New CEA Report: Impact of Health Reform on State and Local Governments

September 29, 2009:  The President's Council of Economic Advisors (CEA) has released a new report detailing the likely financial impact of federal health insurance reform on governments at the state and local level.  The authors of the report acknowledge widespread concern that the current reform proposals could lead to burdensome increases in state Medicaid expenditures.  However, the report goes on to make the case that, in reality, state budgets will likely benefit from federal health insurance reform.

Through a detailed analysis of health spending in a sample of 16 states, the report maintains that federal reform, as currently proposed, would positively impact state budgets in three ways:

1. The proposals would provide Medicaid coverage--which would be primarily federally-funded--for low-income uninsured citizens and legal residents, who currently account for billions of dollars of state spending on uncompensated care.

2. Individuals who currently rely on state-funded insurance programs (like Dirigo Health in Maine or Catamount Health in Vermont) would become eligible for subsidized health insurance through an insurance exchange, at no expense to states.

3. By significantly reducing uncompensated care, health reform would also reduce the "hidden tax" that this care currently imposes on insurance premiums paid by the insured and their employers. Reducing this tax would greatly benefit state and local governments, who employ some 19.4 million workers.  

To view the full CEA report, "The Impact of Health Insurance Reform on State and Local Governments," click here.