Pro/con: Should states accept federal funds to expand Medicaid?

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• No: It already eats up too much of state budgets

With the national election a few weeks away, state policymakers have become pivotal players in the debate over health reform.

Although the Supreme Court’s landmark health-care ruling broadly upheld the constitutionality of the Patient Protection and Affordable Care Act, the court struck down a provision in the law that would have given the federal government the authority to withhold Medicaid funds from states that decline to expand Medicaid coverage to people with incomes that are above current eligibility thresholds but below 138 percent of the federal poverty line — about $32,000 for a family of four.

The Congressional Budget Office now estimates that 6 million potentially eligible low-income individuals will not qualify for Medicaid because of some governors’ stated intentions not to expand their programs. However, the facts on the ground make clear that states would be wise to expand Medicaid. This is true for three reasons:

First, states will be required to pick up very little of the tab. The federal government will pay for 100 percent of the cost of states’ Medicaid expansions through 2016. The federal contribution will start to decline gradually beginning in 2017, and states will be required to pay for 10 percent of the cost of the expansion in 2020 and beyond. The Center on Budget and Policy Priorities estimates that, as a result of these federal subsidies, states’ Medicaid expansions will increase their expenditures on Medicaid by only 2.8 percent between 2014 and 2022.

Second, by expanding Medicaid coverage, states will be able to reduce their spending on uninsured individuals through programs other than Medicaid. Recent estimates show that state and local governments cover nearly 20 percent of the cost of uncompensated hospital care and nearly 45 percent of the cost of mental health services provided to low-income and uninsured individuals.

The third rationale for expanding state Medicaid programs is perhaps the most compelling: Expanded health coverage will help millions of low-income Americans to lead healthier, more productive lives.

State lawmakers are understandably wary of the daunting fiscal challenges that lie ahead. However, Medicaid expansions will improve the well-being of low-income Americans at a modest cost to state governments.

Adam Thomas is a visiting assistant professor at the Georgetown Public Policy Institute.

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