About that Medicaid ruling…


What was supposed to be one of the more straightforward aspects of the case against the Affordable Care Act turned out to be the most complicated. While the big story is obviously Obamacare’s unexpected victory, the point about expanded Medicare eligibility is worth considering in more detail.

First, a little history/context, which will help the larger story make sense.

The ACA, as part of the effort to expand insurance coverage, changed eligibility standards – in 2014, everyone earning up to 133% of the federal poverty line will be able to participate in the Medicaid program. That, of course, is expensive, and states have howled that they can’t afford this – since states pay as much as half of Medicaid costs already.

To accommodate, the Obama administration, under the reform law, will cover every penny of the additional costs, paying states for the expansion. This will be phased out slowly – by 2020, the federal government will pay 90% of the expansion.

To make this work, states weren’t given much of a choice under the ACA: they were being told to go along with Medicaid expansion or risk losing their Medicaid funding from Washington altogether. Florida, among other states, said this was coercion – Medicaid, they argued, was supposed to be an option for states, not a mandate from Congress.

The administration’s response had been pretty straightforward: it’s still optional; if states didn’t like the expansion on Medicaid eligibility, they didn’t have to participate in the Medicaid program.

Today, the Supreme Court took issue with some of this. Matt Yglesias had a good item on this.

Chief Justice Roberts joined with the other conservatives on the court to argue that this penalty – withdrawing of existing federal money unless states kicked in new money of their own – overstepped the constitutional bounds of the spending power. So now states have the carrot to expand Medicaid but not the stick.

Kevin Russell added:

The Court’s decision on the constitutionality of the Medicaid expansion is divided and complicated. The bottom line is that: (1) Congress acted constitutionally in offering states funds to expand coverage to millions of new individuals; (2) So states can agree to expand coverage in exchange for those new funds; (3) If the state accepts the expansion funds, it must obey by the new rules and expand coverage; (4) but a state can refuse to participate in the expansion without losing all of its Medicaid funds; instead the state will have the option of continue the its current, unexpanded plan as is.

If Florida tells Washington it doesn’t want to expand Medicaid eligibility at the state level, it won’t get the additional money, but it won’t lose its current federal Medicaid funding.

I happen to think states would be crazy not to accept the deal, but there are states run by far-right governors who care more about ideology than public policy, so “crazy” isn’t terribly unusual.

Right about now, you might be thinking, “But, Steve, if the court majority is limiting Congress’ power on holding funding threats over the states, won’t this have a sweeping impact going forward?” It’s a good question, and I’m afraid the legal consensus on this is still coming together. The ruling is only two hours old; we’ll know more soon enough.