Medicaid Takes a Hit From the Supreme Court

By Noel Brinkerhoff, AllGov

01 July 12

resident Barack Obama's healthcare reform law survived the U.S. Supreme Court, but that doesn't mean millions of Americans won't lose their chance at medical insurance.

At the same time that the high court upheld the Affordable Care Act's (ACA) mandate requiring people to buy insurance, it struck down the requirement that states expand Medicaid coverage or risk losing all federal funding for the insurance program.

With the Medicaid provision gone, some states may opt out of expanding coverage for non-elderly individuals with incomes up to 133% of the poverty line (about $30,700 for a family of four).

Obama and Democrats predicted that as long as all states expanded Medicaid as planned, nearly 16 million uninsured people would have gained coverage by 2019.

But now "cash-strapped states will almost certainly" not consider this option "since they will ultimately be on the hook for financing at least a portion of this expansion," Stanford University health economist Dr. Jay Bhattacharya wrote on Stanford's medical school blog. "If enough states decide to deny the Medicaid expansion, this may substantially reduce the ability of ACA to expand insurance coverage."

The law calls for the federal government to assume 100% of the Medicaid expansion for the first three years. After that Washington's portion of the tab gradually drops to 90%. While that sounds like a lot, states that agree to participate would still be looking at paying billions of dollars, a tall order for those struggling to close budget deficits.

Texas, for example, only covers parents whose income is 26% of the poverty line or less, or about $2,900 a year. The Medicaid expansion would cost the state an extra $2.6 billion over five years. Arkansas provides coverage for even fewer poor people…those with an income 17% of the poverty line.