All Those People Who Were Supposed to Get Insurance Probably Won't

One year later, the Supreme Court's Obamacare decision on Medicaid expansion looks more like a Pyrrhic victory for the president.

When the Supreme Court decided the big health-care case last June, its ruling was seen as a huge win for President Obama. His administration had fended off a challenge that would have dismantled the entire reform effort; it lost on only a small issue to which few people had paid much heed. But a year later, it's increasingly clear that the minor loss is punching a major hole in the law's primary ambition -- expanding health insurance coverage to most of the 49 million Americans who lack it.

Medicaid, the federal-state health insurance for the poor and disabled, was a cornerstone of the law's strategy. An expansion of the program that would open eligibility to every American earning an income near or below the poverty line was designed to enroll some 17 million people -- about half of the law's coverage gains. But the Court ruled that Washington couldn't force the states to expand their programs, and politicians in most states, disdainful of Medicaid's rules and opposed to all things "Obamacare," have simply said no. That means some 25 states, and some 7 million people, will lose out on access to coverage, leaving low-income residents with no opportunity to obtain affordable insurance in the new regime. "It's bad," says Caroline Pearson of the consultancy Avalere Health. As recently as February, she had predicted as few as five state holdouts by year's end; her current forecast is much more pessimistic.

Health and Human Services Secretary Kathleen Sebelius is putting on a brave face. "Given the climate around this law, given the number of states that were actually in litigation, and the election, the number of Republican governors who stepped up and said, 'We really want to do this,' I find to be very encouraging," she tells National Journal. Nevertheless, it's a long way from the administration's original plan.

Twenty-six states brought the case asserting their right not to expand Medicaid. Although they won that right, administration officials, health industry leaders, and journalists concluded after the Supreme Court decision that they'd eventually go along. The feds promise to pay 100 percent of expansion costs for three years, and then an amount that would never go below 90 percent; this was seen as too good a deal to turn down. Governors had grandstanded against the 2009 economic-stimulus money too, but nearly all had signed on. What state leader would want to turn down a huge infusion of federal cash?

Republican governors soon began querying HHS. Would the department let them use federal funding to expand Medicaid only partway? HHS held off answering them for months, and then, after the presidential election, told them the decision was all or nothing. The administration was sending a message: The law cannot be bargained over or repealed, so the choice is in or out.

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As predicted, Republican governors started flipping. First Gov. Brian Sandoval of Nevada endorsed a full expansion. Then came the governors of New Mexico, Arizona, Ohio, Michigan. Even Rick Scott, the Florida governor elected on an anti-Obamacare platform, said expanding Medicaid was the right thing to do. Chris Christie followed suit in New Jersey, as did others. But endorsements haven't always led to expansions. The Florida Legislature did not share the governor's conversion, and Scott quickly backed down. At press time, both Ohio and Arizona's Legislatures continue to debate expansion.

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Margot Sanger-Katz is the health care correspondent at National Journal.

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