When States Opt Out of Expanding Medicaid, People Get Shafted

Whether for fiscal or ideological reasons, some states are pledging not to participate in Washington's Medicaid expansion plan. If they follow through, that would leave millions of Americans uninsured.

clinic-615.jpgDr. Russ Webb (standing, R), a volunteer oral and maxillofacial surgeon, helps a patient during a free medical clinic in Oakland, California, which attracted thousands of attendees, often without insurance. (Stephen Lam/Reuters)

If the Supreme Court had not upheld the individual mandate in its recent decision, it's unlikely that the insurance exchanges, in which 22 million people are expected to obtain coverage, would have worked well, if at all. Insurance works by having everyone, healthy and sick, in it together. Everyone pays in, and those who need care draw on the fund. Since everyone needs health care at some point, everyone uses insurance eventually, but not all at once. This benefits everyone. You don't have to be a health-care economist to see this.

So the decision is hugely important for the United States. But even if we now have clarity on the individual mandate, the decision raises a major question about what happens with Medicaid expansions, which would cover about 17 million people.

The court's decision--that the Federal government can't penalize states for failing to comply with the ACA's Medicaid expansions by revoking their current levels of Medicaid funding--raises doubts about whether all states will choose to participate in the Medicaid expansions. Even though the Federal government will pay for 90 percent of the expense of Medicaid expansions--and 100 percent initially--some states may face such difficult fiscal problems that they might choose not to participate. Or for ideological reasons: so far the governor of Florida, Rick Scott, has said that his state will opt out. Politicians in a number of other states, too, have already declared their resistance to the ACA Medicaid expansions.

This raises two issues. If states do refuse the Medicaid expansion, what happens to the people who would have been covered under it? Second, what implications will opting out have for the Federal budget? In states that participate, everyone with incomes between the state's current Medicaid eligibility cutoff (for example, 26 percent of the Federal poverty line in Texas, which is less than $4,000 for an individual) and 133 percent of the poverty line (less than $15,000) will be covered by Medicaid. It's estimated that this would extend coverage to 1.4 million people in Texas.

If a state opts out, none of these people will be eligible for Medicaid. The rules of the ACA insurance exchanges say that only people with incomes between 100 and 400 percent of the Federal poverty line will be eligible for the substantial premium subsidies the Federal government will give people who enroll.

That leaves out the poorest people. Those who aren't currently eligible for Medicaid and whose incomes are below 100 percent of the poverty line are technically eligible to enroll in the exchanges--but, because they are ineligible for premium subsidies, they will effectively be excluded. If Texas refuses to participate, everyone in the state with incomes between 26 and 100 percent of the poverty line with be in this situation, and will almost certainly remain uninsured. This would be a substantial number of the 1.4 million people eligible for the Medicaid expansion in Texas--and certainly many more, if a number of states refuse to participate. These people will remain uninsured, and will continue to have to face the specter of choosing between their health or financial ruin, let alone basic necessities, in addition to ending up in high cost emergency rooms at taxpayer expense.

There are a number of different cost impacts if states choose not to participate. The Federal government will pay premium subsidies for those people eligible to get them in the exchanges--adding to the costs of the ACA. On the other hand, the Federal government will save money it would have spent funding the Medicaid expansions in states that decline to participate. States that choose not to participate will have to continue to bear the costs of their uninsured populations through uncompensated care, including expensive visits to the emergency room. Economists are at this very moment generating new estimates of the cost of the ACA, taking these factors into account.

This ties in to what, in my view, is the key outstanding question about the ACA: cost. The ACA is estimated to provide over 30 million people with the benefits of health insurance, and that's a good thing. However, this is going to be expensive, no matter how many states opt out of Medicaid expansion--and, unless Republicans do have the power to overturn the law in the future, all signs point to the great majority of states' accepting it. Unfortunately, Federal spending on health care is already a problem. Total US government spending on health care has risen 2.5 times as fast as national income over the past 30 years. In other words, the government's health care spending is rising much faster than our ability to pay for it. That means that additional spending on health care is limiting our ability to pursue other important goals, such as repairing and replacing our infrastructure, investing in our children, and enhancing national security. It's imperative that we rein this in.

Presented by

Martin Gaynor is the E.J. Barone Professor of Economics and Health Policy, Heinz College at Carnegie Mellon University and chair of the governing board at the Health Care Cost Institute.

How to Cook Spaghetti Squash (and Why)

Cooking for yourself is one of the surest ways to eat well. Bestselling author Mark Bittman teaches James Hamblin the recipe that everyone is Googling.

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register.

blog comments powered by Disqus


How to Cook Spaghetti Squash (and Why)

Cooking for yourself is one of the surest ways to eat well.


Before Tinder, a Tree

Looking for your soulmate? Write a letter to the "Bridegroom's Oak" in Germany.


The Health Benefits of Going Outside

People spend too much time indoors. One solution: ecotherapy.


Where High Tech Meets the 1950s

Why did Green Bank, West Virginia, ban wireless signals? For science.


Yes, Quidditch Is Real

How J.K. Rowling's magical sport spread from Hogwarts to college campuses


Would You Live in a Treehouse?

A treehouse can be an ideal office space, vacation rental, and way of reconnecting with your youth.

More in Health

Just In