How does Health Reform Affect States

The CBO has estimated that the cost will greatly exceed $140 million per year, here (pages 15-16). What about the bill is going to cost them so much money?

One provision that has the potential to have a big effect on states is the formation of high risk pools. Many of the details of the high risk pool such as cost to those insured have yet to be determined. However, many specifics are already known.

The high risks pools will be in place until 2014 when insurance companies can no longer deny health insurance to those with pre-existing conditions. The federal government will provide $5 billion in funding but the program will be run by the states. It is not currently known if the $5 billion will last until 2014. (It works out to be an average of $25 million per state per year.) Any amount in excess of that allocated by the federal government will have to be made up by the states.

The other danger to states comes in the form of Medicare. The legislation significantly cuts funding to Medicare. If significant improvements are not realized in the delivery of health care then states will have to make up the funding difference.

It should be noted that there is no guarantee of these costs to states. If the high risk pool is not over-utilized and significant improvement are quickly made in the delivery of health care, then states could even save money. It is the opinion of the CBO ( who did a cost analysis of the legislation) that this is not the case and that states will end up losing a lot of money due to this legislation.