Those advocating to scale back Kentucky’s highly-successful Medicaid expansion cite a concern about its cost to the state. One way to help buffer costs would be to raise the minimum wage in Kentucky to $10.10 per hour, which would reduce the state’s spending on Medicaid by an estimated $34 million each year according to research by the Center for American Progress.
An increase of the minimum wage to $10.10 would directly impact an estimated 304,000 Kentucky workers, 16,700 of whom would see their earnings increase to the point that they would qualify for healthcare coverage under the Medicaid expansion and move off of traditional Medicaid. Since the state pays a bigger share of traditional Medicaid than it does for the Medicaid expansion, this shift would save us money: about two percent of Kentucky’s traditional Medicaid spending according to Rachel West, a senior policy analyst with the Center for American Progress. Some of these savings will already be realized because both Lexington and Louisville are in the process of raising each city’s minimum wage to $10.10 and $9.00 respectively.
In 2013, Kentucky accepted a federally-funded increase in eligibility for Medicaid as part of the Affordable Care Act. The state pays for 29 percent of traditional Medicaid spending, which only applies to people who meet several family and work requirements and earn up to 62 percent of the federal poverty level. However, the Medicaid expansion is paid for entirely by the federal government initially—with that share dropping to 90 percent by 2020—and covers everyone up to 138 percent of the federal poverty level.
A bill to raise the state-wide minimum wage has passed the House for the last several years but stalled in the Senate. An increase to $10.10 would affect more than 1 in 4 workers in the state and result in an increase of 1,400 jobs and $420.8 million in economic activity, according to one study. There is also evidence that minimum wage increases help reduce poverty.
Raising the minimum wage in Kentucky would also save federal and state money now spent on other social programs. For example, the Center for American Progress estimates that spending in Kentucky on Supplemental Nutrition Assistance Program benefits (commonly known as food stamps) would drop $97.3 million because people would earn enough to phase out of the program.
With both Louisville and Lexington having recently increased their local minimum wages, an estimated 76,300, or 1 in 4 low-wage Kentucky workers will see their hourly wages tick up. Savings at the state level on Medicaid spending is only one of many benefits Kentucky will see from these changes; expanding this to the whole state would only scale up those benefits.