LANSING – A preliminary look at the potential fiscal impact on the state from the newly enacted national health care law suggests the state could see some early savings as the federal government picks up expanded Medicaid match rates, the Senate Fiscal Agency said, but with time those savings could vanish.

The study cautiously pointed out that its findings are preliminary given the enormity and complicated nature of the law, and also warns that with time aspects of the law will change and that would alter the overall fiscal effect on the state and local government.

But preliminarily the state could see some savings from the expansion of Medicaid eligibility to individuals and families with incomes of up to 133 percent of the federal poverty level.

Initially, the federal government will pick up 100 percent of the cost of that expansion once it takes place beginning in 2014, the study said. With time, the federal government will peel back its funding to 90 percent of that expansion, which long term could cost the state as much as $200 million.

However, the state could also see savings in the short term of $144 million because of the impact the Medicaid expansion would have on community mental health services. Now, many people getting services under that program exceed Medicaid eligibility guidelines, but under the expansion could fall under those guidelines. In those cases, the federal government could pick up much of the cost of providing services to those persons, the study said.

The law also requires the state to increase its payments to physicians for Medicaid coverage, but at least initially that too will be covered by federal funding.

The law eventually drops that federal increased match for the increased payments, but also allows the state to pull back on the increase. If the state decided not to reduce the payments, then it would have to cover that increased cost.

Increased Medicaid eligibility could also result in savings to the state under the MI-Child program of perhaps $12 million.

And because the federal government is expanding requirements on lowered costs on Medicaid-related prescriptions, the state could save $25 million, but that, the study said, might actually result in increased costs for the state. The state was now expecting Medicaid drug savings of $32 million, and the changes would affect assumed managed care savings.

A number of changes in long-term care could also cost the state more money, the study said.

The law also limits the state’s ability to seek savings in other areas by eliminating some coverages for Medicaid eligible adults because the federal government is going to pick the costs of the expanded Medicaid eligibility, the study said.

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