What's At Stake For States That Reject Medicaid Expansion

The Affordable Care Act has produced a surge in the number of people signing up for Medicaid. The ACA offers billions of federal dollars to states to expand Medicaid coverage for the poor. But only 25 states have accepted the federal government's offer, and those that haven't could face economic and budget losses.

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The Affordable Care Act has caused a huge jump in Medicaid enrollment. The federal government has offered billions of dollars annually for states to expand Medicaid coverage to everyone below the federal poverty line. But more than 20 states rejected that offer. NPR's John Ydstie reports on the financial cost of rejection.

JOHN YDSTIE, BYLINE: Originally, the Affordable Care Act required states to expand their Medicaid program. But the Supreme Court ruled that the federal government couldn't force states to do so; and many didn't, including Virginia. The state's governor, Bob McDonnell, didn't respond to NPR's requests for an interview. But in a recent appearance on MSNBC, he explained his rationale.

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GOV. BOB MCDONNELL: What we said in Virginia is we're not opposed to it philosophically. But until we have dramatic reform in the Medicaid system that's grown 1,600 percent in 30 years, that it wouldn't be responsible to do that.

YDSTIE: McDonnell also said he fears the federal government will eventually reduce its funding, and leave states holding the bag. The problem is that not expanding Medicaid creates a group of poor people who fall through the cracks - people like Katherine Coons, who lives in St. Petersburg, Fla.

KATHERINE COONS: I'm not able to get assistance through the state, and I'm not available to get assistance through the federal government, to help pay for health care.

YDSTIE: Coons is a 32-year-old college student. She and her husband - who works two part-time jobs - make too little money to get subsidies in the health care exchange; and they don't qualify for Florida's Medicaid system, which doesn't provide health care to childless adults. Each state sets its own Medicaid eligibility requirements. Coons, who suffers from a serious endocrine system disease, says Florida's decision not to expand coverage is infuriating and unfair.

COONS: It's so frustrating because I know it's all politics. It just feels like while they're playing, you know, political games, people like me are suffering.

YDSTIE: In fact, all the governors who refused the Medicaid expansion are Republicans. Sandy Praeger, the Republican insurance commissioner in Kansas who supports the ACA and Medicaid expansion, says their decisions were political.

SANDY PRAEGER: That became sort of the method of trying to derail the Affordable Care Act, was just to not participate in any part of it.

YDSTIE: Praeger says the governors are doing a disservice to poor people in need of health care, and a disservice to their state budgets. And several studies support that conclusion, including one from the policy think tank RAND that focused on 14 states that have declined Medicaid expansion. Christine Eibner is one of the co-authors.

CHRISTINE EIBNER: What we found is if those states don't expand Medicaid, there are going to be 3.6 million people fewer insured, through the Affordable Care Act. But additionally, those states are foregoing about $8.4 billion in federal transfer payments that would come in to support the Medicaid expansion.

YDSTIE: The ACA requires the federal government to pay for 100 percent of the cost of Medicaid expansion in the first two years, with the federal share eventually falling to 90 percent. Eibner says that the RAND study shows that the federal dollars flowing into the states that expand Medicaid will boost their economies, and that their state budgets will benefit as Medicaid replaces state-funded health care programs for the poor.

But Joe Antos is skeptical. He's an economist and health care specialist at the American Enterprise Institute. Antos argues increased federal taxation for Medicaid expansion will put a drag on the U.S. economy overall.

JOSEPH ANTOS: Some states will see some growth because of the additional federal spending, but other states will see some shrinkage.

YDSTIE: Another study, sponsored by the Commonwealth Fund, points out that taxpayers in states that reject Medicaid expansion will end up funding the program for other states. Sherry Glied, a public policy professor at NYU, is a co-author.

SHERRY GLIED: Just because you decide not to participate in the Medicaid expansion doesn't mean that the taxpayers in your state don't pay for Medicaid expansions. Of course they do. They pay taxes to fund the federal share of the Medicaid expansions in all the other states.

YDSTIE: And the amount of money at stake is huge. It's almost two and a half times the amount that goes to the states annually in federal highway dollars. Joe Antos agrees it's tempting for governors to take the free federal money. But he argues given Washington's budget struggles, it's possible the federal contribution will eventually fall below 90 percent, putting a greater burden on the states.

Still, he acknowledges the lack of participation by Republican governors is influenced by politics and the upcoming midterm elections.

ANTOS: After the next election, I think it will be very difficult for any governor to say, we're not going to take the money.

YDSTIE: For now, 21 states remain firmly opposed to Medicaid expansion, four are debating it, and 25 others and the District of Columbia have agreed to expand their Medicaid coverage.

John Ydstie, NPR News, Washington.

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