Arkansas, led by popular Democratic Governor Mike Beebe, has done a cost analysis of the Medicaid expansion, finding that it would save the state $372 million. The analysis is weighted toward the fact that the federal government picks up 100% of the costs of the expansion in the first three years, while in later years, down to 90%. Only one year of the 90% match is included in the analysis, and in that year, the expansion costs Arkansas $3.5 million. That’s out of a $4.7 billion budget.

The analysis does a good job of incorporating all the costs and benefits from the expansion. On the cost side, you have (in addition to the eventual cost of the newly eligibles) costs for previously eligible “woodworkers” who sign up for Medicaid because of the added publicity. You also have the increased administrative costs for signing up and managing all these new Medicaid patients, costs that show up in outreach, processing and customer support.

On the benefit side, you have the reduced costs in uncompensated care, with less uninsured in the population; the increase in tax revenue from the stimulative effect of federal dollars, and the shifting of state programs onto Medicaid to take advantage of the federal match.

Kevin Drum looks at this and muses that states will not be able to pass up the offer. With all due respect to Drum, this is a totally foolish view. First of all, no Republican governor will include a line item about increased tax revenue from the stimulative properties of increased federal dollars streaming into the state from the federal match. They don’t believe that government spending aids the economy, period, full stop. So in the hands of a conservative government – and again, Arkansas is governed by a Democrat – that benefit goes away in the analyses.

Furthermore, because of the uncertainty about the “woodworking” effect and additional administrative costs, there is plenty of opportunity for Republican leaders to come up with unsound analyses showing that the Medicaid expansion will bankrupt them. Even in Arkansas’ analysis, they start spending money on the expansion by 2021, when the federal match settles into its 90% level. Conservative analyses will make that small cost look much bigger, and will argue (actually rightly) that this is the really important analysis, since the 90% match is the ceiling over time. Not to mention the fact that they will warn that Congress will cost-shift onto states in future years and take away that 90% match, or reduce it significantly. Arguing logic is not going to work.

And here’s the important point, made by Naureen Khan at the National Journal:

Now that they have a choice, thanks to the Supreme Court, many governors are saying no or delaying a decision when it comes to expanding Medicaid in their states. And while there is broad public support for Medicaid, chances are they won’t suffer political consequences as a result. In fact, it’s the safest path for conservative governors under pressure from the right to reject the new health law […]

Political dynamics and polling suggest the politics of the Medicaid expansion will be a wash. The program is popular—three-quarters of respondents in a CNN poll last year said they opposed reducing the deficit by cutting Medicaid. But a CNN poll last month found the public split on the Supreme Court move on Medicaid; 49 percent agreed with it, 44 percent disagreed, and 6 percent had no opinion. In addition, studies have shown that low-income people turn out much less heavily in elections than people with higher incomes.

It’s just not accurate to say that Republican governors will feel a lot of political pressure to cover poor, largely African-American and Hispanic communities with Medicaid. They may feel pressure from hospitals and various administrators, but the public at large is divided, and Republicans know exactly how to play that divide. This has not hurt a Southern red-state governor in most of US history, and I don’t see why it would now.

David Dayen

David Dayen