JAMA Forum: Embracing (or Not) the Medicaid Expansion

Aaron Carroll, MD, MS

Aaron Carroll, MD, MS

Last month, I wrote about the slow trickle of states that were either agreeing or refusing to create local insurance exchanges as the Affordable Care Act (ACA) prescribes. This is one of the 2 major decisions states will have to make about health care in the coming year. The other, of course, is whether they will participate in the Medicaid expansion.

As a quick recap, in 2014, the ACA sought to cover about 16-17 million individuals by broadening eligibility for the Medicaid program to those who earn less than 138% of the federal poverty level (FPL). The reason for this policy was that it would be significantly cheaper to enroll many uninsured people in Medicaid than to help them purchase private insurance.

To compel states to expand the program, the law used carrots and sticks. Enticements included covering 100% of the cost of the expansion through 2017 and then still covering 90% of it from 2020 onward. The stick was a threat to remove all other existing Medicaid funding if states refused to expand Medicaid coverage. Many states cried that this policy was unfair, as none could possibly afford to give up their current Medicaid funding. The Supreme Court agreed with them last June, ruling that the ACA was “coercive” on this issue, and struck down the provision that states could lose funding. In this way, the Medicaid expansion became optional.

At this time, nearly half of states have agreed to the expansion or are leaning toward doing it. Another 11 are undecided. But 15 have outright refused or are leaning toward refusal.

Millions of Americans living in states that refuse the Medicaid expansion will remain uninsured without this part of the law. Because the law, as written, assumed states would be required to cover everyone earning less than the FPL, subsidies in the exchanges are only available to people earning at least 100% of the FPL. This means that the poorest among us will not be able to get insurance through the ACA in states without the Medicaid expansion.

That said, it’s important to keep things in perspective. Many are worried that if the law is not implemented immediately and fully, then it will fail. This certainly wasn’t the case with the original passage of Medicaid in 1965. Only 26 signed up in the first year after Medicaid began; it wasn’t until about 18 years later, in 1982, that the last state, Arizona, agreed to participate. That didn’t prevent Medicaid from becoming as American as apple pie. Today, even a threat to remove the funding for the program at the federal level is considered “coercive” by the Supreme Court.

Ironically, Arizona will probably not be a holdout this time. Gov Jan Brewer recently announced that she wants Arizona to participate in the Medicaid expansion right away. It’s worth a closer examination of her reasoning as a likely path for other conservative states. According to a recent news story, “Although Brewer has been a consistent opponent of Obamacare, she acknowledged Monday that the law is now an unavoidable reality and that Arizona would be worse off turning down the federal dollars that will come with broadening Medicaid.” The story noted that Brewer said that the federal funding “would help pay for some individuals already covered by the state’s Medicaid program and provide some protection for the state’s rural hospitals.”

Gov Brewer is correct that refusal of the expansion will harm clinicians and hospitals as well as patients. Compensation for covering the uninsured is set to decrease, and without Medicaid to provide some level of payment, those giving care to the poorest will be hard hit.

Many states are further concerned that while the federal share of the expansion is quite generous, this could change in the future. Much as traditional Medicaid has become a fiscal burden, so too could the expansion. Gov Brewer has an answer for this as well:

“As I weighed this decision, I was troubled that a future president and Congress would reduce matching rates,” Brewer said. “Together with my team, I have crafted a plan that addresses both of those concerns and safeguards Arizona.”

That plan, said Brewer, would include a “circuit-breaker” provision to automatically reduce the state’s Medicaid program if the federal government slashed funding in the future.

If you ask me, this is a completely rational line of reasoning. I’d hate to see Medicaid reduced in the future, but states clearly don’t want to have to respond to an unfunded mandate. These protections acknowledge the law’s intent and a desire to respond to the ACA without leaving a state too exposed if future federal governments decide to change things down the line.

Arizona’s path has defused much of the rhetoric around other states’ refusals to go forward with the Medicaid expansion. While I hesitate to assume that all states will agree by the 2014 deadline, I’m encouraged to see that—at least when it comes to Arizona—history is not repeating itself. The Medicaid expansion is a great deal for states. I predict that it will take far fewer years for the program to become nationwide this time around.


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:  JAMA has assembled a team of leading scholars, including health economists, health policy experts, and legal scholars, to provide expert commentary and insight into news that involves the intersection of health policy and politics, economics, and the law. 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.

Categories: Caring for the Uninsured and Underinsured, Health Policy, The JAMA Forum