The Supreme Court decision to uphold the Patient Protection and Affordable Care Act (ACA) leaves an interesting dilemma in its wake for states rankled by the health insurance mandates of Obamacare. While most provisions of the ACA remain intact, the mandate to expand Medicaid, the health insurance program jointly funded by the federal and state governments for low income, elderly and disabled individuals, did not hold. States are no longer required to extend income eligibility for Medicaid to include adults under age 65 with incomes up to 133% of the federal poverty level (about $14,050 for a single adult), estimated to qualify 17.1 million low-income uninsured adults for coverage nationwide.  This apparent victory for states opposed to the ACA’s insurance provisions may, in fact, be an ideological thorn in their sides: Expand Medicaid and accept federal support to cover the uninsured, or leave individuals who could receive insurance through Medicaid without coverage, and leave federal money on the table—while helping to subsidize states that do choose Medicaid expansion.  

States are not required to expand Medicaid, but there remain strong reasons to do so, including financial incentives, as the federal government will pick up 100% of the costs of state Medicaid coverage beginning on January 1, 2014 for the first three program years. Thereafter, federal support will drop incrementally but no lower than 90% of the Medicaid costs for this new population, with states expected to pick up the remaining costs.  Under the ACA expansion, the Congressional Budget Office estimated that between 2014 and 2022 the federal government would pay $931 billion to cover the Medicaid expansion, while states would pay roughly $73 billion, or 7%.  The state share is said to equal a 2.8% increase in expected Medicaid spending over this time period if ACA provisions were not in effect. 

The Medicaid expansion would cover many of the costs of care for the uninsured, whose numbers approached 50 million in 2010. According to one study funded by the Kaiser Family Foundation, the majority of these costs are borne by federal, state and local governments. Hospitals typically receive most of these funds, which account for about 80% of the costs of uncompensated care for uninsured individuals. The American Hospital Association reports that hospitals incurred a total of $39.3 billion of uncompensated care in 2010, accounting for 5.8% of their expenses.

On the surface, Medicaid expansion looks like a pretty sweet deal. But national reports show that 14 Republican and one Democratic governor have come out against or outright rejected Medicaid expansion.  Twelve Democratic and one Independent governor plan to expand or are leaning that direction. The remaining 22 states are undecided.

Proponents claim that Medicaid expansion will expand access to care, including prevention and treatment, that will decrease costs associated with more serious conditions while providing relief to state and local taxpayers and the already insured who pick up the cost of their uncompensated emergency room and hospital care. Opponents counter that rather than increasing spending for health care coverage, the focus must be on slowing health care spending , now approaching 18% of GDP, to make health care more affordable. Budget conscious states also argue that even though federal dollars pay the administrative costs of expansion, states still must cover the costs of the infrastructure to support it.

Obamacare was upheld as the law of the land by the Supreme Court, but the future of Medicaid expansion at the state level remains unclear. If states turn their backs on Medicaid expansion they leave a lot of federal money on the table. They also leave behind many vulnerable, low income constituents—our friends, families and neighbors—who could receive coverage through Medicaid without purchasing private health insurance (to which they may not have affordable, available options).  According to research by Hadley and colleagues, providing coverage to all of the uninsured, not just those included under full Medicaid expansion, would have resulted in an increase of 5 percent of national health spending and 0.8 percent of gross domestic product in 2008.

To be sustainable our health care and our coverage must be affordable. Can we bend the cost curve and extend coverage to those in need? We can’t afford not to. Balancing health care spending and coverage is a vexing political challenge, one we may not solve on the first try. But we must keep trying until we get it right.