States Have One Last Chance for Feds to Pay for Medicaid Expansion

States are losing their opportunity to expand while the federal government still pays for all of it.

If states want the federal government to foot the bill for a Medicaid expansion, their window is rapidly closing.

Under the Affordable Care Act, states that expand Medicaid are rewarded by a 100 percent federal match rate—until the end of 2016. After next year, the rate starts declining, dropping to 90 percent by 2020.

So far, 21 states have not expanded the program, although three are discussing it. With federal funding decreasing within the next fiscal year and state legislatures wrapping up for the session, it's questionable whether the reduction will deter states from ever expanding.

In other words, states that haven't expanded might, from now on, have less of a carrot to do so.

"I think the 100 percent match is definitely an incentive," said Laura Snyder, a senior policy analyst at the Kaiser Family Foundation. "There's definitely some pressure there."

Although states can choose to opt into the expansion at any point, in most states, budgets that legislators pass next session will include a 100 percent match for only six months before the amount decreases.

"There would be some state costs at that point, but again, it's still well above what states get for their standard matching rate," Snyder said.

The conservative line of thought goes like this: States that already didn't want to expand their Medicaid programs will want to even less now that they'll have to pay for more of it.

In Florida, which is contemplating an expansion, Gov. Rick Scott endorsed it in 2013 but then reversed himself recently during an ongoing fight with the Obama administration over a separate pool of Medicaid funding for uncompensated care. He has cited the specter of the state match for Medicaid expansion to explain his position.

"I've been very consistent. I said this from the beginning: If the federal government wants to have a program that they pay for, I won't stand in their way," Scott said last month. "But don't come and tell me that you want to do something in my state and have me raise the taxes on our citizens."

But liberals say that in light of pre-Obamacare federal match rates, states stand only to gain fiscally by expanding. In 2012, the federal government paid for about 57 percent of total national Medicaid spending, according to the Kaiser Family Foundation.

"The bottom-line thing to remember is for existing Medicaid programs, that is extraordinarily generous compared to what the states have been receiving for decades," said Ron Pollack, executive director of Families USA. "If the states have voluntarily decided to run a Medicaid program and receive a smaller match, I don't believe the slight decrease in the match "¦ will be viewed as a burden."

Additionally, states stand to gain financially by expanding because of decreased uncompensated-care rates and job creation, Pollack said.

"I think the opposition that exists today is not really economic. It's much more political, because the conservative states generally have governors or state legislators who don't like the Affordable Care Act and don't want to appear to be cooperating with the Affordable Care Act," Pollack said. "That's what's causing the opposition, not so much the fiscal concerns."

Like Florida, Utah and Alaska are considering Medicaid expansion. Florida entered a special session Monday, continuing debate over the state budget and health care legislation. The state Senate has backed a plan to provide insurance to low-income Floridians using funds from Obamacare, but the House is opposed and argues that the plan would be a Medicaid expansion.

In Utah, a small group of lawmakers are negotiating a deal with the governor to cover the state's uninsured. And Alaska has called a second special session to work on its state budget. Medicaid expansion wasn't on the agenda last week, Alaska Public Radio Network reported.

Pressure might not just come from lower match rates, Snyder said. Medicaid disproportionate share hospital payments—which help with uncompensated care costs—are set to be reduced in 2018, which also might be a reason to expand.

"While we don't know fully the methodology for how those cuts will go into effect, it's expected they'll affect expansion and non-expansion states alike," Snyder said.

But whether expanding Medicaid saves or costs a state money seems to be a matter of perspective.

"The expansion of Obamacare is not free," Scott said.