States Waiting to Decide on Medicaid Expansion

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Majority of states appear to be waiting until after next week’s election.

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The U.S. Supreme Court’s controversial ruling on the constitutionality of President Obama’s health care reform may reduce the number of new Medicaid enrollees by as many as six million people, according to Congressional Budget Office (CBO) estimates. With over half of all states still undecided, however, the final number of new enrollees may depend on the results of political debates that are now being waged on the campaign trail and in state capitals around the United States.

The Patient Protection and Affordable Care Act (ACA) mandated a Medicaid expansion that the law’s supporters intended would widen Medicaid and CHIP coverage to up to seventeen million more people by 2022. The Supreme Court ruled, however, that the federal government could not compel states to expand Medicaid by withholding federal money to existing programs. With individual states now having the power to opt out of Medicaid expansion due to the Supreme Court’s decision, the CBO has estimated that the likely number of new enrollees will drop from seventeen million to eleven million in 2022.

Currently, twelve states and the District of Columbia have indicated that they will participate in the expansion, and six states have declined to participate. Thirty-two states have yet to make a clear commitment either way.

Much of the substantive debate in states has focused on the budgetary implications of the expansion. If a state opts into the ACA’s Medicaid expansion, the state will be required to expand Medicaid eligibility to 133% of the federal poverty level starting in 2014. This level may be far above current Medicaid eligibility levels for some states.

States generally pay a certain percentage of Medicaid costs, but the federal government would cover 100% of costs of Medicaid expansion for the first three years, and thereafter it would gradually scale back support to 90% by 2020, at which point support would remain at the same percentage for subsequent years. This plan means that states would have to pay a small percentage of the costs of providing coverage to additional people during the first decade the expansion, but would have to shoulder more of the burden after that.

Several Republican governors — including Rick Scott of Florida and Rick Perry of Texas — have claimed that the expansion would hurt their states financially by costing billions of dollars.

However, proponents of Medicaid expansion point to a report from the White House’s Council of Economic Advisers in 2009 that found that state governments might actually save money because of the Medicaid expansion. Besides getting large federal subsidies, states would no longer have to pay for as much uncompensated emergency care. Further, hospitals would no longer have to absorb as much costs for uncompensated care, which can drive up the price of care for all other payers, including state Medicaid programs. A report from the Urban Institute estimates that states would save a total of up to $129 billion by opting into the Medicaid expansion.

In accepting Medicaid expansion, many Democratic governors have focused on its impact on the uninsured rather than its purported budgetary benefits. When Connecticut Governor Dannel Malloy announced his support for the expansion in June, he said that 500,000 additional people would gain coverage in his state after the Medicaid expansion and other ACA insurance reforms took effect. Other governors who have supported the expansion have made similar statements.

Proponents for expansion also point to a recent research paper published in the New England Journal of Medicine which found that the Medicaid expansions that took place in Arizona, Maine, and New York between 2001 and 2002 saved 2,840 deaths for every 500,000 adults covered, corresponding to a 6.1% reduction in the relative risk of death among adults.

Still, even a few Democratic governors have expressed concern about the financial impact of expansion. In September, for example, Arkansas Governor Mike Beebe, a Democrat, announced his tentative support of the Medicaid expansion only after he was given assurances that he could fully opt-out of the program if it proved too expensive.

It is unclear to what extent state decisions will be made based on political considerations instead of cost-benefit evaluations. Notably, nearly all states that have pledged to participate in the Medicaid expansion have a Democratic executive branch, with only one being run by an independent. So far, Republican executives lead all of the states publicly rejecting the expansion. Further, nearly all eighteen states that made their Medicaid expansion positions clear did so within a week of the Supreme Court decision. Only one state has announced its intentions since that time.

Federal health administration officials have said that there is no deadline for states to accept the Medicaid expansion. Many states still on the fence have governors who appear to be waiting until after the November election to make a decision. Republican presidential candidate Mitt Romney has signaled that he would work to repeal the ACA if elected, so some governors may be waiting to see if the election indicates what the people want in terms of health care reform and Medicaid expansion.