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Is the Medicaid Expansion Fool’s Gold?

by Benjamin Domenech on July 3, 2012

As you’ve probably heard by now, at least fifteen governors are leaning toward rejecting the Medicaid expansion as allowed by the Supreme Court:

“Seven states with Republican governors have given a flat “no” to the Medicaid expansion since the Supreme Court ruling, according to reports and press statements. States that will decline to participate include Florida, where Gov. Rick Scott (R) turned his opposition to the law into a political career, and Louisiana, where Gov. Bobby Jindal (R) has vowed to help elect Mitt Romney as president in order to repeal it. In eight other states — seven with GOP governors — the Medicaid expansion seems unlikely, given comments from governors and their offices.”

Ezra Klein maintains, along with just about every other liberal commentator and former CMS head Donald Berwick, that the deal governors are being offered is too good for them to pass up.  Indeed, the federal matching rate for the expansion – which covers people at 100-138 percent of the federal poverty level (FPL) – is set at 100 percent federal tax money for 2014-2016, 95 percent in 2017, 94 percent in 2018, 93 percent in 2019, and 90 percent in 2020 and beyond. Seems pretty tempting, doesn’t it?

But consider Klein’s own examples to see why the states are balking for reasons beyond just partisan politics. He writes: “Texas covers only working adults up to 26 percent of the poverty line.” Texas, along with about half the country, has a Medicaid program that is minimal compared to states like New York and others.  You can see the rankings of income eligibility for low-income adults here (it’s more generous to kids, but you’ll note you have to go through 26 – mostly red – states to get above 70 percent of FPL). While the federal money is indeed generous for the newly eligible population, it is less so for the rest. For your currently eligible population, you only have the regular Medicaid matching rate, which ranges from 50 to 76 percent. This adds up to a huge chunk of change for a lot of these states, many of which already have Medicaid programs overburdened thanks to the recession.

This also makes the expansion more appealing to states with generous Medicaid programs (which can now cut back and shift the costs for everyone else to the federal taxpayers), and less attractive to those states with minimal programs, where already eligible people come out of the woodwork to sign on to the system. And then of course there’s the argument that many of these states don’t want more people on Medicaid anyway, considering the sheer amount of population increase you’re looking at.

All in all, this is less of the carrot-only approach commentators are framing it as, and states are loathe to embark on an approach like this when the possibility of just waiting for an election, or playing a brinksmanship game and getting a block grant is in the cards.

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