Comprehensive Health Insurance Pool, 2008). Under 

the health insurance reform bill, the individuals insured in the high risk pool could be insured 

through the exchange, and Nebraska would no longer have to fund the pool. These cost 

savings would provide a moderate offset against the additional Medicaid costs. 

55 The estimated number of low-income uninsured individuals excludes undocumented immigrants, who would not 

be eligible for Medicaid as a result of health insurance reform. 

67
 
 

 

•	 Hidden Tax: Nebraska’s hospitals and other health care providers also shoulder much of the 

burden of the state’s uncompensated care. Much of this cost is then shifted to those who have 

private health insurance in the form of higher prices for health care services. As a result of 

this uncompensated care, private health insurance premiums are higher than they otherwise 

would be. Health insurance reform would reduce this “hidden tax” that individuals with 

private health insurance pay for uncompensated care for the uninsured. This is of particular 

importance to Nebraska because the state and its local governments help pay for health 

insurance for many of their 113,600 full-time equivalent employees. We estimate that the 

hidden cost of uncompensated care costs the state of Nebraska and its local governments $8.6 

million a year in the form of higher employee health insurance premiums.56 

Additional savings may come from the Children’s Health Insurance Program (CHIP). The state 

of Nebraska currently spends $14.8 million on CHIP coverage (Kaiser Family Foundation, 2009) 

for children in families with incomes up to 200 percent of the FPL (National Conference of State 

Legislatures, 2009). Under the current draft of reform legislation, children in families with 

incomes above 133 percent of the FPL may transition to equivalent, federally-financed coverage 

through the national health insurance exchange, potentially allowing the state to save a 

considerable amount of the costs of this program. However, CEA does not include savings on 

CHIP in bottom line calculations of net state savings from health insurance reform, because 

transitioning children from CHIP to equivalent federal coverage would be subject to approval by 

the Secretary of Health and Human Services, and may not occur in all states. 

The discussion above has highlighted some of the most important examples of state and local 

financing of care for the uninsured, though the list is by no means intended to be comprehensive. 

Instead, it is a lower bound on the savings that state and local governments would realize as a 

result of health insurance reform. Added together, we estimate that Nebraska would see at least 

$36 million in savings in existing programs and in reduced health insurance premiums for state 

and local employees as a result of health insurance reform. 

B. A Snapshot of Health Insurance Coverage for Non-Elderly Residents of Nebraska 

A brief snapshot of insurance coverage in the state helps illustrate the fiscal and coverage impact 

of national health insurance reform. Table 1 shows the insurance status of Nebraska’s nonelderly residents, broken down by poverty status and by age groups. These estimates suggest that 

there are roughly 52,000 uninsured adults and 15,000 uninsured children in Nebraska with 

family incomes below 133 percent of the FPL. 

56 Based on calculation that 15.2 percent of Nebraska’s employment is in state and local government. 

68
 
 

 

Table 1: Total Estimated Non-Elderly Population of Nebraska 

Poverty 

Status Uninsured Private Insurance Medicaid Medicare, VA, or TRICARE 

Adults 

(19-64) 

≥ 133% FPL 118,018 757,477 10,945 56,271 

< 133% FPL 52,049 48,384 29,602 11,411 

Children 

(18 and under) 

≥ 133% FPL 21,670 296,418 48,339 9,832 

< 133% FPL 15,062 27,236 49,485 741 

Note: Data from the March 2008 CPS. Uninsured individuals report having no form of insurance. See the technical appendix for 

a further discussion of the data used and CEA’s methodology with respect to poverty and insurance status classification. 

Number of observations in CPS for Nebraska: 1,730. 

As the table also shows, the majority (68 percent) of the uninsured in Nebraska have incomes 

above 133 percent of the FPL, and would therefore qualify for health insurance through the 

exchange rather than through Medicaid. The state of Nebraska would not be responsible for any 

of the financing for this group. 

C. Estimated Costs to the State of Nebraska from the Medicaid Expansion 

Table 2 lists the estimated number of legal, non-elderly residents in Nebraska with incomes of 

less than 133 percent of the FPL who would become eligible for Medicaid under the proposed 

legislation. The table also presents the projected costs of extending Medicaid to these 

individuals. These estimates suggest that the total cost of this expansion is approximately $178 

million per year. With an FMAP of 90 percent, the cost to the state would be $18 million. We 

consider a 90 percent FMAP because it is the one scheduled to take effect in 2017 in current 

draft legislation, though we recognize that this could change as the legislation moves forward. 

Table 2: Uninsured, Low-Income, Legal, and Non-Elderly Population of Nebraska 

Number of Legal 

Uninsured Below 

133% FPL 

Cost of 

Medicaid 

Expansion 

($ millions) 

Cost per 

New 

Enrollee 

State 

Population 

Cost to State 

with 90% 

FMAP 

($ millions) 

Adults 

(19-64) 42,694 $149 $3,489 

1,774,571 $18 Children 

(18 and under) 12,651 $29 $2,261 

Note: Data from the March 2008 CPS. Uninsured individuals report having no form of health insurance. See the technical 

appendix for a further discussion of the data used and CEA’s methodology with respect to poverty and insurance status 

classification. These data exclude undocumented residents; estimates come from Passel and are described in the appendix. 

D. Bottom Line for Nebraska 

Table 3 shows the net impact for the Nebraska state budget of health insurance reform. It shows 

the likely cost of Medicaid expansion under three FMAP matching rates – current, 90 percent, 

and 100 percent. It then shows the identifiable savings from reducing uncompensated care. And 

as the following table shows, those savings would more than offset the cost of the Medicaid 

expansion described above if a 90 percent FMAP were in effect, as is proposed in current draft 

69
 
 

 

legislation. Moreover, these other savings would offset half of the cost even if the current FMAP 

of 60.56 percent was used.57 

Table 3: Financial Impact of Health Insurance Reform on 

State and Local Governments in Nebraska ($ millions) 

Component Current FMAP 90% FMAP 100% FMAP 

Medicaid Expansion -70.0 -17.8 -0.0 

Comprehensive HI Pool +27 +27 +27 

Hidden Tax +8.6 +8.6 +8.6 

Net Effect for Nebraska -34.4 +17.8 +35.6 

This table understates the benefits to the state of Nebraska and its local governments for at least 

three additional reasons. First, it does not include savings that would result from reductions in 

other state and local programs not listed above that finance health care for the uninsured. Second, 

it ignores the increase in tax revenue that would result from reform-induced increases in the 

efficiency of the labor market, including a reduction in “job lock.” And finally, it does not 

include the benefits of reductions in health care spending that would result from more 

coordinated care. At present, many individuals transition in and out of health insurance, leading 

to inefficient care delivery including more care in emergency rooms. 

57CEA recognizes that not all of the costs from some of these programs will be saved under health insurance reform, 

and thus our calculations are not exact. State and local governments retain the discretion to offer subsidized care 

programs to their residents. Additionally, some of the individuals covered by these programs are undocumented 

immigrants who would not obtain health insurance as a result of reform. However, given that these programs 

analyzed here are not exhaustive of all uncompensated care spending in the state, this table is meant to be illustrative 

of a conservative estimate of the potential cost savings Nebraska can expect to see from health insurance reform. 

70
 
 

References 

Kaiser Family Foundation. State Health Facts. “Medicaid & CHIP.” Accessed 

August 14, 2009. http://www.statehealthfacts.org/comparetable.jsp?ind=235&cat=4. 

National Conference of State Legislatures. “State Health Programs to Cover the Uninsured.” 

July 2009. 

http://www.ncsl.org/IssuesResearch/Health/StateHealthProgramsToCoverTheUninsured2 

009/tabid/13878/Default.aspx#id. 

Nebraska Comprehensive Health Insurance Pool. “2008 Financial Statements.” December 2008. 

http://www.nechip.com/cb_statements.aspx. 

Nebraska Department of Health and Human Services. Nebraska Medicaid Program: Kids 

Connection. Accessed August 14, 2009. http://www.hhs.state.ne.us/med/kidsconx.htm. 

71
 
 

 

NORTH CAROLINA 

Health insurance reform as currently proposed in both the House Tri-Committee and in the 

Senate HELP Committee would ensure that virtually all Americans receive health insurance. 

This memo explores the likely effects of this reform on the budget of the state of North Carolina 

and its local governments. 

North Carolina and its local governments subsidize individuals to obtain health insurance and 

provide direct services to the uninsured. In addition, the state and local governments indirectly 

pay for uncompensated care through higher insurance premiums for government employees. On 

each of these fronts, the reform would save money for the state and local governments. On the 

other hand, the reform calls for an expansion in Medicaid for all individuals under 133 percent of 

the federal poverty line (FPL). 

Our findings, which we summarize below, indicate that North Carolina and its local governments 

currently spend at least $209 million on care for the uninsured. Because this is a lower bound of 

such expenditures, we estimate that at least that much would be saved by current reform 

proposals. We estimate that the total annual cost of the Medicaid expansion to North Carolina’s 

547,747 low-income uninsured individuals would be $1.88 billion (in 2007 dollars).58 After 

initially sharing none of that cost, North Carolina’s share with a 90 percent FMAP would be 

$188 million. Thus health insurance reform would provide a substantial financial benefit to the 

state of North Carolina and its local governments. 

A. Current State and Local Expenditures on Health Care for the Uninsured 

The state and local governments of North Carolina would benefit fiscally from health insurance 

reform because they currently spend money encouraging individuals to become insured, treating 

the uninsured, and providing uncompensated care. Health insurance reform would reduce each of 

these costs, and would have additional financial benefits for North Carolina’s private hospitals 

and other health care providers, which bear heavy costs for providing care to North Carolina’s 

residents who are not insured. These and other uncompensated care costs are passed on to the 

privately insured, including the employees of state and local governments in North Carolina. The 

following is a summary of some of the savings that North Carolina and its local governments 

could expect from health insurance reform. 

•	 NC HealthNet: This program builds upon existing county indigent care programs, using 

state funding to coordinate free and low-cost health care services and indigent care programs. 

For 2009, the state allocated $2.8 million recurring and $0.95 million non-recurring funds to 

sustain indigent care networks and support new collaborations through HealthNet (North 

Carolina Institute of Medicine, 2008). Much of what North Carolina currently allocates for 

indigent care would be saved under health insurance reform. All individuals below 133 

percent of the FPL would qualify for Medicaid and those above that threshold would be 

eligible to obtain subsidized insurance through the exchange, at no cost to the state. 

58 The estimated number of low-income uninsured individuals excludes undocumented residents, who would not be 

eligible for Medicaid as a result of health insurance reform. 

72
 
•	 Medication Assistance Program: This program assists indigent individuals in obtaining 

access to the pharmaceutical manufacturers’ free drug program. In 2009, the state 

appropriated $2.7 million to this program (North Carolina Office of State Budget and 

Management, 2009a). The state would likely save most of the costs of this program, since 

indigent individuals would obtain prescriptions either through the expanded Medicaid 

program, or through subsidized insurance in the national exchange. 

•	 Inclusive Health [also known as North Carolina Health Insurance Risk Pool 

(NCHIRP)]: The state’s high-risk pool offers coverage to individuals with a qualifying 

medical condition, those who have been denied coverage, offered coverage with restrictions, 

offered coverage at higher rates than the Inclusive Health rate, or have federal eligibility 

under HIPAA or TAA (National Conference of State Legislatures, 2009). Benefits are similar 

to those available in the non-group market, and have annual deductibles starting at $1,000 

and a lifetime maximum of $1,000,000. Premiums are set at 175 percent of the average 

premium that a person with a standard health risk would pay for similar coverage. Premiums 

vary by age, gender, and smoker status (North Carolina Institute of Medicine, 2009). 

Inclusive Health is funded both by premiums and state funding sources. In 2008, Inclusive 

Health received $22.9 million from the state in the form of grants and revenue from premium 

taxes (North Carolina Health Insurance Risk Pool, 2008). North Carolina would save the 

costs of this program under health insurance reform, since the federal government would take 

responsibility for providing a larger, more efficient subsidized pool for low-income 

uninsured individuals in the form of a national health insurance exchange. 

•	 Area Health Education Centers (AHEC) Program: The AHEC program works to meet the 

state’s health and health workforce needs by providing educational programs for healthcare 

professionals in partnership with academic institutions, health care agencies, and other 

organizations. As part of this mission, AHEC supports residency programs in family 

medicine, rural family medicine, internal medicine, obstetrics/gynecology, pediatrics, and 

surgery. These residency programs provide a significant amount of services to the uninsured. 

In 2003-2004, AHEC residency programs provided outpatient services to an estimated 

35,427 uninsured patients (North Carolina Institute of Medicine, 2005). The 2009 state 

budget allocates $50.3 million for this program (North Carolina Office of State Budget and 

Management, 2009b). The state may save some of the costs of this program under health 

insurance reform, since there would be less of a demand for indigent care from these 

residency programs. 

•	 County Indigent Care Spending: Several counties in North Carolina appropriate funds for 

indigent care. In 2009, Charlotte-Mecklenburg County appropriated $20.5 million for 

indigent care (Charlotte-Mecklenburg County North Carolina, 2009). Additionally, in FY 

2006-07 Beaufort County spent $1.6 million funding care for the indigent through the 

Medically Indigent Assistant Act as well as Beaufort-Jasper Comprehensive Health, a 

provider for the underserved in South Carolina (Beaufort County North Carolina, 2006). 

•	 Project Access: The program is a partnership between county government, county 

physicians, county service agencies, hospitals and pharmacists, though which physicians 

provide care to individuals free of charge. Buncombe County appropriated $420,000 to the 

73
 
 

 

program in 2005, while Durham County appropriated $451,000 in 2008 (Buncombe County 

North Carolina, 2005) (Durham County North Carolina, 2008). 

•	 Hospital Indigent Care: State and local governments in North Carolina provide funding for 

indigent care at hospitals. The University of North Carolina (UNC) health care system 

provides substantial levels of primary care and other vital clinical services to the uninsured. 

In 2008, the state allocated $47.4 million to the UNC health care system to help cover 

operating expenses, including those associated with indigent care services (University of 

North Carolina Health Care System, 2008). In addition, Beaufort County allocated $635,000 

in FY 2006-07 to Beaufort Memorial Hospital (Beaufort County North Carolina, 2006). 

Much of what North Carolina currently allocates for indigent care provided by the UNC 

health care system would be saved under health insurance reform. All individuals below 133 

percent of the FPL would qualify for Medicaid and those above that threshold would be 

eligible to obtain subsidized health insurance through the exchange, at no cost to the state. 

•	 Hidden Tax: North Carolina’s hospitals and other health care providers also shoulder much 

of the burden of the state’s uncompensated care.59 Much of this cost is then shifted to those 

who have private health insurance in the form of higher prices for health care services. As a 

result of this uncompensated care, private health insurance premiums are higher than they 

otherwise would be. Health insurance reform would reduce this “hidden tax” that individuals 

with private health insurance pay for uncompensated care for the uninsured. This is of 

particular importance to North Carolina because the state and its local governments help pay 

for health insurance for many of their 542,180 full-time equivalent employees. We estimate 

that the hidden cost of uncompensated care costs the state of North Carolina and its local 

governments $58.6 million a year in the form of higher employee health insurance 

premiums.60 

Additional savings may come from the Children’s Health Insurance Program (CHIP). The state 

of North Carolina currently spends $89.8 million on CHIP coverage for children in families with 

incomes up to 200 percent of the FPL (Kaiser Family Foundation, 2009). Under the current draft 

of reform legislation, children in families with incomes above 133 percent of the FPL may 

transition to equivalent, federally-financed coverage through the national health insurance 

exchange, potentially allowing the state to save a considerable amount of the costs of this 

program. However, CEA does not include savings on CHIP in bottom line calculations of net 

state savings from health insurance reform, because transitioning children from CHIP to 

equivalent federal coverage would be subject to approval by the Secretary of Health and Human 

Services, and may not occur in all states. 

The discussion above has highlighted some of the most important examples of state and local 

financing of care for the uninsured, though the list is by no means intended to be comprehensive. 

Instead, it is a lower bound on the savings that state and local governments would realize as a 

result of health insurance reform. Added together, we estimate that North Carolina would see at 

59 North Carolina’s hospitals incurred $850 million in uncompensated care costs in 2007 (North Carolina Institute of 

Medicine, 2009).

60 Based on calculation that 15.2 percent of North Carolina’s employment is in state and local government.
 

74
 
least $209 million in savings in existing programs and in reduced health insurance premiums for 

state and local employees as a result of health insurance reform. 

B. A Snapshot of Health Insurance Coverage for Non-Elderly Residents of North Carolina 

A brief snapshot of insurance coverage in the state helps illustrate the fiscal and coverage impact 

of national health insurance reform. Table 1 shows the insurance status of North Carolina’s nonelderly residents, broken down by poverty status and by age groups. These estimates suggest that 

there are roughly 473,000 uninsured adults and 191,000 uninsured children in North Carolina 

with family incomes below 133 percent of the FPL. 

As the table also shows, the majority (55 percent) of the uninsured in North Carolina have 

incomes above 133 percent of the FPL, and would therefore qualify for health insurance through 

the exchange rather than through Medicaid. The state of North Carolina would not be responsible 

for any of the financing for this group. 

Table 1: Total Estimated Non-Elderly Population of North Carolina 

Poverty 

Status Uninsured Private Insurance Medicaid Medicare, VA, or TRICARE 

Adults 

(19-64) 

≥ 133% FPL 658,987 3,199,308 119,298 323,583 

< 133% FPL 472,858 300,827 207,156 133,161 

Children 

(18 and under) 

≥ 133% FPL 167,875 1,199,882 207,762 99,644 

< 133% FPL 191,029 139,767 383,813 17,056 

Note: Data from the March 2008 CPS. Uninsured individuals report having no form of insurance. See the technical appendix for 

a further discussion of the data used and CEA’s methodology with respect to poverty and insurance status classification. 

Number of observations in the CPS for North Carolina: 2,243. 

C. Estimated Costs to the State of North Carolina from the Medicaid Expansion 

Table 2 lists the estimated number of legal, non-elderly residents in North Carolina with incomes 

of less than 133 percent of the FPL who would become eligible for Medicaid under the proposed 

legislation. The table also presents the projected costs of extending Medicaid to these 

individuals. These estimates suggest the total cost of this expansion is approximately $1883 

million per year. With an FMAP of 90 percent, the cost to the state would be $188 million. We 

consider a 90 percent FMAP because it is the one scheduled to take effect in 2017 in current 

draft legislation, though we recognize that this could change as the legislation moves forward. 

75
 
 

 

 

 

 

Table 2: Uninsured, Low-Income, Legal, and Non-Elderly Population of North Carolina 

Number of Legal 

Uninsured Below 

133% FPL 

Cost of 

Medicaid 

Expansion 

($ millions) 

Cost per 

New 

Enrollee 

State 

Population 

Cost to State 

with 90% 

FMAP 

($ millions) 

Adults 

(19-64) 385,447 $1,476 $3,829 

9,061,032 $188 Children 

(18 and under) 162,300 $408 $2,512 

Note: Data from the March 2008 CPS. Uninsured individuals report having no form of health insurance. See the technical 

appendix for a further discussion of the data used and CEA’s methodology with respect to poverty and insurance status 

classification. These data exclude undocumented residents; estimates come from Passel and are described in the appendix. 

D. Bottom Line for North Carolina 

Table 3 shows the net impact for the North Carolina state budget of health insurance reform. It 

shows the likely cost of Medicaid expansion under three FMAP matching rates – current, 90 

percent, and 100 percent. It then shows the identifiable savings from reducing uncompensated 

care. And as the following table shows, those savings would more than offset the cost of the 

Medicaid expansion described above if a 90 percent FMAP were in effect, as is proposed in 

current draft legislation. Moreover, these other savings would offset almost one-third of the cost 

even if the current FMAP of 65.13 percent was used.61 

Table 3: Financial Impact of Health Insurance Reform on 

State and Local Governments in North Carolina ($ millions) 

Component Current FMAP 90% FMAP 100% FMAP 

Medicaid Expansion -656.8 -188.3 -0.0 

NC HealthNet +3.8 +3.8 +3.8 

Medication Assistance +2.7 +2.7 +2.7 

NCHIRP +22.9 +22.9 +22.9 

AHEC +50.3 +50.3 +50.3 

County Indigent Care +22.1 +22.1 +22.1 

Project Access +0.9 +0.9 +0.9 

Hospital Indigent Care +48.0 +48.0 +48.0 

Hidden Tax +58.6 +58.6 +58.6 

Net Effect for North Carolina -447.5 +21.0 +209.3 

This table understates the benefits to the state of North Carolina and its local governments for at 

least three additional reasons. First, it does not include savings that would result from reductions 

in other state and local programs not listed above that finance health care for the uninsured. 

Second, it ignores the increase in tax revenue that would result from reform-induced increases in 

the efficiency of the labor market, including a reduction in “job lock.” And finally, it does not 

61 CEA recognizes that not all of the costs from some of these programs will be saved under health insurance reform, 

and thus our calculations are not exact. State and local governments retain the discretion to offer subsidized care 

programs to their residents. Additionally, some of the individuals covered by these programs are undocumented 

immigrants who would not obtain health insurance as a result of reform. However, given that these programs 

analyzed here are not exhaustive of all uncompensated care spending in the state, this table is meant to be illustrative 

of a conservative estimate of the potential cost savings North Carolina can expect to see from health insurance 

reform. 

76
 
include the benefits of reductions in health care spending that would result from more 

coordinated care. At present, many individuals transition in and out of health insurance, leading 

to inefficient care delivery including more care in emergency rooms. 

77
 
References 

Beaufort County, North Carolina. “FY 2006-2007 Beaufort County Budget.” August 10, 2006. 

http://www.sccounties.org/client_resources/services/Research/Budgets/07/BeaufortBudge 

t07.pdf. 

Buncombe County, North Carolina. Office of the County Manager. “Fiscal Year 2005-2006 

Budget Message.” May 17, 2005. 

http://www.buncombecounty.org/common/finance/annualBudget_FY06/04-

Budget_Message.pdf. 

Charlotte-Mecklenburg County, North Carolina. “Fiscal Year 2010 Budget.” Accessed 

September 10, 2009. 

http://www.charmeck.org/NR/rdonlyres/eexoc7uxmrmrwbtnreiubugo7b6ztfj7gsr2wjtpu3j 

ai26vdjdc3absz4c5v6kranqvaamgs32hw6r5atx7isre43e/FY10StrawVoteSpreadsheetFinal 

.pdf. 

Durham County, North Carolina. Board of County Commissioners. “October 13, 2008 Regular 

Session Agenda.” July 28, 2008. 

http://www.co.durham.nc.us/departments/bocc/Agendas/Archives/2008/13oct08--rs.pdf. 

Kaiser Family Foundation. State Health Facts. “Medicaid & CHIP.” Accessed 

August 14, 2009. http://www.statehealthfacts.org/comparetable.jsp?ind=235&cat=4. 

National Conference of State Legislatures. “State Health Programs to Cover the Uninsured.” July 

2009. 

http://www.ncsl.org/IssuesResearch/Health/StateHealthProgramsToCoverTheUninsured2 

009/tabid/13878/Default.aspx#id. 

North Carolina Department of Health and Human Services. “Health Choice.” Accessed August 

14, 2009. http://www.ncdhhs.gov/dma/healthchoice/index.htm. 

North Carolina Health Insurance Risk Pool. “Statement of Financial Positions.” December 31, 

2008. 

http://www.inclusivehealth.org/intranet/downloadManagerControl.php?mode=getFile&el 

ementID=112&atomID=93&type=5. 

North Carolina Institute of Medicine. “North Carolina Healthcare Safety Net Task Force 

Report.” April 2005. 

http://www.nciom.org/projects/SafetyNet/Fullreportwcover_6-18-09.pdf. 

North Carolina Institute of Medicine. 2005 Task Force on the North Carolina Healthcare Safety 

Net Report. “2008 Updates to Recommendations.” 2008. 

http://www.nciom.org/projects/SafetyNet/Safety%20Net%20Update%209_22_08.pdf. 

North Carolina Office of State Budget and Management. The North Carolina State Budget. 

78
 
“Recommended Operating Budget with Performance Management Information: 2009-

2011. Health and Human Services, Volume 3.” March 2009a. 

http://www.osbm.state.nc.us/files/pdf_files/bgt0911v3r.pdf. 

North Carolina Office of State Budget and Management. The North Carolina State Budget. 

“Summary of Recommendations: 2009-2011.” March 2009b. 

http://www.osbm.state.nc.us/new_content/historical_budget_data.pdf. 

79
 
 

 

OREGON 

Health insurance reform as currently proposed in both the House Tri-Committee and in the 

Senate HELP Committee would ensure that virtually all Americans receive health insurance. 

This memo explores the likely effects of this reform on the budget of the state of Oregon and its 

local governments. 

Oregon and its local governments subsidize individuals to obtain health insurance and provide 

direct services to the uninsured. In addition, the state and local governments indirectly pay for 

uncompensated care through higher insurance premiums for government employees. On each of 

these fronts, the reform would save money for the state and local governments. On the other 

hand, the reform calls for an expansion in Medicaid for all individuals under 133 percent of the 

federal poverty line (FPL). 

Our findings, which we summarize below, indicate that Oregon and its local governments 

currently spend at least $138 million on care for the uninsured. Because this is a lower bound of 

such expenditures, we estimate that at least that much would be saved by current reform 

proposals. We estimate that the total annual cost of the Medicaid expansion to Oregon’s 174,531 

low-income uninsured individuals would be $593 million (in 2007 dollars).62 After initially 

sharing none of that cost, Oregon’s share with a 90 percent FMAP would be $59 million. Thus 

health insurance reform would provide a substantial financial benefit to the state of Oregon and 

its local governments. 

A. Current State and Local Expenditures on Health Care for the Uninsured 

The state and local governments of Oregon would benefit fiscally from health insurance reform 

because they currently spend money encouraging individuals to become insured, treating the 

uninsured, and providing uncompensated care. Health insurance reform would reduce each of 

these costs, and would have additional financial benefits for Oregon’s private hospitals and other 

health care providers, which bear heavy costs for providing care to Oregon’s residents who are 

not insured. These and other uncompensated care costs are passed on to the privately insured, 

including the employees of state and local governments in Oregon. The following is a summary 

of some of the savings that Oregon and its local governments could expect from health insurance 

reform. 

In addition to the portion of the costs that would be covered by the federal government, Oregon’s 

state government and local governments would see large offsetting cost savings from state 

insurance programs and local spending on health care. 

•	 The Family Health Insurance Assistance Program (FHIAP): This program provides 

subsidies for adults and children up to 185 percent of the FPL to buy insurance in the private 

market (National Conference of State Legislatures, 2009). Enrollment in the program is 

severely limited; only 6,356 individuals are currently in the program, while 64,638 

individuals are on the waiting list (Oregon Office of Private Health Partnerships, 2009b). The 

62 The estimated number of low-income uninsured individuals excludes undocumented residents, who would not be 

eligible for Medicaid as a result of health insurance reform. 

80
 
subsidies are funded through general funds, and taxes on health providers (such as hospitals). 

Funding for the program, excluding federal funds, is currently about $24 million per year 

(Oregon Office of Private Health Partnerships, 2009a). Under the proposed legislation, the 

individuals in this program could obtain coverage through Medicaid or subsidized coverage 

through the exchange. The state would see offsetting cost savings from the latter group. In 

addition, the exchange would provide subsidized coverage to many of the over 60,000 

individuals on the waiting list for this program, at no extra cost to the state. 

•	 The Oregon Medical Insurance Pool: The pool provides health insurance for individuals 

who have been denied private health insurance or who have moved jobs and lack portability 

of coverage. The pool is funded by premiums and assessments on insurers operating in the 

state of Oregon (Oregon Department of Consumer and Business Services, 2009). In 2008, 

these assessments amounted to $79 million (Oregon Department of Consumer and Business 

Services, 2008). Under the proposed legislation, the individuals in the pool could obtain 

insurance through the exchange; in many cases, the insurance would be subsidized. This 

would result in sizeable offsetting cost savings to the state of Oregon. 

•	 Health Districts: Oregon Health Districts provide funding for local clinics and hospitals in 

Oregon. There are 25 health districts in the state. In FY2006-2007, these districts collected 

$13 million in tax revenues (McGinnis et al., 2007). Reducing the number of patients 

without insurance is likely to have large savings for these local health districts, providing 

moderate offsetting cost savings for the state of Oregon. 

•	 Hidden Tax: Oregon’s hospitals and other health care providers also shoulder much of the 

burden of the state’s uncompensated care. Much of this cost is then shifted to those who 

have private health insurance in the form of higher prices for health care services. As a result 

of this uncompensated care, private health insurance premiums are higher than they 

otherwise would be. Health insurance reform would reduce this “hidden tax” that individuals 

with private health insurance pay for uncompensated care for the uninsured. This is of 

particular importance to Oregon because the state and its local governments help pay for 

health insurance for many of their 190,197 full-time equivalent employees. We estimate that 

the hidden cost of uncompensated care costs the state of Oregon and its local governments 

$22.3 million a year in the form of higher employee health insurance premiums.64 

Additional savings may come from the Children’s Health Insurance Program (CHIP). The state 

of Oregon currently spends $25 million on CHIP coverage for children in families with incomes 

up to 185 percent of the FPL (Kaiser Family Foundation, 2009). Under the current draft of 

reform legislation, children in families with incomes above 133 percent of the FPL may 

transition to equivalent, federally-financed coverage through the national health insurance 

exchange, potentially allowing the state to save a considerable amount of the costs of this 

program. However, CEA does not include savings on CHIP in bottom line calculations of net 

 

63 Oregon’s hospitals incurred $722 million in uncompensated care costs in 2006 (Office for Oregon Health Policy 

and Research). 

64 Based on calculation that 13.6 percent of Oregon’s employment is in state and local government.
 

63

81
 
 

 

state savings from health insurance reform, because transitioning children from CHIP to 

equivalent federal coverage would be subject to approval by the Secretary of Health and Human 

Services, and may not occur in all states. 

The discussion above has highlighted some of the most important examples of state and local 

financing of care for the uninsured, though the list is by no means intended to be comprehensive. 

Instead, it is a lower bound on the savings that state and local governments would realize as a 

result of health insurance reform. Added together, we estimate that Oregon would see at least 

$138 million in savings in existing programs and in reduced health insurance premiums for state 

and local employees as a result of health insurance reform. 

B. A Snapshot of Health Insurance Coverage for Non-Elderly Residents of Oregon 

A brief snapshot of insurance coverage in the state helps illustrate the fiscal and coverage impact 

of national health insurance reform. Table 1 shows the insurance status of Oregon’s non-elderly 

residents, broken down by poverty status and by age groups.65 These estimates suggest that there 

are roughly 169,000 uninsured adults and 60,000 uninsured children in Oregon with family 

incomes below 133 percent of the FPL. 

Table 1: Total Estimated Non-Elderly Population of Oregon 

Poverty 

Status Uninsured Private Insurance Medicaid Medicare, VA, or TRICARE 

Adults 

(19-64) 

≥ 133% FPL 344,672 1,496,088 65,624 77,988 

< 133% FPL 168,512 96,179 85,309 31,713 

Children 

(18 and under) 

≥ 133% FPL 74,055 514,424 98,941 13,260 

< 133% FPL 59,827 45,183 90,887 0 

Note: Data from the March 2008 CPS. Uninsured individuals report having no form of insurance. See the technical appendix for 

a further discussion of the data used and CEA’s methodology with respect to poverty and insurance status classification. 

Number of observations in the CPS for Oregon: 1,592. 

As the table also shows, the majority (65 percent) of the uninsured in Oregon have incomes 

above 133 percent of the FPL, and would therefore qualify for health insurance through the 

exchange rather than through Medicaid. The state of Oregon would not be responsible for any of 

the financing for this group. 

C. Estimated Costs to the State of Oregon from the Medicaid Expansion 

Table 2 lists the estimated number of legal, non-elderly residents in Oregon with incomes of less 

than 133 percent of the FPL who would become eligible for Medicaid under the proposed 

legislation. The table also presents the projected costs of extending Medicaid to these 

individuals. These estimates suggest that the total cost of this expansion is approximately $593 

million per year. With an FMAP of 90 percent, the cost to the state would be $59 million. We 

consider a 90 percent FMAP because it is the one scheduled to take effect in 2017 in current 

draft legislation, though we recognize that this could change as the legislation moves forward. 

65 This table indicates that there were 0 children in Oregon with incomes of less than 133 percent of poverty in the 

Medicare, VA, or TRICARE category. This presumably reflects sampling error, whereby there were no children in 

the March 2008 CPS sample selected from Oregon with these characteristics. 

82
 
 

 

 

Table 2: Uninsured, Low-Income, Legal, and Non-Elderly Population of Oregon 

Number of Legal 

Uninsured Below 

133% FPL 

Cost of 

Medicaid 

Expansion 

($ millions) 

Cost per 

New 

Enrollee 

State 

Population 

Cost to State 

with 90% 

FMAP 

($ millions) 

Adults 

(19-64) 123,570 $504 $4,076 

3,747,455 $59 Children 

(18 and under) 50,961 $90 $1,762 

Note: Data from the March 2008 CPS. Uninsured individuals report having no form of health insurance. See the technical 

appendix for a further discussion of the data used and CEA’s methodology with respect to poverty and insurance status 

classification. These data exclude undocumented residents; estimates come from Passel and are described in the appendix. 

D. Bottom Line for Oregon 

Table 3 shows the net impact for the Oregon state budget of health insurance reform. It shows 

the likely cost of Medicaid expansion under three FMAP matching rates – current, 90 percent, 

and 100 percent. It then shows the identifiable savings from reducing uncompensated care. And 

as the following table shows, those savings would more than offset the cost of the Medicaid 

expansion described above if a 90 percent FMAP were in effect, as is proposed in current draft 

legislation. Moreover, these other savings would offset more than 60 percent of the cost even if 

the current FMAP of 62.74 percent was used.66 

Table 3: Financial Impact of Health Insurance Reform on 

State and Local Governments in Oregon ($ millions) 

Component Current FMAP 90% FMAP 100% FMAP 

Medicaid Expansion -221.1 -59.3 -0.0 

FHIAP +24 +24 +24 

Medical Insurance Pool +79 +79 +79 

Health Districts +13 +13 +13 

Hidden Tax +22.3 +22.3 +22.3 

Net Effect for Oregon -82.8 +79.0 +138.3 

This table understates the benefits to the state of Oregon and its local governments for at least 

three additional reasons. First, it does not include savings that would result from reductions in 

other state and local programs not listed above that finance health care for the uninsured. Second, 

it ignores the increase in tax revenue that would result from reform-induced increases in the 

efficiency of the labor market, including a reduction in “job lock.” And finally, it does not 

include the benefits of reductions in health care spending that would result from more 

coordinated care. At present, many individuals transition in and out of health insurance, leading 

to inefficient care delivery including more care in emergency rooms. 

66CEA recognizes that not all of the costs from some of these programs will be saved under health insurance reform, 

and thus our calculations are not exact. State and local governments retain the discretion to offer subsidized care 

programs to their residents. Additionally, some of the individuals covered by these programs are undocumented 

immigrants who would not obtain health insurance as a result of reform. However, given that these programs 

analyzed here are not exhaustive of all uncompensated care spending in the state, this table is meant to be illustrative 

of a conservative estimate of the potential cost savings Oregon can expect to see from health insurance reform. 

83
 
References 

Kaiser Family Foundation. State Health Facts. “Medicaid & CHIP.” Accessed 

August 14, 2009. http://www.statehealthfacts.org/comparetable.jsp?ind=235&cat=4. 

McGinnis, Paul, S. Howk, and E. Ong. “Health Districts in Oregon.” Oregon Rural Practicebased Research Network and Oregon Office of Rural Health, August 2007. 

http://www.ohsu.edu/ohsuedu/outreach/oregonruralhealth/data/upload/2007-HealthDistrict-White-Paper.pdf. 

National Conference of State Legislatures. “State Health Programs to Cover the Uninsured.” July 

2009. 

http://www.ncsl.org/IssuesResearch/Health/StateHealthProgramsToCoverTheUninsured2 

009/tabid/13878/Default.aspx#id. 

Office for Oregon Health Policy and Research. “Uncompensated Hospital Care in Oregon: 1996 

to 2006.” December 2007. 

http://www.oregon.gov/OHPPR/RSCH/docs/WebUncompensatedCareTrends_1996_200 

6.pdf. 

Oregon Department of Consumer and Business Services. Oregon Medical Insurance Pool. “State 

Pack.” December 2008. http://www.oregon.gov/DCBS/OMIP/docs/omip_stat_pack.pdf. 

Oregon Department of Consumer and Business Services. Oregon Medical Insurance Pool. 

“OMIP frequently asked questions.” September 1, 2009. 

http://www.omip.state.or.us/DCBS/OMIP/faqs.shtml. 

Oregon Office of Private Health Partnerships. “Presentation to the Joint Committee on Ways and 

Means, Subcommittee on Human Services.” April 18, 2009a. 

http://www.oregon.gov/OPHP/docs/ways_means_4_09.pdf. 

Oregon Office of Private Health Partnerships. “FHIAP Snapshot of Program Activity.” August 3, 

2009b. http://www.oregon.gov/OPHP/docs/snapshot/8_3_09.pdf. 

84
 
 

 

PENNSYLVANIA 

Health insurance reform as currently proposed in both the House Tri-Committee and in the 

Senate HELP Committee would ensure that virtually all Americans receive health insurance. 

This memo explores the likely effects of this reform on the budget of the state of Pennsylvania 

and its local governments. 

Pennsylvania and its local governments subsidize individuals to obtain health insurance and 

provide direct services to the uninsured. In addition, the state and local governments indirectly 

pay for uncompensated care through higher insurance premiums for government employees. On 

each of these fronts, the reform would save money for the state and local governments. On the 

other hand, the reform calls for an expansion in Medicaid for all individuals under 133 percent of 

the federal poverty line (FPL). 

Our findings, which we summarize below, indicate that Pennsylvania and its local governments 

currently spend at least $215 million on care for the uninsured. Because this is a lower bound of 

such expenditures, we estimate that at least that much would be saved by current reform 

proposals. We estimate that the total annual cost of the Medicaid expansion to Pennsylvania’s 

422,659 low-income uninsured individuals would be $1.50 billion (in 2007 dollars).67 After 

initially sharing none of that cost, Pennsylvania’s share with a 90 percent FMAP would be $150 

million. Thus health insurance reform would provide a substantial financial benefit to the state of 

Pennsylvania and its local governments. 

A. Current State and Local Expenditures on Health Care for the Uninsured 

The state and local governments of Pennsylvania would benefit fiscally from health insurance 

reform because they currently spend money encouraging individuals to become insured, treating 

the uninsured, and providing uncompensated care. Health insurance reform would reduce each of 

these costs, and would have additional financial benefits for Pennsylvania’s private hospitals and 

other health care providers, which bear heavy costs for providing care to Pennsylvania’s 

residents who are not insured. These and other uncompensated care costs are passed on to the 

privately insured, including the employees of state and local governments in Pennsylvania. 

The following is a summary of some of the savings that Pennsylvania and its local governments 

could expect from health insurance reform. 

•	 adultBasic: This program provides subsidized basic health insurance coverage to uninsured 

legal resident adults with incomes up to 200 percent of the FPL. Although coverage is 

subsidized, there are premium and co-payment requirements for the program. adultBasic is 

funded partially through proceeds from the state’s tobacco settlement, as well as a funding 

agreement with charitable Blue Cross/Blue Shield health insurers. In 2008, the program cost 

$171.8 million (Pennsylvania Insurance Department, 2008). Due to budget constraints, the 

program is limited in size. Enrollees can purchase unsubsidized coverage through the 

program while on the wait list for subsidized coverage (National Conference of State 

67 The estimated number of low-income uninsured individuals excludes undocumented residents, who would not be 

eligible for Medicaid as a result of health insurance reform. 

85
 
 

 

Legislatures, 2009). Currently, over 44,000 individuals are enrolled in the program, and there 

are an additional 289,000 on the wait list (Pennsylvania Insurance Department, 2009). It is 

reasonable to assume that under health insurance reform Pennsylvania would recover a 

substantial amount of what it currently spends on the adultBasic program. Under current 

reform proposals, individuals now enrolled in adultBasic with incomes below 133 percent of 

the FPL would become eligible for Medicaid, likely at no additional cost to the state. 

Individuals currently enrolled in adultBasic with incomes above 133 percent of the FPL 

would be eligible for subsidized health insurance through the national health insurance 

exchange. It would cost the state nothing to insure these individuals. 

•	 Hidden Tax: Pennsylvania’s hospitals and other health care providers also shoulder much of 

the burden of the state’s uncompensated care.68 Much of this cost is then shifted to those who 

have private health insurance in the form of higher prices for health care services. As a result 

of this uncompensated care, private health insurance premiums are higher than they 

otherwise would be. Health insurance reform would reduce this “hidden tax” that individuals 

with private health insurance pay for uncompensated care for the uninsured. This is of 

particular importance to Pennsylvania because the state and its local governments help pay 

for health insurance for many of their 594,225 full-time equivalent employees. We estimate 

that the hidden cost of uncompensated care costs the state of Pennsylvania and its local 

governments $43.1 million a year in the form of higher employee health insurance 

premiums.69 

Additional savings may come from the Children’s Health Insurance Program (CHIP). The state 

of Pennsylvania currently spends $96.8 million on CHIP coverage for children in families with 

incomes up to 300 percent of the FPL (Kaiser Family Foundation, 2009). Under the current draft 

of reform legislation, children in families with incomes above 133 percent of the FPL may 

transition to equivalent, federally-financed coverage through the national health insurance 

exchange, potentially allowing the state to save a considerable amount of the costs of this 

program. However, CEA does not include savings on CHIP in bottom line calculations of net 

state savings from health insurance reform, because transitioning children from CHIP to 

equivalent federal coverage would be subject to approval by the Secretary of Health and Human 

Services, and may not occur in all states. 

The discussion above has highlighted some of the most important examples of state and local 

financing of care for the uninsured, though the list is by no means intended to be comprehensive. 

Instead, it is a lower bound on the savings that state and local governments would realize as a 

result of health insurance reform. Added together, we estimate that Pennsylvania would see at 

least $215 million in savings in existing programs and in reduced health insurance premiums for 

state and local employees as a result of health insurance reform. 

68 Pennsylvania’s hospitals incurred $678 million in uncompensated care costs in 2007 (Pennsylvania Health Care 

Cost Containment Council, 2008). 

69 Based on calculation that 12.2 percent of Pennsylvania’s employment is in state and local government. 

86
 
 

 

B. A Snapshot of Health Insurance Coverage for Non-Elderly Residents of Pennsylvania 

A brief snapshot of insurance coverage in the state helps illustrate the fiscal and coverage impact 

of national health insurance reform. Table 1 shows the insurance status of Pennsylvania’s nonelderly residents, broken down by poverty status and by age groups.70 These estimates suggest 

that there are roughly 312,000 uninsured adults and 140,000 uninsured children in Pennsylvania 

with family incomes below 133 percent of the FPL. 

As the table also shows, the majority (62 percent) of the uninsured in Pennsylvania have incomes 

above 133 percent of the FPL, and would therefore qualify for health insurance through the 

exchange rather than through Medicaid. The state of Pennsylvania would not be responsible for 

any of the financing for this group. 

Table 1: Total Estimated Non-Elderly Population of Pennsylvania 

Poverty 

Status Uninsured Private Insurance Medicaid Medicare, VA, or TRICARE 

Adults 

(19-64) 

≥ 133% FPL 629,206 5,330,566 273,863 260,649 

< 133% FPL 312,157 238,593 327,965 84,686 

Children 

(18 and under) 

≥ 133% FPL 117,613 1,800,210 340,108 22,288 

< 133% FPL 140,411 106,649 396,939 0 

Note: Data from the March 2008 CPS. Uninsured individuals report having no form of insurance. See the technical appendix for 

a further discussion of the data used and CEA’s methodology with respect to poverty and insurance status classification. 

Number of observations in the CPS for Pennsylvania: 3,488. 

C. Estimated Costs to the State of Pennsylvania from the Medicaid Expansion 

Table 2 lists the estimated number of legal, non-elderly residents in Pennsylvania with incomes 

of less than 133 percent of the FPL who would become eligible for Medicaid under the proposed 

legislation. The table also presents the projected costs of extending Medicaid to these 

individuals. These estimates suggest the total cost of this expansion is approximately $1,497 

million per year. With an FMAP of 90 percent, the cost to the state would be $150 million. We 

consider a 90 percent FMAP because it is the one scheduled to take effect in 2017 in current 

draft legislation, though we recognize that this could change as the legislation moves forward. 

70 This table indicates that there were 0 children in Pennsylvania with incomes of less than 133 percent of poverty in 

the Medicare, VA, or TRICARE category. This presumably reflects sampling error, whereby there were no children 

in the March 2008 CPS sample selected from Pennsylvania with these characteristics. 

87
 
 

 

 

 

 

 

Table 2: Uninsured, Low-Income, Legal, and Non-Elderly Population of Pennsylvania 

Number of Legal 

Uninsured Below 

133% FPL 

Cost of 

Medicaid 

Expansion 

($ millions) 

Cost per 

New 

Enrollee 

State 

Population 

Cost to State 

with 90% 

FMAP 

($ millions) 

Adults 

(19-64) 288,463 $1,122 $3,889 

12,432,792 $150 Children 

(18 and under) 134,196 $375 $2,794 

Note: Data from the March 2008 CPS. Uninsured individuals report having no form of health insurance. See the technical 

appendix for a further discussion of the data used and CEA’s methodology with respect to poverty and insurance status 

classification. These data exclude undocumented residents; estimates come from Passel and are described in the appendix. 

D. Bottom Line for Pennsylvania 

Table 3 shows the net impact for the Pennsylvania state budget of health insurance reform. It 

shows the likely cost of Medicaid expansion under three FMAP matching rates – current, 90 

percent, and 100 percent. It then shows the identifiable savings from reducing uncompensated 

care. And as the following table shows, those savings would more than offset the cost of the 

Medicaid expansion described above if a 90 percent FMAP were in effect, as is proposed in 

current draft legislation. Moreover, these other savings would offset almost one-third of the cost 

even if the current FMAP of 54.81 percent was used.71 

Table 3: Financial Impact of Health Insurance Reform on 

State and Local Governments in Pennsylvania ($ millions) 

Component Current FMAP 90% FMAP 100% FMAP 

Medicaid Expansion -676.3 -149.7 -0.0 

adultBasic +171.8 +171.8 +171.8 

Hidden Tax +43.1 +43.1 +43.1 

Net Effect for Pennsylvania -461.4 +65.2 +214.9 

This table understates the benefits to the state of Pennsylvania and its local governments for at 

least three additional reasons. First, it does not include savings that would result from reductions 

in other state and local programs not listed above that finance health care for the uninsured. 

Second, it ignores the increase in tax revenue that would result from reform-induced increases in 

the efficiency of the labor market, including a reduction in “job lock.” And finally, it does not 

include the benefits of reductions in health care spending that would result from more 

coordinated care. At present, many individuals transition in and out of health insurance, leading 

to inefficient care delivery including more care in emergency rooms. 

71 CEA recognizes that not all of the costs from some of these programs will be saved under health insurance reform, 

and thus our calculations are not exact. State and local governments retain the discretion to offer subsidized care 

programs to their residents. Additionally, some of the individuals covered by these programs are undocumented 

immigrants who would not obtain health insurance as a result of reform. However, given that these programs 

analyzed here are not exhaustive of all uncompensated care spending in the state, this table is meant to be illustrative 

of a conservative estimate of the potential cost savings Pennsylvania can expect to see from health insurance reform. 

88
 
References 

Kaiser Family Foundation. State Health Facts. “Medicaid & CHIP.” Accessed 

August 14, 2009. http://www.statehealthfacts.org/comparetable.jsp?ind=235&cat=4. 

National Conference of State Legislatures. “State Health Programs to Cover the Uninsured.” 

July 2009. 

http://www.ncsl.org/IssuesResearch/Health/StateHealthProgramsToCoverTheUninsured2 

009/tabid/13878/Default.aspx#id. 

Pennsylvania Health Care Cost Containment Council. “Statewide Income Margins Increase for 

PA Hospitals.” Financial Analysis 2007 News Release, April 18, 2008. 

http://www.phc4.org/reports/fin/07/nr041808.htm. 

Pennsylvania Insurance Department. “Pennsylvania’s adultBasic Program: 2008 Annual Report 

to the Legislature.” 2008. 

http://www.ins.state.pa.us/ins/lib/ins/chip_ab/adultBasic_Annual_Report_2008_FINAL.p 

df. 

Pennsylvania Insurance Department. “adultBasic: Waiting List Comparison by County.” 

January 26, 2009. 

http://www.ins.state.pa.us/ins/cwp/view.asp?a=1336&Q=543301&PM=1. 

89
 
 

 

VERMONT 

Health insurance reform as currently proposed in both the House Tri-Committee and in the 

Senate HELP Committee would ensure that virtually all Americans receive health insurance. 

This memo explores the likely effects of this reform on the budget of the state of Vermont and its 

local governments. 

Vermont offers uninsured state residents who would not otherwise be eligible for Medicaid a 

combination of subsidized insurance and assistance in paying employer-sponsored health 

insurance premiums. In addition, the state and local governments indirectly pay for 

uncompensated care through higher insurance premiums for government employees. On each of 

these fronts, the reform would save money for the state and local governments. On the other 

hand, the reform calls for an expansion in Medicaid for all individuals under 133 percent of the 

federal poverty line (FPL). 

Our findings, which we summarize below, indicate that Vermont and its local governments 

currently spend at least $20.8 million on care for the uninsured. Because this is a lower bound of 

such expenditures, we estimate that at least that much would be saved by current reform 

proposals. We estimate that the total annual cost of the Medicaid expansion to Vermont’s 22,258 

low-income uninsured individuals would be $68 million (in 2007 dollars).72 After initially 

sharing none of that cost, Vermont’s share with a 90 percent FMAP would be $6.8 million. Thus 

health insurance reform would provide a substantial financial benefit to the state of Vermont and 

its local governments. 

A. Current State and Local Expenditures on Health Care for the Uninsured 

The state and local governments of Vermont would benefit fiscally from health insurance reform 

because they currently spend money encouraging individuals to become insured, treating the 

uninsured, and providing uncompensated care. Health insurance reform would reduce each of 

these costs and would have additional financial benefits for Vermont’s private hospitals and 

other health care providers, which bear heavy costs for providing care to Vermont’s residents 

who are not insured. These and other uncompensated care costs are passed on to the privately 

insured, including the employees of state and local governments in Vermont. 

The following is a summary of some of the savings that Vermont and its local governments could 

expect from health insurance reform. 

•	 Catamount Health: Catamount Health is a health insurance plan, offered in cooperation 

with the state of Vermont, by Blue Cross Blue Shield of Vermont and MVP Health Care. 

Uninsured Vermonters who are not eligible for Medicaid or other state programs and do not 

have reliable access to an employer-sponsored plan can enroll in Catamount Health, and may 

receive state-funded premium assistance if they meet certain qualifications. In state fiscal 

year 2008, Vermont paid a net amount $10.2 million in state funds for Catamount Health 

72 The estimated number of low-income uninsured individuals excludes undocumented residents, who would not be 

eligible for Medicaid as a result of health insurance reform. 

90
 
enrollees, which would be saved after individuals in Catamount Health transitioned to 

federally-funded coverage through the national health insurance exchange. 

•	 Vermont Health Access Plan (VHAP) Expansion Population: Vermont’s Section 1115 

Medicaid waiver allows the state to cover an “expansion population” beyond federallymandated and optional Medicaid eligibles such as low income families with children and 

certain pregnant women. For example, Vermont’s VHAP expansion population includes 

adults with children with incomes between 150 and 185 percent of the FPL (Centers for 

Medicare and Medicaid Services, 2009). In 2008 more than 2,000 Vermont adults were not 

covered by Medicaid in this income bracket (U.S. Department of Commerce, 2009). Based 

on the reported $302 per-member-per-month cost of the VHAP program in 2008 (Office of 

Vermont Health Access), these individuals cost the state approximately $7.3 million to 

cover. After health insurance reform, the individuals in the expansion population would be 

covered by federally-subsidized insurance through the exchange, reducing the need for state 

spending on their care. 

•	 Hidden Tax: Vermont’s hospitals and other health care providers also shoulder much of the 

burden of the state’s uncompensated care. Much of this cost is then shifted to those who have 

private health insurance in the form of higher prices for health care services. As a result of 

this uncompensated care, private health insurance premiums are higher than they otherwise 

would be. Health insurance reform would reduce this “hidden tax” that individuals with 

private health insurance pay for uncompensated care for the uninsured. This is of particular 

importance to Vermont because the state and its local governments help pay for health 

insurance for many of their 48,185 full-time equivalent employees. We estimate that the 

hidden cost of uncompensated care costs the state of Vermont and its local governments $3.3 

million a year in the form of higher employee health insurance premiums. 

Additional savings may come from the Children’s Health Insurance Program (CHIP). The state 

of Vermont currently spends nearly $700,000 on CHIP coverage for children in families with 

incomes up to 300 percent of the FPL (Kaiser Family Foundation, 2009). Under the current draft 

of reform legislation, children in families with incomes above 133 percent of the FPL may 

transition to equivalent, federally-financed coverage through the national health insurance 

exchange, potentially allowing the state to save a considerable amount of the costs of this 

program. However, CEA does not include savings on CHIP in bottom line calculations of net 

state savings from health insurance reform, because transitioning children from CHIP to 

equivalent federal coverage would be subject to approval by the Secretary of Health and Human 

Services, and may not occur in all states. 

The discussion above has highlighted some of the most important examples of state and local 

financing of care for the uninsured, though the list is by no means intended to be comprehensive. 

Instead, it is a lower bound on the savings that state and local governments would realize as a 

result of health insurance reform. Added together, we estimate that Vermont would see at least 

$20.8 million in savings in existing programs and in reduced health insurance premiums for state 

and local employees as a result of health insurance reform. 

91
 
 

 

 

B. A Snapshot of Health Insurance Coverage for Non-Elderly Residents of Vermont 

A brief snapshot of insurance coverage in the state helps illustrate the fiscal and coverage impact 

of national health insurance reform. Table 1 shows the insurance status of Vermont’s non-elderly 

residents during the 2007 calendar year, broken down by poverty status and by age groups.73 

These estimates suggest that there are roughly 14,600 uninsured adults and 7,900 uninsured 

children in Vermont with family incomes below 133 percent of the FPL. 

As the table shows, the majority of uninsured individuals (70 percent) in Vermont has incomes 

above 133 percent of the FPL, and would therefore qualify for health insurance through the 

exchange rather than through Medicaid. The state of Vermont would not be responsible for any 

of the financing for this group. 

Table 1: Total Estimated Non-Elderly Population of Vermont 

Poverty Status Uninsured Private 

Insurance Medicaid Medicare, VA, or TRICARE 

Adults 

(19-64) 

≥ 133% FPL 42,565 254,191 28,302 18,641 

< 133% FPL 14,587 13,631 16,942 6,784 

Children 

(0-18) 

≥ 133% FPL 9,621 69,679 25,387 5,147 

< 133% FPL 7,881 1,202 14,928 0 

Note: Data from the March 2008 CPS. Uninsured individuals report having no form of insurance. See the technical appendix for 

a further discussion of the data used and CEA’s methodology with respect to poverty and insurance status classification. 

Number of observations in the CPS for Vermont: 1,556. 

C. Estimated Costs to the State of Vermont from the Medicaid Expansions 

Table 2 lists the estimated number of legal, non-elderly residents in Vermont with incomes of 

less than 133 percent of the FPL who would become eligible for Medicaid under the proposed 

legislation. The table also presents the projected costs of extending Medicaid to these 

individuals. These estimates suggest that the total cost of this expansion would be $68 million 

per year. With an FMAP of 90 percent, the annual cost to the state would be $6.8 million. We 

consider a 90 percent FMAP because it is the one scheduled to take effect in 2017 in current 

draft legislation, though we recognize that this could change as the legislation moves forward. 

Table 2: Uninsured, Low-Income, Legal, and Non-Elderly Population of Vermont 

Number of Legal 

Uninsured Below 

133% FPL 

Cost of 

Medicaid 

Expansion 

($ millions) 

Cost per 

New 

Enrollee 

State 

Population 

Cost to State 

with 90% 

FMAP 

($ millions) 

Adults 

(19-64) 14,514 49 $3,377 

621,254 $6.8 Children 

(18 and under) 7,744 19 $2,487 

Note: Data from the March 2008 CPS. Uninsured individuals report having no form of health insurance. See the technical 

appendix for a further discussion of the data used and CEA’s methodology with respect to poverty and insurance status 

classification. These data exclude undocumented residents; estimates come from Passel and are described in the appendix. 

73 This table indicates that there were 0 children in Vermont with incomes of less than 133 percent of poverty in the 

Medicare, VA, or TRICARE category. This presumably reflects sampling error, whereby there were no children in 

the March 2008 CPS sample selected from Vermont with these characteristics. 

92 
 

 

D. Bottom Line for Vermont 

Table 3 shows the net impact for the Vermont state budget of health insurance reform. It shows 

the likely cost of the Medicaid expansion under three FMAP matching rates – current, 90 percent 

and 100 percent. It then shows the identifiable savings from reducing uncompensated care. As 

the following table shows, those savings would more than offset the cost of the Medicaid 

expansion described above if a 90 percent FMAP were in effect, as is proposed in current draft 

legislation. Moreover, these other savings would offset nearly 75 percent of the cost even if the 

current FMAP of 58.73 percent was used.74 

Table 3: Financial Impact of Health Insurance Reform on 

State and Local Governments in Vermont ($ millions) 

Component Current FMAP 90% FMAP 100% FMAP 

Medicaid Expansion -28.1 -6.8 0.0 

Catamount Health +10.2 +10.2 +10.2 

VHAP Expansion +7.3 +7.3 +7.3 

Hidden Tax +3.3 +3.3 +3.3 

Net Effect for Vermont -7.3 +14.0 +20.8 

This table likely understates the benefits to the state of Vermont and its local governments for at 

least three additional reasons. First, it does not include savings that would result from reductions 

in other state and local programs not listed above that finance health care for the uninsured. 

Second, it ignores the increase in tax revenue that would result from reform-induced increases in 

the efficiency of the labor market, including a reduction in “job lock.” And finally, it does not 

include the benefits of reductions in health care spending that would result from more 

coordinated care. At present, many individuals transition in and out of health insurance, leading 

to inefficient care delivery including more care in emergency rooms. 

74 CEA recognizes that not all of the costs from some of these programs will be saved under health insurance reform, 

and thus our calculations are not exact. State and local governments retain the discretion to offer subsidized care 

programs to their residents. Additionally, some of the individuals covered by these programs are undocumented 

immigrants who would not obtain health insurance as a result of reform. However, given that the programs analyzed 

here are not exhaustive of all uncompensated care spending in the state, this table is meant to be illustrative of a 

conservative estimate of the potential cost savings Vermont can expect to see from health insurance reform. 

93
 
 

References 

Centers for Medicare and Medicaid Services. “Vermont Global Commitment to Health Section 

1115 Demonstration Fact Sheet.” April 16, 2009. 

http://www.cms.hhs.gov/MedicaidStWaivProgDemoPGI/downloads/Vermont%20Global 

%20Committment%20to%20Healthcare%20Fact%20Sheet.pdf. 

Kaiser Family Foundation. State Health Facts. “Medicaid & CHIP.” Accessed 

August 14, 2009. http://www.statehealthfacts.org/comparetable.jsp?ind=235&cat=4. 

Hadley, Jack, J. Holahan, T. Coughlin, and D. Miller. “Covering the Uninsured in 2008: Current 

Costs, Sources of Payment, and Incremental Costs.” Health Affairs, 2008, 27(5): w399-

w415. 

Office of Vermont Health Access. “Medicaid Budget Document: State Fiscal Year 2009.” 

February 7, 2008. 

http://ovha.vermont.gov/budget-legislative/sfy2009_budget_document_all.pdf. 

State of Vermont. Green Mountain Care. “About Green Mountain Care.” Accessed September 

11, 2009. http://www.greenmountaincare.org/about.html. 

U.S. Department of Commerce. U.S. Census Bureau. Current Population Survey. Annual Social 

and Economic Supplement. 2008. 

Vermont Coalition of Clinics for the Uninsured. “2008 Annual Report.” 2008. 

http://www.vccu.net/2008%20VCCU%20Annual%20Report.pdf. 

94
 
 

 

WYOMING 

Health insurance reform as currently proposed in both the House Tri-Committee and in the 

Senate HELP Committee would ensure that virtually all Americans receive health insurance. 

This memo explores the likely effects of this reform on the budget of the state of Wyoming and 

its local governments. 

Wyoming and its local governments subsidize individuals to obtain health insurance and provide 

direct services to the uninsured. In addition, the state and local governments indirectly pay for 

uncompensated care through higher insurance premiums for government employees. On each of 

these fronts, the reform would save money for the state and local governments. On the other 

hand, the reform calls for an expansion in Medicaid for all individuals under 133 percent of the 

federal poverty line (FPL). 

Our findings, which we summarize below, indicate that Wyoming and its local governments 

currently spend at least $11.4 million on care for the uninsured. Because this is a lower bound of 

such expenditures, we estimate that at least that much would be saved by current reform 

proposals. We estimate that the total annual cost of the Medicaid expansion to Wyoming’s 

25,645 low-income uninsured individuals would be $106 million (in 2007 dollars).75 After 

initially sharing none of that cost, Wyoming’s share with a 90 percent FMAP would be $10.6 

million. Thus health insurance reform would provide a substantial financial benefit to the state of 

Wyoming and its local governments. 

A. Current State and Local Expenditures on Health Care for the Uninsured 

The state and local governments of Wyoming would benefit fiscally from health insurance 

reform because they currently spend money encouraging individuals to become insured, treating 

the uninsured, and providing uncompensated care. Health insurance reform would reduce each of 

these costs, and would have additional financial benefits for Wyoming’s private hospitals and 

other health care providers, which bear heavy costs for providing care to Wyoming’s residents 

who are not insured. Since Wyoming does not spend large amounts on providing health care for 

the uninsured, the main benefits to the state would come through reducing hospital 

uncompensated care costs, which would lower health care costs generally and make it less 

expensive for the state to provide insurance for its employees. These and other uncompensated 

care costs are passed on to the privately insured, including the employees of state and local 

governments in Wyoming. 

The following is a summary of some of the savings that Wyoming and its local governments 

could expect from health insurance reform. 

•	 The Wyoming Health Insurance Pool: The pool provides insurance to individuals who 

have been turned down by private insurers. In 2009, the state contributed $6 million in 

revenue from its general fund to the pool. It is also funded through premiums and 

assessments against insurance companies that operate in Wyoming. In exchange for the 

75 The estimated number of low-income uninsured individuals excludes undocumented residents, who would not be 

eligible for Medicaid as a result of health insurance reform. 

95
 
 

 

insurer assessments, the state grants the insurance companies tax credits. Under the bill, 

individuals could be covered through the exchange, saving Wyoming state general funds as 

well as tax revenue (Wyoming Insurance Department, 2009). 

	 County Indigent Care: Many of Wyoming’s hospitals and other health facilities receive 

funding from county governments to finance uncompensated care. For example, in the 2007-

08 fiscal year, Fremont County allocated $242,000 for indigent care services and in the 2005-

06 fiscal year, Sweetwater County allocated $700,000 (Sweetwater County commissioner 

minutes, 2005, Freemont County Treasurer, 2007). 

	 Hidden Tax: Wyoming’s hospitals and other health care providers also shoulder much of the 

burden of the state’s uncompensated care.76 Much of this cost is then shifted to those who 

have private health insurance in the form of higher prices for health care services. As a result 

of this uncompensated care, private health insurance premiums are higher than they 

otherwise would be. Health insurance reform would reduce this “hidden tax” that individuals 

with private health insurance pay for uncompensated care for the uninsured. This is of 

particular importance to Wyoming because the state and its local governments help pay for 

health insurance for many of their 48,050 full-time equivalent employees. We estimate that 

the hidden cost of uncompensated care costs the state of Wyoming and its local governments 

•

•

$4.5 million a year in the form of higher employee health insurance premiums.77 

Additional savings may come from the Children’s Health Insurance Program (CHIP). The state 

of Wyoming currently spends $4.7 million on CHIP coverage for children in families with 

incomes up to 200 percent of the FPL (Kaiser Family Foundation, 2009). Under the current draft 

of reform legislation, children in families with incomes above 133 percent of the FPL may 

transition to equivalent, federally-financed coverage through the national health insurance 

exchange, potentially allowing the state to save a considerable amount of the costs of this 

program. However, CEA does not include savings on CHIP in bottom line calculations of net 

state savings from health insurance reform, because transitioning children from CHIP to 

equivalent federal coverage would be subject to approval by the Secretary of Health and Human 

Services, and may not occur in all states. 

The discussion above has highlighted some of the most important examples of state and local 

financing of care for the uninsured, though the list is by no means intended to be comprehensive. 

Instead, it is a lower bound on the savings that state and local governments would realize as a 

result of health insurance reform. Added together, we estimate that Wyoming would see at least 

$11.4 million in savings in existing programs and in reduced health insurance premiums for state 

and local employees as a result of health insurance reform. 

B. A Snapshot of Health Insurance Coverage for Non-Elderly Residents of Wyoming 

A brief snapshot of insurance coverage in the state helps illustrate the fiscal and coverage impact 

of national health insurance reform. Table 1 shows the insurance status of Wyoming’s non76 In 2007, Wyoming hospitals provided more than $125 million in uncompensated care (Wyoming Hospital 

Association, 2009). 

77 Based on calculation that 21.6 percent of Wyoming’s employment is in state and local government. 

96
 
 

 

elderly residents, broken down by poverty status and by age groups. These estimates suggest that 

there are roughly 23,000 uninsured adults and 5,000 uninsured children in Wyoming with family 

incomes below 133 percent of the FPL. 

As the table also shows, the majority (61 percent) of the uninsured in Wyoming have incomes 

above 133 percent of the FPL, and would therefore qualify for health insurance through the 

exchange rather than through Medicaid. The state of Wyoming would not be responsible for any 

of the financing for this group. 

Table 1: Total Estimated Non-Elderly Population of Wyoming 

Poverty 

Status Uninsured Private Insurance Medicaid Medicare, VA, or TRICARE 

Adults 

(19-64) 

≥ 133% FPL 34,587 216,340 2,837 17,799 

< 133% FPL 23,025 11,381 8,882 4,947 

Children 

(18 and under) 

≥ 133% FPL 9,854 81,504 12,212 8,077 

< 133% FPL 5,451 4,256 12,007 1,618 

Note: Data from the March 2008 CPS. Uninsured individuals report having no form of insurance. See the technical appendix for 

a further discussion of the data used and CEA’s methodology with respect to poverty and insurance status classification. 

Number of observations in the CPS for Wyoming: 1,470. 

C. Estimated Costs to the State of Wyoming from the Medicaid Expansion 

Table 2 lists the estimated number of legal, non-elderly residents in Wyoming with incomes of 

less than 133 percent of the FPL who would become eligible for Medicaid under the proposed 

legislation. The table also presents the projected costs of extending Medicaid to these 

individuals. These estimates suggest that the total cost of this expansion is approximately $106 

million per year. With an FMAP of 90 percent, the cost to the state would be $10.6 million. We 

consider a 90 percent FMAP because it is the one scheduled to take effect in 2017 in current 

draft legislation, though we recognize that this could change as the legislation moves forward. 

Table 2: Uninsured, Low-Income, Legal, and Non-Elderly Population of Wyoming 

Number of Legal 

Uninsured Below 

133% FPL 

Cost of 

Medicaid 

Expansion 

($ millions) 

Cost per 

New 

Enrollee 

State 

Population 

Cost to State 

with 90% 

FMAP 

($ millions) 

Adults 

(19-64) 20,629 $94 $4,573 

522,830 $10.6 Children 

(18 and under) 5,016 $11 $2,242 

Note: Data from the March 2008 CPS. Uninsured individuals report having no form of health insurance. See the technical 

appendix for a further discussion of the data used and CEA’s methodology with respect to poverty and insurance status 

classification. These data exclude undocumented residents; estimates come from Passel and are described in the appendix. 

D. Bottom Line for Wyoming 

Table 3 shows the net impact for the Wyoming state budget of health insurance reform. It shows 

the likely cost of Medicaid expansion under three FMAP matching rates – current, 90 percent, 

and 100 percent. It then shows the identifiable savings from reducing uncompensated care. And 

as the following table shows, those savings would more than offset the cost of the Medicaid 

97 
 

expansion described above if a 90 percent FMAP were in effect, as is proposed in current draft 

legislation. Moreover, these other savings would offset 22 percent of the cost even if the current 

FMAP of 50 percent was used.78 

Table 3: Financial Impact of Health Insurance Reform on 

State and Local Governments in Wyoming ($ millions) 

Component Current FMAP 90% FMAP 100% FMAP 

Medicaid Expansion -52.8 -10.6 -0.0 

Health Insurance Pool +6 +6 +6 

County Indigent Care +0.9 +0.9 +0.9 

Hidden Tax +4.5 +4.5 +4.5 

Net Effect for Wyoming -41.4 +0.8 +11.4 

This table understates the benefits to the state of Wyoming and its local governments for at least 

three additional reasons. First, it does not include savings that would result from reductions in 

other state and local programs not listed above that finance health care for the uninsured. Second, 

it ignores the increase in tax revenue that would result from reform-induced increases in the 

efficiency of the labor market, including a reduction in “job lock.” And finally, it does not 

include the benefits of reductions in health care spending that would result from more 

coordinated care. At present, many individuals transition in and out of health insurance, leading 

to inefficient care delivery including more care in emergency rooms. 

78 CEA recognizes that not all of the costs from some of these programs will be saved under health insurance reform, 

and thus our calculations are not exact. State and local governments retain the discretion to offer subsidized care 

programs to their residents. Additionally, some of the individuals covered by these programs are undocumented 

immigrants who would not obtain health insurance as a result of reform. However, given that these programs 

analyzed here are not exhaustive of all uncompensated care spending in the state, this table is meant to be illustrative 

of a conservative estimate of the potential cost savings Wyoming can expect to see from health insurance reform. 

98
 
 

References 

Fremont County Treasurer. “Fremont County Adopted Budget: 2007-08.” October 9, 2007. 

http://fremontcountytreasurer.org/info/assets/2008%20Original%20Adopted%20Budget. 

pdf. 

Kaiser Family Foundation. State Health Facts. “Medicaid & CHIP.” Accessed 

August 14, 2009. http://www.statehealthfacts.org/comparecat.jsp?cat=4. 

Sweetwater County Commissioner. “Minutes of the July 5, 2005 meeting.” July 5, 2005. 

http://www.sweet.wy.us/clerk/Commissioinerminutes/2005/2005-07-05.pdf. 

Wyoming Hospital Association. “Admission and Treatment Facts.” Accessed August 14, 2009. 

http://www.wyohospitals.com/_pdf/Hospital%20Facts%20&%20Figures.pdf. 

Wyoming Insurance Department. “2009-2010 Biennium Budget Request.” February 2008. 

http://ai.state.wy.us/budget/pdf/0910BudgetRequest/agency%20044.pdf. 

99