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Medicaid cures cities' uninsured rate: Study

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Obamacare is going to significantly cut the number of people without health insurance in big cities—but much more so in states that are loosening Medicaid eligibility rules, according to a new study

Cities in states that are expanding Medicaid will also get billions of dollars more in federal spending than their counterparts in nonexpansion states, the study released Thursday by the Urban Institute and the Robert Wood Johnson Foundation noted.

Seven large, diverse cities whose states are expanding Medicaid eligibility are projected to see an average decrease of 57 percent in their overall uninsured rates by 2016, according to the study.

But in seven other big cities, whose states didn't expand eligibility in government-run Medicaid to include nearly all poor adults, the average decrease in the uninsured will be just 30 percent, the research found.

"In states that took advantage of the Affordable Care Act Medicaid expansion, cities saw a dramatic drop in the number of uninsured," said Dr. John Lumpkin, senior vice president at the Robert Wood Johnson Foundation. "Medicaid expansion helped those who needed it the most, low- and moderate-income people.

In Medicaid-expanding Michigan, Detroit is expected to see the biggest drop out of the 14 cities examined, with a 66 percent reduction in its uninsured by 2016—a decrease that reflects the fact that almost two-thirds of the uninsured in the Motor City are poor. Denver will see an estimated 49 percent decrease, the study found.

"Except for Denver, the number of uninsured is expected to be reduced by more than half in every Medicaid expansion city we analyzed," wrote the report's authors, Matthew Buettgens and Jay Dev, referring to Los Angeles; Chicago; Columbus, Ohio; Phoenix; and Seattle, in addition to the aforementioned cities.

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Those decreases in the uninsured rate will come not only from the expansion of Medicaid eligibility, but also from new enrollment in Medicaid from people who were previously eligible under the old rules, as well as from sign-ups in Obamacare private insurance plans via government-run exchanges.

Among the seven big burgs whose states are not expanding Medicaid, the drop in the uninsured rates ranged from a low of 25 percent in Atlanta to 36 percent in Charlotte, North Carolina.

If those seven cities—which also include Houston, Philadelphia, Indianapolis, Miami and Memphis, Tennessee—were in expansion states, they would likely see an average reduction in their uninsured rates of 52 percent, the study found.

Twenty-four states have refused to expand Medicaid so far.

The study also underscores the fact that cities whose states are not expanding Medicaid will get billions of dollars less in new federal health spending than they otherwise would have. The federal government is footing 100 percent of the costs from the newly eligible under Medicaid in the first three years, and 90 percent of the costs thereafter.

For example, Houston will get nearly $10 billion in new federal health spending from 2014 to 2023, primarily as a result of federal subsidies people receive to buy private Obamacare coverage. But the city would get an estimated $16.4 billion during the same time if Texas did expand Medicaid benefits, the study found.

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Conversely, as a result of California's decision to expand Medicaid, Los Angeles over the next 10 years will receive $27 billion in federal spending just for that program alone. LA will get another $3.3 billion in federal and state health spending during that time from Obamacare subsidies and the state's contribution to Medicaid.

But those financial impact findings, which echo past studies about the effect of Medicaid expansion, are not without controversy.

Proponents of Obamacare have argued that state governments are foolish not to expand Medicaid because they are foregoing large sums of federal money. On the other hand, Obamacare opponents criticize using taxpayer funds to expand Medicaid for able-bodied adults, particularly for a program that they say has serious flaws in delivering health care.

Lumpkin, of the Robert Wood Johnson Foundation, said expansion's benefits more than outweigh any arguments against it.

"Philadelphia, for example, is essentially foregoing $8 billion in federal spending over the next few years and that's a huge economic hit, not to mention the impact it has on people who live in Philadelphia who aren't eligible for [Medicaid] insurance and will live sicker and die younger," he said. "There's clear evidence that people with health insurance live healthier lives."

In addition to the health benefits, Lumpkin said the expansion of Medicaid would help alleviate the problem of hospitals not being reimbursed for caring for uninsured poor people. At the same time, he said, the federal funds would offset reduction in payments that hospitals are getting from Medicare reimbursements.

But health-care researcher Joshua Archambault, a senior fellow of the Foundation for Government Accountability, said, "Access to a Medicaid card is not the same as access to health care."

"The recent record of Medicaid in this country has been of poor care and even worse access to care," he said..

He pointed to a recent Boston Herald opinion piece, which noted problems that have resulted in Massachusetts after it placed more than a quarter-million people on temporary Medicaid coverage because of serious problems in its Obamacare private insurance exchange.

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A woman quoted in that article said that a skin-condition medication that cost her $150 per month under her prior private insurance plan is not covered by the state's Medicaid program at all, and would now cost her $1,000 per month—which she is unable to pay.

The Urban Institute/Robert Wood Johnson Foundation study comes at a time of continued debate over the wisdom of expanding Medicaid.

The nationwide expansion was an integral part of the Affordable Care Act when it was passed into law.

It was meant to cover adults who earn up to $16,105 per year—138 percent of the federal poverty line—many of whom were not previously eligible in states that either limited Medicaid to adults with dependent children, or who had lower income caps than that amount.

The 2012 Supreme Court decision upholding the legality of the ACA also found that the federal government could not force Medicaid expansion on the states. The ruling left it up to individual states to decide whether to expand Medicaid.

—By CNBC's Dan Mangan

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