JAMA Forum — Supreme Court Ruling on the Medicaid Expansion: Carrots Are Okay, Sticks Are Not

Aaron Carroll, MD, MS

Aaron Carroll, MD, MS

Most of the country will be focused on the fact that the US Supreme Court upheld the individual mandate, albeit as a tax, not a penalty. The Court made another significant ruling, however, concerning the Medicaid expansion.

As a reminder, Medicaid currently exists as a somewhat universal program for poor children and poor pregnant women. It is a somewhat less universal program for poor parents and is a rather threadbare safety net for poor people in general. The Affordable Care Act (ACA) changes that dramatically.

The Medicaid expansion makes the program completely universal for everyone below 133% of the poverty line, regardless of age or parental status. This is not an inconsequential part of the law: about half of those who stand to become insured through the ACA will do so through Medicaid.

The ACA declared that the federal government will pay the entire bill for the expansion when it begins in 2014. They will also commit to paying most of it (90%) by 2020. But this still means significant costs to states, first as their share of the expansion increases, and second as previously qualifying people who did not sign up before suddenly do. The law says that states, not the federal government, will have to cover those people.

Medicaid has always been an “optional” program for states. States that agree to engage received somewhere between 50% and 75% of the bill paid by the federal government. Theoretically, the states could refuse to do the expansion as well. But that’s where the ACA made things difficult. It declared that if states refused the expansion money, and all it entailed, they would lose all their Medicaid funding, even that which they already had.

Because of this, many states opposed the expansion. They feared the increased expense. Medicaid is already a significant burden to their budgets. They said it was “coercive” for the federal government to take away their existing Medicaid money as well as the new money.

Today, the Court somewhat agreed with this line of reasoning. Over at SCOTUSblog, Kevin Russell explains:

The Court’s decision on the constitutionality of the Medicaid expansion is divided and complicated. The bottom line is that: (1) Congress acted constitutionally in offering states funds to expand coverage to millions of new individuals; (2) So states can agree to expand coverage in exchange for those new funds; (3) If the state accepts the expansion funds, it must obey by the new rules and expand coverage; (4) but a state can refuse to participate in the expansion without losing all of its Medicaid funds; instead the state will have the option of continu[ing] …  its current, unexpanded plan as is.

Put simply, states can opt out of the expansion without losing all of their Medicaid funding. The question is, will they?

It will be very difficult for states to do so. Because the federal government is going to fund the entire cost of the expansion initially, states will be hard-pressed to turn away free money. This will be especially difficult for those politicians running for reelection in those states. How can a state explain to its poorest constituents that they must remain uninsured because the state is refusing to accept money from the federal government that other states are accepting? This will be made more difficult as more states do accept the funds. Some have already started.

Many people will make the argument that governors and states should do so out of principle. But it will be more and more difficult to make that stand when it seems completely political. Moreover, there will likely be enormous pressure from hospitals, physicians, and others who offer health care to accept that Medicaid money, as it will eventually flow into the medical system.

Interestingly, the Court seemed to rule that traditional Medicaid is so engrained in the bedrock of the United States, removing funding from it is unduly “coercive.” Down the road, this may prove problematic for those who would like to see the program go away entirely.

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About the author: Aaron E. Carroll, MD, MS, is a health services researcher and the Vice Chair for Health Policy and Outcomes Research in the Department of Pediatrics at Indiana University School of Medicine. He blogs about health policy at The Incidental Economist and tweets at @aaronecarroll.
About The JAMA Forum: To provide ongoing coverage throughout this election year, JAMA has assembled a team of leading scholars, including health economists, health policy experts, and legal scholars, to provide insight about the political aspects of health care. Each JAMA Forum entry expresses the opinions of the author but does not necessarily reflect the views or opinions of JAMA, the editorial staff, or the American Medical Association. More information is available here and here.



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