TJC Blog

$10 Billion and Counting

April 12, 2021 // Gordon Bonnyman

In January 2014, the Affordable Care Act made federal funding available to each state to enable them to expand their Medicaid programs to cover their low wage working citizens. For the first two years, the ACA covered 100% of the cost. Federal funding gradually declined over the next 5 years to 90% of the cost, where it remains permanently. Most states immediately accepted the money and expanded coverage. Several of the remaining states have joined in the intervening years, and no state that expanded has reversed its decision. A majority of states that are run by Republican elected officials have now expanded their Medicaid program, and in every Republican state where Medicaid expansion has been on the ballot, voters have approved expansion.  

Tennessee is now one of only 12 states that have not expanded Medicaid. Former Governor Bill Haslam proposed a plan in 2015 in which Tennessee hospitals agreed to pay the state’s share of the costs, so that expansion would be free to Tennessee taxpayers. However, the Tennessee General Assembly rejected the proposal and continues to bar expansion of Tennessee’s Medicaid program, known as TennCare.  

How much federal funding has Tennessee lost by refusing to expand Medicaid?

The TennCare Division and the Fiscal Review Committee of the General Assembly estimated that, with expansion of TennCare, 300,000 Tennesseans would gain health coverage and the state would receive $1.4 billion annually in federal funding. As of April, at the end of the first calendar quarter of 2021, the amount of federal health funding that Tennessee has lost by refusing to expand Medicaid already exceeds $10.15 billion.  

That figure, calculated by simply multiplying $1.4 billion by 7.25 years, doesn’t capture the total value of dollars lost, because it fails to include inflation over the period, or the effects of compounded interest. It also fails to take into account the broader economic impact the funds would have had as they circulated through the state economy and generated state and local taxes. But it is a round number that conveys the magnitude of the harm. 

The cost of Tennessee’s refusal to expand coverage continues to climb at more than $3.8 million per day. 

UPDATE: The American Rescue Plan Act, signed into law March 11, 2021, increases the incentive for states to expand Medicaid. The Act would pay Tennessee an additional $900 million over two years ($1.2 million per day) over and above the cost of expanding coverage. This money remains available to the state whenever it decides to expand TennCare.