Georgia Medicaid Expansion – Woodwork Effect

Even if Georgia decides not to expand Medicaid eligibility, the state could be facing a $385 million annual increase in Medicaid costs. This comes on the heels of the provider fee increase this year that raised $689 million to fill a shortfall in the Medicaid program.

The Georgia Department of Community Health (DCH) projects that ObamaCare will cost Georgia taxpayers $225 million in FY 2015. This includes the cost of individuals who are currently eligible for Medicaid but not enrolled signing up for coverage due to the “woodwork effect” — literally thousands of new Medicaid enrollees “coming out of the woodwork” to sign up for Medicaid.

The Urban Institute estimates there are 159,000 adult, low-income Georgians who are eligible for Medicaid but not enrolled. The DCH projections assume less than 25,000 of these Georgians will sign up for Medicaid. But what if they are wrong? Millions of dollars are being spent around the nation to encourage individuals to sign up for health insurance. If the number is closer to 75 percent, that’s over 100,000 new enrollees.

This doesn’t include the 18 percent of eligible children who CMS estimates are not enrolled in Medicaid or PeachCare.

Why does this matter? The federal government has offered to pick up 100 percent of the cost of newly eligible enrollees, but Georgia will still have to pay roughly one-third of the cost of every currently eligible enrollee. Based on an 75 percent sign-up rate and the DCH cost estimates, that would be an additional cost of $160 million in state dollars a year. The current $225 million cost projection plus the additional $160 million is a total of $385 million in additional annual Medicaid spending that the state must fund even if it declines to expand Medicaid eligibility.