Medicaid Expansion: What If a State Opts Out?

One of the key provisions of the Affordable Care Act, the new health reform law, gives money to states to expand Medicaid to adults and families with low incomes – a total of about 17 million additional people. However, the Supreme Court recently ruled that the federal government cannot effectively coerce states into accepting the Medicaid expansion by withdrawing all a state’s Medicaid funds if it refuses.  Although elderly and disabled individuals who currently receive Medicaid aren't affected by the Court's ruling, it could leave millions of others without any options for health coverage -- and possibly cost lives.

The Affordable Care Act expands Medicaid eligibility starting in 2014 to individuals and families with incomes up to 133 percent of the poverty line, which is $15,654 for an individual in 2016. (Most states currently limit Medicaid to certain categories of people at or below the poverty line, including children, pregnant women, parents of eligible children, people with disabilities and elderly needing long-term care.) The federal government will pay the complete cost for the Medicaid expansion for three years for newly eligible beneficiaries, and 90 percent of a state’s costs thereafter. 

Nevertheless, the governors of several states, including Texas, Louisiana, and Florida, have said they will not accept federal money in order to expand coverage.  Although politics is undoubtedly playing a role in these pronouncements, some are worried about the costs associated with expanding Medicaid, despite the federal money. On the other hand, some analysts predict that expanding Medicaid could actually lead to savings, in part because uninsured individuals already cost states billions of dollars. Arkansas officials estimated the expansion would save the state $372 million in the first six years. Another recent study found that when states have expanded their Medicaid programs in the past, fewer people have died.

If a state opts out of the expansion, then adults who earn too much to qualify for Medicaid but too little to qualify for tax subsidies to pay for private health insurance will be left without coverage. People in those states who earn less than 100 percent of the federal poverty limit ($11,770 for an individual in 2016) and are not eligible for Medicaid benefits would also not be eligible for tax credits to purchase otherwise unaffordable private insurance. If the state chooses to expand Medicaid, those people would be covered. 

Check out a KFF Commission brief titled "How will the Medicaid Expansion for Adults Impact Eligibility and Coverage?," which includes a state-by-state breakdown of current Medicaid eligibility.