First Focus released a brief projecting that, even in the worst possible scenario, state savings under health reform will outweigh the law’s costs.  The authors estimate that, between 2014 and 2019, health care reform will yield cumulative state savings ranging from $40.6 billion to $131.6 billion.  The authors conclude that health reform will reduce costs for states, and that state officials can generate the most savings by reconfiguring their health programs to operate effectively under the law.

From the report:

The Patient Protection and Affordable Care Act (Affordable Care Act or ACA) will affect state budgets in many ways. State Medicaid spending on low-income adults will rise, for two reasons. First, the Affordable Care Act is expected to increase enrollment among individuals who currently qualify but have not yet signed up for Medicaid, enrollment for which states must pay their standard share of Medicaid expenses. Second, the legislation requires Medicaid to cover all adults with incomes at or below 133 percent of the federal poverty level (FPL). While the federal government will pay 100 percent of all health care costs for newly eligible adults during 2014- 2016, states will begin paying some of these costs in 2017, with the state share gradually rising to 10 percent in 2020 and thereafter. Taking into account both of these factors, prior analyses by the Urban Institute have concluded that, depending on whether participation levels resemble historical averages, as anticipated by the Congressional Budget Office, or significantly exceed those levels, state costs for Medicaid adults with incomes at or below 133 percent of FPL will rise by between $21.1 billion and $43.2 billion during 2014-2019.

Full Report: Net Effects of the Affordable Care Act on State Budgets (PDF | 1.1 MB)

First Focus. (2010). Net effects of the Affordable Care Act on state budgets. Dorn, S and Buettgens, M.