Congressional Digest

    Medicaid Expansion: The New Health Care Debate

By , Editor,
October 18, 2012

A main goal of the Patient Protection and Affordable Care Act (ACA), President Obama’s health care reform legislation, was to extend health care insurance coverage to most uninsured Americans ― an estimated 30 million people. One way it does that for low-income people is by expanding eligibility for Medicaid, a Federal–State program that now covers more than 60 million Americans. It’s estimated that an additional 7 million would be covered through the expansion.

The ACA provides that, effective January 1, 2014, Medicaid will be expanded to include individuals age 19 to 65 with incomes up to 133 percent of the Federal Poverty Level —  about $14,865 for one person in 2012. (In most States, low-income adults who are not disabled, pregnant, or parents of dependent children do not currently qualify for Medicaid coverage.) The Federal Government will pay the full cost of Medicaid expansion for the first two years. After that, the Federal share will be reduced to 95 percent in 2017, 94 percent in 2018, and 93 percent in 2020. In future decades, States will cover 10 percent.

Originally, the law provided that the Federal Government could take away a State’s Medicaid funding if the State refused to go along with the expansion, but the U.S. Supreme Court’s June 2012 decision on the ACA changed the equation. Although the Court largely upheld the constitutionality of the health care reform law, the majority of the justices determined that the Federal Government could not withhold Medicaid funding from States that declined to expand eligibility for the program.

Shortly after the ruling, seven Republican governors said that they would reject the money to expand Medicaid rolls in their States, and many more have said no since then. The States do not face a deadline for making a decision, and those that initially choose not to participate will be able to drop the coverage later.

Governors who are rejecting the coverage say that they are doing so on principle because they don’t want the Federal Government to grow. In addition, Medicaid takes a large bite out of State budgets, and the governors don’t want to pay more for it, even though that would only happen gradually down the road. For some Republican State leaders, declining to participate is a way of signaling their opposition to the Affordable Care Act.

Supporters of the expansion see it as a substantial boon to the States, providing them with additional revenue that could create more tax income. They also point to public health studies showing that expanding Medicaid eligibility leads to improved health outcomes.

Some governors are taking a wait-and-see approach, and much depends on the results of the General Election and whether national Republican leaders will act on their threat to “repeal Obamacare.” Realistically, however, the law is already in effect and congressional Democrats might be able to thwart any attempts to repeal it.

One likely outcome of the Supreme Court’s ruling is that the Medicaid portion of the health care law will cost less. New projections by the Congressional Budget Office are that the coverage provisions will cost an estimated $1.168 trillion over the next decade, compared with the $1.252 trillion estimate released in March. CBO has estimated that the law as a whole will reduce the Federal deficit.



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