Monday, July 16, 2012
While several governors have announced their intentions to reject the Affordable Care Act's Medicaid expansion option, there is good reason to view their statements as political posturing rather than indications of the future of their states' Medicaid programs. As the New York Times reported last week, hospitals and other health care providers will lobby state legislatures hard to participate in the expansion. Moreover, the terms of the expansion are quite favorable for states, with the federal government picking up the full cost initially and 90 percent after a gradual reduction in the federal share.
The real budgetary burden for states comes not from the Medicaid expansion but from the "woodwork" effect in the pre-ACA Medicaid program. Many currently eligible persons have not signed up for Medicaid. When the individual mandate to purchase health insurance and streamlined enrollment for Medicaid kick in under ACA, they will encourage these eligibles to sign up, and the federal government's share of their costs will be its current share, which may be as low as 50 percent, not the 90-100 percent share for the expansion population. The governors threatening to opt out may be hoping that a Romney administration blocks ACA or that Congress will sweeten the Medicaid expansion deal even more, but in the end, it will be a big surprise if any states opt out. Talk is cheap, but declining billions of federal dollars is not.
[DO, with hat tips to Larry McCullough and Ed Richards]