Lead author Carter Price, a mathematician at RAND, a non-profit research organization, and colleagues at the University of Pittsburgh Graduate School of Public Health, used the RAND COMPARE microsimulation model to estimate the effect of the federal Affordable Care Act on health insurance coverage in Pennsylvania.
The model found expanded Medicaid would require an additional $53 million in state spending in 2014 but would increase federal revenue to the state by more than $2 billion annually and provide 340,000 residents with health insurance.
The annual cost would rise to $611 million in 2020 as the federal government trimmed its support for the Medicaid expansion, Price said.
"The expansion of Medicaid in Pennsylvania increases healthcare coverage, net federal inflows, economic growth and employment compared to not expanding Medicaid, but requires a net increase in state spending beginning in 2017," Price said in a statement. "Our findings may help policymakers decide whether the benefits are worth the cost."
Federal payments into Pennsylvania for health programs are estimated to be $6 billion in 2014 if Medicaid is expanded and $4 billion without expansion. Because tax payments and other outflows to the federal government from Pennsylvania under the Affordable Care Act would be nearly $5 billion annually in either case, the state receives a net financial benefit only if Medicaid is expanded, Price said.
The federal government would cover 100 percent of the cost of expanded Medicaid in 2014 through 2016, and then gradually decrease support to 90 percent of costs beginning in 2020. The federal government currently pays about 54 percent of the costs for Medicaid in Pennsylvania.
Spending on Medicaid by Pennsylvania would grow whether the program was expanded or not. Without expansion, Medicaid costs are expected to rise $50 million in 2014, growing to $120 million by 2020, the study said.
The study said much of the higher state costs for Medicaid would be offset by new state tax revenue that resulted from the increased spending on healthcare.
However, one benefit of expanded Medicaid would be to lower the amount of uncompensated care provided by the Pennsylvania hospitals -- in 2011, uncompensated care cost hospitals $990 million, Price said.