The Impact of Obamacare on Nevada's Medicaid Spending

Federal mandates will cost Nevada $5.4 billion in the next decade

Executive Summary

Medicaid is a state-operated program that originally was intended to provide critical medical services for highly vulnerable populations. Although the federal government assumes a large share of its financial cost, Medicaid still accounts for an increasingly significant proportion of Nevada's budget expenditures: More than 12 percent of general fund spending was allocated to Medicaid in fiscal year 2010.

As the number of people eligible for Medicaid has grown, so too has the range of services offered by Nevada's Medicaid program. It now offers benefits comparable to those of the most generous corporate health plans in America, providing comprehensive coverage to 10 percent of the state's population. Medicaid's growth is already crowding out state expenditures on other policy objectives.

The declining ability of taxpayers to support the growing costs of Medicaid is clearly evidenced by Nevada's current structural deficit. The state general fund began to experience negative revenue growth in fiscal year 2009, and projected revenues of $5.34 billion for the 2011-13 budget period are $1.1 billion less than budgeted expenditures of $6.42 billion for the current 2009-11 budget period. Despite this gap, state agencies initially requested a $2 billion increase in spending for the 2011-13 budget cycle, primarily driven by projected growth in Medicaid expenditures.

The Silver State's mounting long-term obligations also present a bleak picture: Official estimates of unfunded pension obligations now top $10.4 billion and even this figure significantly understates the true shortfall because it is based on unduly optimistic actuarial assumptions. In addition, the state's unemployment rate of 13.6 percent — highest in the nation — implies larger entitlement expenditures and slower growth in tax revenues compared to most other states. Serious as Nevada's budget problems already are, the Patient Protection and Affordable Care Act of 2010 — popularly known as Obamacare and hereafter referenced for brevity by the initials ACA — promises to compound them by further increasing the state's future Medicaid spending commitments.

This study estimates ACA's effect on Nevada's Medicaid expenditures. It does so by constructing and comparing state Medicaid spending projections with and without ACA mandates. The resulting detailed assessment shows that Nevada would spend $17.4 billion on Medicaid during the first 10 years (2014 through 2023) of ACA's implementation, which is $5.4 billion (45 percent) more than its projected spending without ACA during the same period. We also compare Nevada's Medicaid spending growth with Medicaid growth in other states — California, Illinois, Oklahoma and Texas

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