What happens if a state refuses to expand Medicaid?

The Supreme Court decided today that states can refuse the ACA Medicaid expansion without having to give up federal funding for their existing Medicaid program. This was the threat in the ACA, the stick that was intended to pusuade (or coerce, if you like) states into compliance. According to the court, that stick is unconstitutional. In terms of health policy, this is the most significant aspect of the court’s ruling.

On Twitter, I’m seeing a lot of questions about what happens to the would-be Medicaid eligible people in states that refuse the ACA Medicaid expansion. I believe that Jared Bernstein has it right:

Because the law was written assuming that the uninsured poor would be covered by Medicaid, subsidies to purchase health insurance in the exchanges don’t kick in until higher income levels [above the federal poverty level*]. The poor won’t have to pay the tax penalty formerly known as the mandate because of a hardship exemption in the law, but neither will they get the subsidy until their incomes go up enough.

It’s a very weird reversal of the usual means-test for government benefits.  Typically, as your income rises you become ineligible for benefits.  Here, you become eligible.

I agree with Bernstein and Aaron and Kevin Drum (all posts worth reading) that it is unlikely many states will actually refuse the money that comes with Medicaid expansion due to the pressure they’re likely to receive from providers. But it is possible some may try, and in particular they may do so to extract concessions from regulators. “Hey, let that waiver through and we’re on board.” It’d be an ugly game, threatening the affordability of coverage of low-income individuals, but that doesn’t mean some states won’t play it.

*UPDATE: I originally wrote 133% of FPL. See a the follow-up post for some additional detail.


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