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Court Takes Away Medicaid Stick, But Leaves Big Carrot
Today’s Supreme Court ruling upheld the individual mandate in the Affordable Care Act. But it did strike down one part of the law—the provision that withdraws all Medicaid funding from states that do not expand eligibility to all people under age 65 living below 133 percent of the poverty line. States that do not expand eligibility will have to forgo only those federal funds that would have financed the expanded coverage, not all Medicaid funds.
Some people are fretting about this. They worry that states will opt out and low-income people in conservative states will be left without coverage. But I think we will have expanded Medicaid in all 50 states in pretty short order.
The health care law had both a carrot and a stick to encourage states to expand Medicaid eligibility. The stick was the potential loss of all federal Medicaid funds if they didn’t. The carrot was that the federal government will pay for nearly the entire cost of Medicaid expansion—100 percent of it in the early years, gradually declining to 90 percent.
That’s a pretty big carrot. States that refuse to expand Medicaid will be rejecting nearly free federal money. Such a rejection would be tantamount to saying that government health insurance for low-income people is so undesirable that a state is not even willing to pay ten cents on the dollar for it.
Even the most conservative states participate in the original Medicaid program, which is also optional. The last state to implement Medicaid was Arizona, in 1982, seventeen years after the federal program was created. And they joined because not being in Medicaid was unpopular: lawmakers acquiesced and enacted a program under the threat that voters would otherwise pass one by ballot initiative.
It took 17 years to get every state on board for Medicaid with the federal government paying 57 percent of the tab. With the feds paying 90 percent of the bill for the expansion, I expect universal adoption to come much faster.
If every state is going to sign up for expanded Medicaid anyway, why did 26 of them line up to challenge the law at the Supreme Court? One answer may be to defend the principle that the federal government cannot be too heavy handed in forcing states to implement programs, even if this particular one looks to be a good deal.
I think the real answer is political. Suing to block Obamacare was an easy way for Republican state-level officials to please conservative activists. If you attacked the law from enough angles and weakened it sufficiently in court, the whole thing might go away.
Now the states have won on their specific question, but the law otherwise stands untouched. The next question states have to answer will be “should we take this nearly free money from the federal government?” As pique toward President Obama fades, the increasingly obvious answer to that question will be “yes.”
(Josh Barro is lead writer for the Ticker. Follow him on Twitter.)
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