Besides essentially upholding the entire Affordable Care Act, the most important news coming out of the Supreme Court decision is that it limited how the federal government can implement the Medicaid expansion. The law would provide money for states to expand Medicaid for everyone up to 138 percent of the Federal poverty level (FPL). This could have huge policy implications given that the Medicaid expansion is supposed to be responsible for roughly half of the law’s coverage expansion.
The Court concluded that the federal government can’t force states to take part in the Medicaid expansion by threatening to end their current Medicaid funding if they don’t. As a result, states will get a genuine “choice,” they can keep their Medicaid program as is or expand it in 2014 to cover more people. From the opinion syllabus:
The threatened loss of over 10 percent of a State’s overall budget is economic dragooning that leaves the States with no real option but to acquiesce in the Medicaid expansion. The Government claims that the expansion is properly viewed as only a modification of the existing program, and that this modification is permissible because Congress reserved the “right to alter, amend, or repeal any provision” of Medicaid. §1304. But the expansion accomplishes a shift in kind, not merely degree.
The constitutional violation is fully remedied by precluding the Secretary from applying §1396c to withdraw existing Medicaid funds for failure to comply with the requirements set out in the expansion. See §1303. The other provisions of the Affordable Care Act are not affected. Congress would have wanted the rest of the Act to stand, had it known that States would have a genuine choice whether to participate in the Medicaid expansion.
The Medicaid expansion can be seen as a “good” deal for the states because the federal government will cover the majority, but not all the costs, of expanding the program. It will still cost the states a significant amount to implement. From a policy perspective it would still be a good deal to accept the money, but what is best policy is rarely the guiding principle in our government.
There is a lot of Republican and popular opposition to Obamacare. It is very conceivable that some red states may decide to not expand Medicaid, at least in part, as a political statement and to also keep state spending low. Given that most people who would qualify for Medicaid expansion tend to live in red states, this move by states could result in the law covering millions fewer than it was supposed to. For example, according to Kaiser Family Foundation, in Texas and Florida 44 percent of non-senior adults with incomes below 139% FPL are uninsured. Those two big red states have the highest rate of uninsured among this group which the Medicaid expansion is meant to help.
If some red states don’t expand Medicaid it leaves open a big question of what will happen to these individuals. Will the federal government find a way to make all of them eligible for sufficient subsidies to buy private insurance on the exchanges; or will some of them instead fall into a perverse poverty doughnut hole, too rich for the states’ old Medicaid program, but too poor for exchange subsidies?
At the very least, there is a decent chance the decision of whether or not to expand Medicaid will be a nasty political fight in several red states in the coming months. The medicaid expansion is popular with the general public, even though the whole law is not.
While probably a long shot, my one hope is that long term this situation could eventually give momentum to the push for the federal government to completely take over Medicaid. It is well past time to end its idiotic federal-state partnership setup. There is at least some bipartisan support for the basic concept. Sen. Lamar Alexander (R-TN) has proposed the federal government take over Medicaid in exchange for leaving education funding completely up to the states.
*corrected to indicating quote the opinion’s syllabus