A new report from actuarial consulting firm Milliman, Inc. shows a provision of the health reform law intended to tax health insurance companies to help fund coverage expansions will be paid entirely by state Medicaid programs for the portion assessed to Medicaid managed care organizations.

The cost to states is greater than previously thought, with one-sixth of the total fee being paid by Medicaid health plans, the report concludes. That fee, along with additional taxes paid due to the non-deductibility of the fee, will be entirely passed along to state Medicaid programs, costing $38.4 billion over the 10-year period 2014-2023, according to conservative moderate growth scenarios. This will cost the states themselves about $13.6 billion and the federal government about $24.8 billion due to the state-federal Medicaid matching formula.

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